SUMITRA SURENDRA GADODIA,MUMBAI vs. ITO 31(3)(4), BANDRA, MUMBAI

Per Smt. Beena Billai, JM: Present appeal filed by the assessee arises out of order dated 18/06/2025 passed by NFAC, Delhi [hereinafter “the Ld. CIT(A)”] for assessment year 2014-15 on the following grounds:-

2. The learned CIT(A) erred in upholding the Assessment order treating the LTCG as non-genuine on basis of general information without bringing on record any material/ evidence/ orders/ reports showing assessee involvement in the alleged transaction of accommodation entry/price rigging etc.

3. The learned CIT(A) has erred in law and on facts in upholding the alleged additions and failed to consider and deal with the contentions raised by the assessee nor dealt with the judgements cited in the submissions and passing the order without providing cross examination, nor confronting statement of Mr. Sanjay Vora, hereby, violating the principles of natural justice. Addition u/s 68 of Rs. 40,031 : 4. The Ld. CIT(A) erred in confirming the addition u/s 68 of Rs. 40,03l towards sale of shares of SRK Industries by calculating difference between sale proceeds vs. amount disclosed under IDS Scheme 2016 viz. Rs. 32,37,031/- minus Rs. 31,97,000/- ignoring the provisions of IDS Scheme.

5. The Assessee craves leave to add, alter modify or delete one or more ground before or at the time of hearing of Appeal.”

The assessee is an individual and filed her return of income for the year under consideration declaring total income of Rs. 8,80,390/-. The case was selected for scrutiny and statutory notices u/s 143(2) and 142(1) of the Act were issued to the assessee alongwith questionnaire. In response to the statutory notices, authorised representative of the assessee appeared before the Ld.CIT(A) and filed the requisite details as called for.

2.1. The Ld.AO observed that assessee carries on business of saree retail and has shown income from business u/s 44AD of the Act. The Ld.AO observed that during the year under consideration assessee also shown income from other sources and claimed long term capital gain on shares as exempt u/s 10(38) of the Act Rs. 81,72,625/-. Following are the details of the capital gains that were available with the Ld.AO as per ITS/AIR statement that was also provided to the assessee:-

Scrip Name & Code: KDJ Holidayscapes Resorts Limited (Scrip code - 530701) Buy Sale Gain Date of Code qty Rate Amount qty Rate Amount Purchase / (appx) (appx) Sale 23/12/2011 530701 20000 32.72 654497 28/10/2013 20000 441.36 8827123 8172626 to 09/12/2013 Total 20000 654497 20000 8827123 8172626 2.2. The Ld.AO further noted that the assessee had also claimed long term capital gain as exempt on sale of shares of M/s. SRK Industries Ltd., amounting to Rs. 31,97,000/-. The Ld. AO also noted that, assessee vide letter dated 14/12/2016, availed benefit of IDS Scheme and declared the funds available with her amounting to Rs.31,97,000/- during assessment year 2013-14.

2.2.1. The assessee thus had admitted that the funds received on sale of shares of SRK Industries were not real long-term capital gain. The Ld.AO thus, treated the difference of Rs.40,031/- between the sale consideration and IDS declaration as unexplained cash credit u/s 68 of the Act in the hands of the assessee. In respect of KDJ Holidayscapes Resorts Limited, the assessee claimed capital gains of Rs.81,72,626/- to be exempt u/s 10(26), the Ld.AO.

2.3. Based upon the Investigation Wing’s report the Ld.AO observed that there is no co-relation in the price rise of KDJ Holidayscapes Resorts Limited. The Ld.AO dealt with various facts of transactions, allotment of shares, payment of premium one allotment of shares, price trend on stock exchange, the report of Kolkata Investigation Wing and the statement of the persons. The Ld.AO based on these documents, doubted the earnings of long- term capital gain on sale of shares of KDJ Holidayscapes Resorts Limited as not to be satisfactory. The Ld.AO observed that there could be money trail and came to a unilateral conclusion that the transaction is not genuine. The Ld.AO, thus, made an addition of Rs. 88,27,123/- being the gross amount received by the assessee upon sale of shares of KDJ Holidayscapes Resorts Limited.

Aggrieved by the order of Ld.AO, the assessee preferred appeal before Ld.CIT(A).

3. The Ld.CIT(A) upheld the disallowance made by Ld.AO in respect of KDJ Holidayscapes Resorts Limited. The Ld.CIT(A) also analyzed the price movement and the commercial rationale in respect of this company and came to the conclusion that the transaction has been correctly identified to be a part of systematic scheme for converting unaccounted money into exempt capital gains. The Ld.CIT(A), thus, held that the transactions in KDJ Holidayscapes Resorts Limited shares was bogus and designed primarily to evade tax.

Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.

4. At the outset, the Ld.AR submitted that assessee vide letter dated 25/07/2016, furnished following details in respect of the purchase of shares in KDJ Holidayscapes Resorts Limited:-  Details of Long- Term Capital Gain.  Contract Notes for Purchase along with Bank Statement.  Contract Notes for Sales of shares along with Bank statement for sales.  Broker KDJ and SRK Ledger Account.  Form 10DB  Global Report KDJ Holidays.  Demat Account KDJ Holidays.  SRK Industries Global Report.

4.1. In respect of SRK Industries, the Ld.AR submitted that, the assessee submitted declaration under IDS dated 20/09/2016 declaring Rs.31,97,000/- against which tax was paid. The assessee also filed copies in Form 10DB, Demat account in respect of SRK Industries. Based on this, assessee was issued Form 2 in which 25% of the tax paid by the assessee has been acknowledged.

4.2. The Ld.AR submitted that in respect of KDJ Holidayscapes Resorts Limited, the assessee purchased 20,000 equity shares of Rs.10/- each on 23/12/2011 through recognised stock exchange broker Joindre Capital Services Ltd., for a sum of Rs.6,54,450/-. He submitted that the purchase transaction was executed on the Bombay Stock Exchange by payment of security transaction tax of Rs.815/- along with brokerage and cess thereon. The Ld.AR relied on the details of the purchase of these shares made through banking channels drawn on Saraswat Cooperative Bank Ltd., vide 4.3. The Ld.AR also admitted that KDJ Holidayscapes Resorts Limited, was initially known as Two-up Financial Limited. Subsequently the assessee sold the entire 20,000 equity shares through recognised and reputed stockbroker on the Bombay Stock Exchange by making payment of security transaction tax of Rs.8,857/- along with service tax of Rs.2,187/-. The Ld.AR intimated that the said shares were held by the assessee in a Demat account with Saraswat Cooperative Bank Ltd. and during this period, the shares were mixed reflected in the balance-sheet for the assessment years 2012-13 and 2013-14. The Ld.AR also informed that the sale proceeds of the shares were deposited by the assessee in the savings bank account with Saraswat Cooperative Bank Ltd. 4.4. The Ld.AR, thus submitted that, all preliminary evidence in order to establish that assessee had generally invested in the shares of KDJ Holidayscapes Resorts Limited, were available with the Ld.AO which has not been rejected or found to be false. He submitted that it was the observation of the Ld.AO that KDJ Holidayscapes Resorts Limited did not have sufficient commercial stability in the market and the Ld.AO has merely relied on the statement of third parties without giving any opportunity to cross- examine to the assessee.

4.5. The Ld.AR placed reliance on various decisions of Co-ordinate Bench of this Tribunal wherein sale of shares of KDJ Holidayscapes Resorts Limited, were dealt with in case of ITO vs Shri Jimeet Vipul Modi (ITA No. 4297/Mum/2018 (ITAT. Mum)), wherein, this contention of the revenue that KDJ Holidayscapes Resorts Limited, has been dismissed. The Ld.AR also placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of Karishma Ajay Agarwal vs. ITO in dated 02/03/2023; AY 2014-15 (Mum -Trib.) wherein similar transactions with KDJ Holidayscapes Resorts Limited was considered. Further reliance was also placed on the decision in the case of Dinesh Maheshwari vs. ACIT, Thane dated 20/05/2025.

4.6. On the contrary, the Ld.DR will placed reliance on the observations of the Ld.AO/Ld.CIT(A) and reviewed that this company does not have any creditworthiness and does not carry out any business in order to have strong financial.

We have perused the submissions advanced by both sides in light of the records placed before us.

5. Primarily in respect of the share transactions in case of SRK Industries, it is noted that, assessee opted to declare the income under IDS against the long-term capital gain on sale of shares. Admittedly the amount offered under IDS of Rs. 31,97,000/- was accepted by the revenue authorities. Under such circumstances no further addition can be made in respect of the same. Accordingly the addition of Rs.40,031/- stands deleted.

