NARENDRA SHANTILAL BAPNA,NAVI MUMBAI vs. INCOME TAX OFFICER, WD-28(2)(3), MUMBAI, MUMBAI

1. On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition u/s 68 of Rs.2,33,24,050/- of entire sale consideration of STT paid listed shares of M/s Surabhi Chemicals & Investments Ltd on rejecting the appellant’s claim of Long term capital gain;

2. The Ld. CIT(A), before confirming the addition of sale consideration of shares of Rs.2,33,24,050/-, ought to have considered the understated vital facts, being; a) The correctness of the documentary evidences, being Contract-cum-bills, ledger account/confirmation of broker, D-mat statements, Bank statements, Share certificates, Bhav copy, etc. are not disputed by Ld. AO and Ld. CIT(A); b) The substantial increase in price of shares cannot be a sole reason to treat the bonafide transaction as non-genuine, since the appellant had sold the listed shares on floor of recognised Bombay stock exchange at prevailing market price; c) The period of holding of listed shares in appellant’s D-mat account exceeds 15 months and such shares had been sold on floor of BSE on which STT, Service Tax, etc. had been paid; d) The appellant, in statement recorded on oath u/s 131, had confirmed the transactions along with supporting documents; A.Y. 2014-15 Narendra Shantilal Bapna e) The SEBI had not framed any allegations and had not passed any contrary order against the appellant and stock broker; f) The appellant is not related to any directors/promoters and exit providers and the AO, inspite of appellant’s written request, had not provided the copies of contrary material/evidence and statements of 3rd persons for rebuttal and also did not allow an opportunity of cross examination; g) The genuineness of capital asset acquired in earlier year cannot be disputed in impugned year.

Sale consideration of 4,00,000 shares Rs. 2,32,79,435/- sold on floor of Bombay Stock Exchange on 28/10/2013 to 18/11/2013 Less: Cost of acquisition of shares Rs.10,00,000/- acquired on 26/03/2012 Long term capital gain Rs. 2,22,79,435/- 3.1 As per the assessment order, it was noticed by the AO from the Investigation Reports of various Directorates of Investigation(Income Tax), statements recorded during the assessment proceedings that long term capital gains booked by assessee was pre-arranged to evade taxes and launder money. The assessee had purchased 4,000 shares in physical form and sold 4,00,000 shares at sale consideration of Rs. 2,32,79,434/-,resulting in Long term capital gain of Rs 2,22,79,435/-, which was 22 times increase of the cost price. Facts revealed that such trading transactions of purchase and sale of shares were not effected for commercial purpose but to create artificial gains, with a view to evade taxes. The AO further observed that the order of BSE/SEBI had also A.Y. 2014-15 Narendra Shantilal Bapna given the similar finding that the prices of the shares were determined artificially by manipulations. The assessee failed to show any knowledge about the shares traded and having any knowledge about the fundamentals of the penny stock company. Even though the net worth of the company and the business activity were negligible, the share prices had been artificially rigged to unusual high. Exit Provider was shell company operated by well known entry operator as per finding of Investigation wing, Kolkata. It had no assets, employee, business or commercial activities. This proved that the transaction, which was a colorable devise as explained by the Hon’ble SC in the case of MC Dowell & Co. Ltd V/ СТО (154 ITR 148).It concluded that the funds amounting to Rs. 2,33,24,050/- which was the assessee's own unexplained money, were introduced in the form of LTCG of Rs. 2,22,79,435/- through a colorable device under a pre-meditated and well planned strategy. Before purchasing of alleged shares, the assessee did not even obtain independent valuation from a third party. The assessee had been confronted with all the evidence gathered and the issues mentioned above. The explanation was general in nature that as the transaction was through Stock Exchange and the payment was by cheque for purchase of shares, the transactions should be treated as genuine. Thus, considering the findings of the search/survey, of assessee, brokers, inquiries conducted in the case operators and the entry providers and the nature of transaction, the LTCG of Rs. 2,22,79,435/- claimed as exempt u/s A.Y. 2014-15 Narendra Shantilal Bapna 2,33,24,050/- by the assessee was disallowed and the entire amount received back as sales proceeds on sale of shares was added under section 68 of the act.

