DCIT - 19(1), MUMBAI, PIRAMAL CHAMBERS, MUMBAI vs. DISHANT DEEPAK SHAH, MUMBAI

Per O. P. Kant (A.M.)

This appeal by the Revenue is directed against the order dated 07th April, 2025 passed by the Ld.
Commissioner of Income Tax Appeals/National Faceless
Appeal Center, Delhi [in short Ld. CIT (A)] for Assessment
Year 2016-17 , raising following grounds:-

“1. Whe case an AO to d
7,21,28
of the A 69C of fact tha informa assesse
Lifeline exempti
2. Whet case an delete th scrip" M stock an generate a large n
3. Whet case an addition without was ba investig into pe transact lack of ether on the facts and in the circums nd in law, the Ld. CIT(A) has erred in delete the additions of Rs. 2,40,42,9
9/- on account of unexplained cash c
Act and un-explained commission exp the Act respectively made by the AO at the addition was made on the bas tion received from DGIT (Inv.) Kolk ee has sold shares of Penny scrips
Drugs and Pharma
Limited
"a ion. u/s 10(38) of the Act?"
ther on the facts and in the circums nd in law, the Ld. CIT(A) has erred i he addition made by AO in spite of th
M/s Lifeline Drugs and Pharma Lim nd the said penny stock has been m e entries of bogus LTCG facilitating ta number of persons?
ther on the facts and in the circums nd in law, the Ld. CIT(A) has erred in n made on account of penny stoc appreciating the facts that the acti ased on analysis of information r ation Wing Kolkata that the assessee enny stock transaction, which w tion involved the series of preconceiv f commercial content and totally a 2
Mr. Dishant Deepak Shah stances of the n directing the 951/- and Rs.
credit u/s. 68
penditure u/s O, ignoring the sis of credible kata, that the named M/s.
and claimed stances of the in directing to e fact that the mited is penny manipulated to ax evasion by stances of the n deleting the k transaction ion of the AO received from e has entered was arranged ved steps and an artificially structur evade ta
4. Whet case an addition without investig assesse accomm
5. Whet in law, t that in trade, t genuine penny
LTCG/S placed o the case
ITAT No held th compan channel prove th manipul
6. Whet in law, circums
Prasad red transaction entered into with the axes ?"
ther on the facts and in the circums nd in law, the Ld. CITIA) has erred in n made on account of penny stoc appreciating the facts that during ation, it was found that the scrips ee traded is penny stock used f modation entry only in form of bogus LT ther on the facts and circumstances of the Ld. CIT(A) has erred in not apprec the cases, where there was a suspic the onus is on the assessee to eness of price hike and to prove tha stock in which he was traded
STCG or losses was not manipulated, on Hon'ble Calcutta High Court in th e of Pr. CIT Vs. Swati Bajaj (I.A.No. G o. 6 of 2022, Dated. 14.06.2022, w hat merely demonstrating the finan ny, volume of trade, transactions tho ls inter alia will not suffice. The ass hat the price of the share or penny s lated?"
ther on the facts and circumstances of the Ld. CIT(A) has erred in ignoring t tantial evidences in view of the deci
More (1971) 82 ITR 540 (SC) and 3
Mr. Dishant Deepak Shah sole intent to stances of the n deleting the k transaction the course of in which the for providing
TCG."
f the case and ciating the fact cious or bogus establish the at the price of d to claimed as reliance is he decision in GA/2/2022 in wherein it was ncials of the ough banking sessee has to stock was not f the case and the direct and ision in Durga
Sumati Dalal

(1995)
(1995), was he evidence probabil been ex
7. Whet in law, t on accou the fact
ITAT, K
1782/K income gain, an of Calcu has bee dismiss
20.09.2
8. Whet in law, without
Court in wherein has bee
Poddar impugne
ITA No.

80 Taxmann 89(SC)/1995) 2014
rendered by the Hon'ble Supreme Cou eld that the court and tribunal have es before it by applying the tes lities, the surrounding circumstances ercised by the Officer?"
ther on the facts and circumstances of the Ld. CIT(A) is right in deleting the a unt of penny stock transaction withou ts that on the similar issue of LTCG
Kolkata in the case of Manoj Jain (HU
KOL/2018, treated the penny stock t from other sources instead of long nd the same was upheld by the Hon'b utta [2024] 164 taxmann.com 133 (Ca en confirmed by the Hon'ble Supre ing
SLP in SLP(C) of 21636/
024 ?"
ther on the facts and circumstances of the Ld. CIT(A) is right in deleting appreciating the decision of the Hon'b n the case of Suman Poddar Vs ITO (IT n exemption claim u/s 10(38) on acc en denied and further the SLP file vide appeal (c) No. 26864/2019 (a ed final judgment and order dated 1
841/2019 passed by the High Cou
4
Mr. Dishant Deepak Shah
ITR 801(SC) urt, wherein it e to judge the st of human s, which had f the case and addition made ut appreciating
G, the Hon'ble
UF) in ITA No.
transaction as g term capital ble High Court alcutta), which eme Court by /2024
dated f the case and the addition ble Delhi High
TA 841/2019), count of LTCG ed by Suman arising out of 17.09.2019 in urt of Delhi at New De of India