6. In respect of the share transactions in case of KDJ Holidayscapes Resorts Limited, it is noted that Co-ordinate Bench “7. We find that the assessee has substantiated the facts before the lower authorities and AO has relied on the statement of the third party and has not conducted any independent investigation. Further, the assessee has given the complete details on the nature of the business activities and audited financial statements of the company and justification of increase in share price and placed reliance on the evidences referred at page 48 to 63 of paper book but AO has failed to examine the company profile and made additions on presumptions and conjectures. The Ld.AR relied on the judicial decisions of Honble High Court and Honble Tribunal in support of e submissions. We find the facts and circumstances of the present case are similar and identical and pertains to A.Y.2014-15 in respect of sale of Shares M/s KDJ Holidayscapes and resorts ltd (earlier known as M/s Gomti Finlease (India) Ltd) dealt by the Coordinate Bench of the Honble Tribunal in the case ITO Vs. Shri Jimeet Vipul Modi in and has dismissed the revenue appeal observing at Page 4 Para 4.1 of the order read as under:

4.1 During appellate proceedings, the assessee again refuted the allegations of Ld. AO by way of elaborate written submissions which have already been extracted in the impugned order. The Ld. CIT(A), at the outset, noted that provisions of Sec.68 were invoked by Ld. AO to add back the purchase price of shares. However, the payment for purchase of shares was made through banking channels which stood corroborated by various documents submitted by the assessee. All the payment for purchases was made through account payee cheques which were debited in assessee’s books of accounts. Thus, the transaction was a debit entry in the books of accounts and therefore, the purchase price paid by the assessee could not be held to be unexplained cash credit in the books of account. This being so, the provisions of Sec.68 would have no applicability to the fact of the case and the addition was totally on a wrong footing. Therefore, the impugned additions were not sustainable under law. 4.2 At the same time, in para-5.3, it was observed by Ld. CIT(A) that Ld. AO had not considered the documents pertaining to purchase and sale of shares of Gomti Finlease (India) Limited. These documents were in the shape of contract note, bank statements, brokers ledger and Demat Account statement of the assessee which were duly submitted at the time of assessment proceedings. The assessee had fully discharged the onus to prove the transactions. The assessee had purchased the shares of a listed company through recognized stock broker on BSE and similarly sold the shares through recognized stock broker on BSE at the prevalent price. As regards adjustment / fluctuation in rate (Rs 494/- to Rs. 99/-), the same was due to splitting of shares since the scrip had face value of Rs.10/- which was split on 26/12/2013 to Rs.2/- per share. Accordingly, the market value was reduced in that proportion. The assessee had fully discharged his onus to prove the transaction of purchase of shares including source of funds for the purchase. The assessee furnished justification for purchase of shares based on the market information that the said company, as per Special Resolution passed on 29/11/2012 and the Board of Directors meeting held on 09/03/2013, had Rs.15 Crores in the equity of KDJ Hospital Limited wherein the company had existing equity of 40.76%. By making additional investment, the holding would be more than 75% and accordingly, the scrip exhibited a consistent Higher-Top Higher-Bottom pattern on its charts. It has also exhibited pattern of correcting and bouncing back from its 14 days moving average which also coincided with a lower-bottom in the charts. The stock was trading well above the long-term average i.e. 200 days moving average of the stock, which indicated that the long term trend of the stock was firmly up. The said shares were sold as the price of any script would be market driven. Since the assessee was an investor, when the prices were continuously falling, the assessee exited from the said script and booked losses to safeguard himself against future losses. The statement of Shri Nikhil Jain and Shri Bidyoot Sarkar as referred to by Ld. AO did not contain any reference to the assessee. The reliance on the said statement without any co-relation does not prove that the transactions were non-genuine. There was no evidence of any cash transaction and Ld. AO failed to bring on record any evidence to support the conclusions that the losses were not genuine. Rather the conclusions were based merely on surmises and conjectures. On the other hand, the assessee had furnished all the documentary evidences in support of the claim. 4.3 Finally, relying upon the decision of Hon’ble Bobay High Court in the case of CIT vs. Mukesh Ratilal Marolia (ITA 456 of 2007 dated 07/09/2011), the decision of Hon’ble Punjab & Haryana High Court in case of Pr. CIT vs. Prem Lal Gandhi (ITA No.95 of 2017 dated 18/01/2018) and the decision of Delhi Tribunal in Chander Prakash vs. ITO in (ITA No.6880/Del/2017 dated 12/03/2018), the impugned additions as well as consequential addition of estimated commission, as made by Ld.AO, was deleted. Aggrieved, the revenue is in further appeal before us.

Our findings & Adjudication

5. After having gone through the findings of Ld. CIT(A) in the impugned order, the undisputed fact that emerges are that the purchase as well as sale transactions have taken place on stock exchange through stock-broker. There is movement of shares in assessee’s demat statement. The transactions have taken place through banking channels and duly supported by broker’s contract notes, demat statements, ledger statements as well as bank statements. The assessee is regular investor in shares. The assessee has always maintained that the transactions were genuine. As against this, the only adverse material in the armory of Ld. AO is the investigation findings. However, the assessee has not been named in any of the statement. The assessee has denied having known Shri Nikhil Jain & Shri Bidyoot Sarkar whose statements form the very basis of doubting the assessee’s transactions. The assessee, as rightly pointed out by Ld. CIT(A), had duly discharged the onus to establish the genuineness of the transactions and the onus was on Ld. AO to dislodge them. However, except for mere allegations, there is no adverse material against the assessee and the additions are based merely on conjectures and surmises. Another aspect is that the provisions of Sec.68, as invoked by Ld. AO, had no applicability to the fact of the case. The invoking of wrong provisions would make the additions unsustainable in the eyes of law. Therefore, we are of the considered opinion that the issue has been clinched in the right perspective by Ld.CIT(A) in the impugned order. Finding no reason to interfere in the same, we dismiss the appeal.

6. From the above observation and by respectfully following the decision cited above, we hereby direct to delete the addition made u/s 68 of the Act.

11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that thtransaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from demat account and the consideration has been received through banking channels.

The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.

12. Mr. Hossain’s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above- stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue.

13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order.”

5. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present appeal. Accordingly, the same is dismissed.

Section 68 of the Income-tax Act, 1961 Cash credit (Bogus LTCG on sale of shares) - Assessment years 2014-15 and 2015-16 Assessee had sold shares of a company held by it and claimed exemption under section 10(38) on account of long-term capital gain (LTCG) arose on such sale of shares - Assessing Officer noted that there was astounding 4849.2 per cent jump in share prices of said company within a span of two years and financials of said company did not show any reason for such extraordinary performance of its stock - Thus, he concluded that assessee had adopted a colourable device of LTCG to avoid tax and, accordingly, made addition under section 68 treating such LTCG arose on sale of such shares as bogus It was noted that there was no dispute that shares of said company were purchased by assessee online and payments were made through banking channel - Shares were dematerialized and sales were routed from demat account and consideration was received through banking channels Assessing Officer simply proceeded on basis of financials of company to come to conclusion that transactions were bogus Assessing Officer had not made its conclusion on basis of any cogent material Finding of Assessing Officer was thus purely an assumption based on conjecture made by Assessing Officer Whether, on facts, impugned addition made under section 68 by treating impugned LTCG as bogus was unjustified and same was to be deleted - Held, yes [Paras 11 and 13 in favour of assessee]

11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels.” The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.

12. Mr. Hossain’s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue.

13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order.

Section 68 of the Income-tax Act, 1961 Cash credit (Share dealings) - Assessment years 2003-04 to 2006-07 Assessee declared capital gain on sale of shares of two companies. Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices. held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted Held, yes [Para 7] [In favour of assessee] It was revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange- words showed that the shares were purchased for code numbers S003 and R121 of STPL and RMPL pectively. Out of these two, only RMPL is listed in the appraisal report and it is stated to be involved in dus operandi It is on this material that the Assessing Offices holds that the transactions of sale and purchase of shares are doubtful and not genuine. In relation to assessee's role in all this, all that the Commissioner observed is that the assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the assessee to the accounted income and the assessee utilized the scheme Para 5] The Tribunal concluded that there was something more which was required, which would connect the assessee to the transactions and which are attributed to the promoters/directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not cared forward by the revenue. A copy of the DMAT account, placed before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available which gave details of the transactions. The contract note is a system generated and prescribed by the stock exchange. From this material, the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client code has been referred to. But the Tribunal concluded that same, by itself, is not enough to prove that the transactions in the impugned shares were bogus sham. The details received from stock exchange have been relied upon for the purposes of faulting the revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. [Para 6]

Section 10(38) of the Income-tax Act, 1961 Capital gains Income arising from transfer of long-term securities (Shares) Assessment year 2014-15 Assessee- individual engaged in business of trading in shares claimed long term capital gains arising out of sale of shares as exemption under section 10(38) - Assessing officer denied claim and made certain additions into assessee's income on grounds that said gains were earned through bogus penny stock transactions and companies to whom sold shares belonged were bogus in nature Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under section 10(38) High court by impugned order held that no substantial question of law. arose from Tribunal's order - Whether SLP against said impugned order was to be dismissed -Held, yes (Para 2) (In favour of assessee)