elhi) was dismissed by the Hon'ble S vide order dated 22.11.2019?”
ted the facts of the case are th turn of income for the year unde
2016 declaring total income o
1) of the Income Tax Act, 1961
sequently, notice u/s. 148A da d as to why his case should not -17. In response, the assessee dated 13.06.2022 in support n of purchase and sale of s rugs and Pharma Limited whe u/s. 10(38) was made of Rs g term capital gain. However, s not satisfied with the respon nd accordingly, his case was re notice u/s. 148 of the Act after competent authority. In respon e assessee filed his return
3. e reassessment, in support of th
42,944/- claimed u/s. 10(38) the copies of contract notes fo
Lifeline Drugs and Pharma
5
Mr. Dishant Deepak Shah
Supreme Court hat the Assessee er consideration f Rs.5,03,860/-
1 (In short, “the ated 26.05.2022
be reopened for e filed response t of the alleged shares of M/s.
erein a claim of . 2,40,42,944/-
, the Assessing nse filed by the eopened by way taking sanction nse to the said of income on he exemption of , the Assessee or sale of shares a Ltd., demat statements bank state acquisition relied on relating to individuals
Long Term losses on Statements were recor the Act. T wide scam the stock certain pe providing t of shares.
Lifeline Dr penny sto
Officer dis adopted b promoters/
tandem, to On the evidence, s, allotment letters, ledger acc ments and proof of source of fu n of said shares. However, the A the report of the Investigat coordinate enquiries in the c s who were engaged in providing m Capital Gains, Short Term Ca share transactions in listed s of many entry providers an rded under section 132(4) and he investigation led to unearth m of bogus entry using penny s exchanges. The investigation r enny stock companies which the bogus entries of LTCG/STCG
The Assessing Officer has n rugs and Pharma Limited wa ock companies. Furthermore, scussed about the general m by the entry providers, shar
/directors of penny stock comp o generate bogus entries of LTC basis of documentary and applying the test of human
6
Mr. Dishant Deepak Shah ount of broker, unds utilised for Assessing Officer tion Directorate cases of various g bogus entry of apital Gains and penny stocks.
nd beneficiaries section 131 of hing of country stocks, listed on report identified were used for G/STCL on sale noted that M/s as one of such the Assessing modus operandi e brokers and panies, acting in CG/STCG/STCL.
circumstantial n conduct and prepondera the appare sham ones device for the sum o claimed as bogus acco same as un
Act, and a an addition paid @3% o
4. Aggrieved b an appeal and delete
69C of the 5. Before us l for the Rev appreciate
DGIT(Inv.) penny scrip and wrong
The ld. CIT penny stoc ance of probability, the AO has ent is not real, the financial t s and the entire edifice was on evading taxes. Accordingly, the of Rs. 2,40,42,951/-, which th exempt LTCG arising on sale o ommodation entry, and accordi nexplained cash credit under s added the same to total income n of Rs. 7,21,289/- u/s. 69C be on such income.
by the additions made, the ass before the ld. CIT(A) who allo ed the aforesaid additions mad
Act.
learned Departmental Represent venue submitted that the ld. CIT the credible information rec
Kolkata that the assessee has p namely M/s. Lifeline Drugs a gly claimed exemption u/s. 10
T(A) has also failed to apprecia ck has been manipulated to gen
7
Mr. Dishant Deepak Shah concluded that, transactions are nly a colourable e AO held that, he assessee has of shares, was a ngly treated the ection 68 of the e. He also made eing commission sessee preferred owed his appeal de u/s. 68 and tative appearing
T(A) has failed to ceived from the s sold shares of and Pharma Ltd.
(38) of the Act.
ate that the said nerate entries of bogus LTC persons. Th there was onus was genuinenes penny stoc manipulate
Kolkata Hi
[2022] 139
reliance on of Durga P
Dayal (199
the circum are not in f
6. On the oth submits th for the det also submi
DR are no distinguish
7. We have perused th issue for c