Capital gain-Share transaction-Addition-Deletion thereof-During course of assessment proceedings u/s 153A, it was noticed by AO that assessee had shown long term capital gain on sale of shares of company-AO treated share transaction as non-genuine transaction and amount was shown as long term capital gain on share transaction was added to income of assessee-CIT(A) deleted addition-Tribunal upheld order passed by CIT(A) and dismissed appeal of revenue-Held, assessee sold shares through MTL shares and Stock Broker limited which was SEBI registered Stock Broker-Payment for sale of shares was received through banking channels-All documentary evidence being in favour of assessee, deletion of addition made by CIT(A) was upheld by Tribunal-All these documentary evidences in favour of assessee were rejected by AO merely on basis of some casual replies given by assessee to AO- Documentary evidences were in favour of assessee and CIT(A) had passed very reasoned and speaking order-Dividend amount was received with regard to holding of shares and said amount was disclosed by assessee in his return of income and exemption was claimed accordingly-Thus, addition being without any logical basis was deleted-Revenue's appeal dismissed.

Held:

The CIT(A) examined the matter and the comments of the Assessing Officer in the remand report. It has been recorded by the CIT(A) that the purchase of shares in the financial year 2006-07 for an amount of Rs. 11 lakhs had been physically transferred in favour of the assessee in the books of the company namely GeeFCee Finance Limited. Further, the said shares were dematerialized and credited in the assessee's account maintained with depositary participant i.e. HDFC on 16.10.2006. The dividend amount of Rs. 1,50,000/- had been received with regard to aforementioned holding of shares on 23.10.2007. The said amount had been disclosed by the in his return of income and exemption was claimed accordingly. Thus, the addition being without any logical basis was directed to be deleted. (Para 4)

Assessee had sold shares through MTL shaes and Stock Brokers Limited as is noted by Assessing Officer in reply to question No.24 which is a SEBI registered Stock Broker. Furthermore the payment for sale of shares was received through Banking channels. All these documentary evidences in favour of the assessee were rejected by Assessing Offiver merely on the basis of some casual replies given by assessee to the Assessing Officer. However, the fact remains that all the documentary evidences are in favour of assessee and learned CIT(A) has passed a very reasoned and speaking order and we do not find any infirmity in the same."

14. The Hon’ble High Court of Bombay in the case of CIT Vs. Smt. Jamnadevi Agrawal, 328 ITR 656 (Bom) has observed as under: Income-Cash credit-Genuineness of share transactions-Assessees offered long- term capital gains arising from sale of shares-On the basis of material seized during the search in the case of various assessees who belong to H group, AO did not accept the capital gains and treated the entire sale proceeds of the shares as income from undisclosed sources under s. 68-Not justified-Fact that the assessees in the group have purchased and sold shares of the same companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence has been produced to establish the genuineness of the sale- Company has confirmed that it has handed over the shares purchased by the assessees-Similarly, the sale of shares to the respective buyers is also established by producing documentary evidence-Purchase and sale price of the shares declared by the assessees is in conformity with the market rates prevailing on the respective dates-Thus, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions-Tribunal has arrived at a finding of fact that the transactions were genuine-Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence-Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessees-Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises.

The fact that the assessees in the group have purchased and sold shares of similar companies hrough the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. The statement of the broker P that the transactions with the H Group were bogus has been demonstrated to be wrong by producing documentary evidence to the effect that the shares sold by the assessees were in consonance with the market price. On perusal of those documentary evidence, the Tribunal has arrived at a finding of fact that the transactions were genuine. Nothing is brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TT) (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished. (Paras 11 to 14 & 16)

Conclusion:

Assessees having established the genuineness of purchase and sale of shares by producing documentary evidence and declaring the purchase and sale price of shares in conformity with the market rates prevailing on the respective dates, the finding of the Tribunal that the transactions were genuine is a finding of fact based on documentary evidence on record and, therefore, no substantial question of law arises from the order of the Tribunal deleting the addition under s. 68.

7. In the facts of the present case also, we note that, the revenue has not been able to establish any of the requirements to justify the addition u/s 68 of the Act. We, therefore, do not find it fit to confirm the addition made by the Ld.AO. Accordingly, the additions made in relation to transactions with KDJ Holidayscapes Resorts Limited, stands deleted.

Accordingly, the grounds raised by the assessee stands allowed.

In the result, appeal filed by assessee stands allowed.