CG facilitating tax evasion by a l he ld. DR further emphasized th a suspicious or bogus trade an heavy on the assessee to ss of the price hike and prove t ck in which he traded was ge ed. He further relied on the dec igh Court in the case of PCIT
9 taxmann.com 352 (Calcutta).
n the decision of Hon’ble Apex C rasad More (1971) 82 ITR 540 (
95) 80 Taxmann 89 (SC) wherei mstantial evidences should be co favour of the assessee in the pre her side, the ld. AR appearing f hat the ld. CIT(A) has rightly allo tails reasons enumerated there itted that the case laws relied ot relevant in his facts of the c hable.
heard rival submission of th he relevant material available consideration before us is whe
8
Mr. Dishant Deepak Shah large number of hat in this scrip, nd therefore the establish the that the price of enuine and not cision of Hon’ble
T v. Swati Bajaj
He also placed
Court in the case
(SC) and Sumati n it is held that onsidered which esent case.
for the assessee owed his appeal ein. Further, he upon by the ld.
case and clearly he parties and on record. The ether the LTCG earned on Pharma Lt and thereb
Act is corre of the Act a by the Asse
CIT(A) is re
6.11 AP addition materia appeal, submiss point fo circums shares appellan therefro financia aimed a LTCG in has to b materia the app has br transact the su transact
Demat A On a ca that, th primary transact and sa furnishi
6.12 In merely n sale of shares of M/s. Lifel td. amounting to Rs. 2,40,42,9
by claim of exemption made u/
ect or not and how the addition and also the commission @3%
essing Officer is justified. The fi eproduced as under:-
PPELLATE DECISION (Gr. No.-3) : On n, I have carefully considered the l facts on record, in respect of th as brought out in the assessmen sions made during appeal proceedin or adjudication is whether, on the giv tances, the transaction of purchase of M/s Lifeline Drugs and Pharma L nt, and the long term capital gains ( m in the hands of the appellant, w al transaction, or it was a colourable at claiming substantial exempt incom n the hands of the appellant. I find th be addressed having regard to all the l facts relating to the said transactio pellant, in the course of assessment rought on record the necessary p tions of purchase and sale of share upporting documents relating to tion, viz. Contract Notes, Ledger acco
Account Statements and relevant Ban areful perusal of evidence brought on he appellant has satisfactorily dis y onus cast upon it to substantiate tions, in the nature of purchase and s ale consideration received during t ing all the relevant and material evide the course of assessment proceeding doubted the genuineness of share
9
Mr. Dishant Deepak Shah line Drugs and 44/- is genuine
/s. 10(38) of the n made u/s. 68
on such income finding of the ld.
n merits of the relevant and his ground of nt order and ngs. The moot ven facts and e and sale of Limited by the (LTCG) arising was a genuine device solely me by way of hat, this issue e relevant and on. I find that, t proceedings, particulars of es, along with each such unt of Broker, nk Statements.
record, I find scharged the the impugned sale of shares, the year, by nce.
gs, the AO has transactions, and LTC report o aside th the app relates gains/lo entry pr referenc purchas the app the appe

CG arising there from, primarily rely of the Investigation Directorate and he plethora of documentary evidence pellant. The report of the Investigatio to providing bogus accommodation en osses on transactions in penny stoc roviders. The AO has not pointed ou ce, or mention, of the impugned tr se and sale of this particular scrip u ellant (which has resulted in LTCG in ellant) in the said enquiry report.
he AO has merely relied upon the s entry providers recorded by the rate, but has failed to examine them o essment proceedings, in relation to tions in the scrip of M/s Lifeline Drugs undertaken by the appellant. The A ot made any independent enquiry ment proceedings, viz. by way of issu e Brokers; or calling for information he Stock Exchanges to verify the ge tions.
he impugned share transactions hav on the platform of stock excha ed Stock Brokers, and payments received through Banking channel se of these shares was not ments of previous years. All tran d in the Appellant's regular books emain undisputed by the Ld. AO. the ed comprehensive records of ted subsequent to the dispu strating ongoing and substantial en market activities.
hus, neither the purchase nor the sale e-off transactions. The AO has not finding in the assessment order th eposits reflected in the bank state nt, or that of his Stock Broker, o
/entity which could be traced back to O has only made certain general
10
Mr. Dishant Deepak Shah ying upon the has brushed furnished by on Directorate ntry of capital ck by certain ut the specific ransactions of undertaken by n the hands of statements of Investigation on oath during the impugned s and Pharma
AO on his part y during the e of summons enuineness of ve been under nge, through s have been l. The initial disputed in nsactions are of accounts, appellant has transactions uted period, ngagement in e of this scrip reverted any hat, there are ements of the or any other the appellant.
observations regardin to gener the spe the app am not AO reg particula the cont
6.16 It assesse as to p relevant assesse that, th examine to the te human cogent colorabl general which is find tha laid dow
McDowe cannot similar
Banyan distingu
McDowe

"W avo dou bon act of wh bra
Mc dec res exp colo ng modus operandi adopted by the en rate bogus LTCG/STCG/STCL. Howev cific, relevant and material evidence pellant to substantiate the impugned inclined to agree with the adverse fi garding genuineness of the share arly so due to absence of any cogen trary being brought on record by the A is well-established that, the onus ee to adduce necessary documentary prove the genuineness of the transa t facts are within the special know ee. However, the Courts have held in he evidence adduced by the assesse ed not superficially, but in depth and est of the human probabilities and nor conduct. A genuine transaction, in ab contrary evidence, cannot be cons le device to evade taxes, merely on observations, devoid of any specific f s relevant to the impugned transactio at, the principles relating to use of colo wn by the Hon'ble Supreme Court i ell & Co Ltd. Vs CTO (1977) (1 S be applied on the facts of the pres facts, Hon'ble Gujrat High Court in n & Berry Vs CIT (1996) (222 ITR 831) uished the case of ell & Co Ltd and held as under, -
What has been deprecated as tax plan oidance of tax are those acts whi ubtful or questionable character as na fide and righteousness. Not all l ts of a taxpayer, which in the ordinar conducting his affairs a person d hich under law he is entitled to do, anded of questionable character on the Dowells. One cannot read in the a cision that any act of an assesse sults in reduction of his tax lia pectation of lax benefit in future amou ourable device, a dubious me
11
Mr. Dishant Deepak Shah ntry providers ver, in view of e adduced by transaction, I findings of the transactions, nt evidence to AO.
s lies on the y evidence so action, as the wledge of the various cases ee have to be having regard rmal course of bsence of any sidered as a n the basis of factual finding on. As such, I ourable device n the case of CR 914) (SC) sent case. On n the case of ) (Gujarat) has nning for ich have to their egitimate ry course does and , can be e anvil of aforesaid ee which ability or unts to a thod or sub act the wo

Wh tax rea arr tax red aut tax

The rati case ha case of (263 ITR
6.17 On judgeme
Sandip
(137 ta where a under evidence and ban purchas found disallow and fur shares
68 was reprodu
“22
con as not by thr we
The phy bterfuge to avoid tax and can be igno ts are unambiguous and bona fide, m e ground that treating those as d ould result in tax liability in future.
hile the planning adopted as a device x had been deprecated, the principle c ad as laying down the law that a per range his affairs so as to attract the m x liability, and every act which resul duction, exemption of tax or not attra thorized by law is to be treated as a x avoidance."
io of the Gujrat High Court decision as been upheld by Hon'ble Supreme n similar facts, the Surat Bench of ITAT ent dated 29th November 2021, in pkumar Parsottambhai Patel Vs axmann.com 373) (Surat-Trib.) ha assessee sold shares and claimed LT section 10(38), since assessee ha es in form of bills, contract notes, dem nk account to prove genuineness of tr se and sale of shares by him and th any fault in said documents wance of exemption under section 10( rther addition made on account of sal as undisclosed income of assessee s unjustified. The relevant part of the uced as under -
2. We note that all evidences of sales ntract noteswere submitted by the a noted by us above. The Assessing of t found any fault in the documents, us above. The payments were rough account payee cheques and tra ere done through recognized stock e e inflow of shares is reflected by ysical share certificate and demat
12
Mr. Dishant Deepak Shah red if the merely on deliberate e to avoid cannot be rson is to maximum lts in tax acting tax device of in the above e Court in the ndolan (2003)
T in the recent n the case of ITO (2022) as held that,
TCG as exempt ad submitted mat statement ransactions of he AO had not s, impugned
(38) of the Act le proceeds of under section e judgment is including assessee, fficer has as noted received ansaction exchange.
way of account.

The acc buy pai
In cas to the con con tha inv onl inv gai tra evi offi diff at q

Tarun, Sr. P.S..

Copy of the Ord
1. The Appellan
2. The Respond
3. CIT
4. DR, ITAT, Mu
5. Guard file.

////

aws relied upon by the ld. DR a ble in the context of factual m hence, not applicable. Accordin of the ld. CIT(A) in deleting the 44/- u/s. 68 of the Act as - u/s. 69C of the Act.
ult, appeal of the revenue is dism ounced in the open Court on 0
d/-
AR CHAUHAN)
(OM PRA
AL MEMBER
ACCOUNT
025
er forwarded to :
nt ent.
umbai

BY (Assista

ITAT
17
Mr. Dishant Deepak Shah are not relevant matrix of present ngly, we uphold e addition of Rs.
s well as Rs.
missed.
05/12/2025. AKASH KANT)
TANT MEMBER
ORDER, ant