4. In the subsequent appeal, the ld.CIT(A) upheld the addition taking into account the facts narrated in the assessment order. He observed that the assessee was unable to file any satisfactory reply to justify the logic behind genuine purchase and sale of the above shares and failed to justify the genuineness of sudden increase and decrease of the prices of the shares . The AO had culled out proximate facts in each of the case , took into consideration the surrounding circumstances which came to light after the investigation, assessed the conduct of the assessee by recording statement issuing summon , took note of the proximity of the time between the buy and sale operations and also the sudden and steep rise of the price of the shares of the companies when the general market trend was admittedly recessive and thereafter arrived at a conclusion. He placed reliance on Principal Commissioner of Income-tax v. Swati Bajaj [2022] 139 taxmann.com 352 (Calcutta) and upheld the addition.

5. Before us, the ld.DR has placed reliance on the orders of authorities below.

6. The ld.AR made a detailed oral and written submissions inter alia stating that in order to justify the genuineness of long term capital gain, the assessee filed documentary evidences such as Contract notes-cum-sale bills, A.Y. 2014-15 Narendra Shantilal Bapna transactions confirmation of stock broker M/s L.F.C Securities Pvt. Ltd., bank statements, rate publication, Demat statements, Purchase bill, payment receipt, share certificate, Advertisement, Corporate announcements for bonus and stock-split, balance sheet of earlier years and other documents on record. The assessee had made off-market purchase of 4,000 shares of SCIL from M/s Sarvottam Advisory Services Pvt. Ltd. on 26/03/2012 at a purchase consideration of Rs.10,00,000/-, on making the payment through banking channel on 27/04/2012 and such shares were credited in Demat account on 05/07/2012. He received 36,000 bonus shares credited in his D-mat account on 23/08/2012 and such shares were sub-divided into 4,00,000 shares. The period of holding of shares by him, in his Demat account, exceeded 15-16 months. The acquisition of such shares was properly disclosed in balance sheet of the assessee of earlier years as ‘Investments’. The sale of shares were made on floor of Bombay Stock Exchange at prevailing market price through registered stock broker M/s L.F.C Securities Pvt. Ltd., on making the payment of Security Transaction tax, Service tax, etc. He delivered the shares through Demat account on 24/10/2013 and 07/11/2013 and received the entire sale consideration through banking channel from 31/10/2013 to 21/11/2013 through online mechanism of stock Exchange. The CIN Master data and record of the Stock Exchange discloses the present status of such listed company as ‘Listed’ and ‘active’.

A.Y. 2014-15 Narendra Shantilal Bapna 6.1 It was further submitted that during course of assessment, the AO recorded the statement of the assessee on oath u/s 131 of the Act wherein he confirmed the transactions and filed supporting documents on record. The AO and ld. CIT(A) disbelieved the transactions under the reason that substantial increase in price of shares is not in consonance to fundamentals of the listed company and prices of such shares was manipulated, in stock exchange, by certain operators and exit providers to provide accommodation entries to the beneficiaries. In this context, it was submitted that there is absolutely no involvement of the assessee in alleged rigging of share prices, since he purchased the shares at fair price and had sold such shares at prevailing market price on floor of BSE and he did not have any relation or connection with alleged operators and exit providers. It was submitted that SEBI vide final order dated 30/09/2021 had conducted an investigation against the listed company SCIL and other persons for the period from 01/08/2012 to 06/01/2015 and it had not passed any contrary orders against the assessee, listed company and stock broker M/s L.F.C Securities Pvt. Ltd. and had imposed a meager penalty of Rs.2,00,000/- on 2 unrelated persons. The SEBI’s order dated 30/09/2021 imposing the penalty of Rs.2,00,000/- on two unrelated persons would not disprove his transaction on understated reasons:- a) The para-18.1 at page-13 to15 of SEBI order discloses that the alleged manipulation of price was made during the period from 27/11/2012 to 21/03/2013. However, the A.Y. 2014-15 Narendra Shantilal Bapna appellant had sold the shares of such listed company on 28/10/2013 to 18/11/2013 (subsequent to disputed period), thus the allegations framed on unknown and unrelated entities would not hold any adverse bearing on the appellant; b) The SEBI, in concluding para-32 at page-21, had not imposed any monetary fine/penalty on the listed company and stock broker, however had imposed the nominal penalty of Rs. 2,00,000/- each on 2 unknown persons. The SEBI order does not disclose any sort of appellant’s involvement in alleged manipulation of share price; 6.2 The ld.AR further relied on the orders of coordinate bench of ITAT Mumbai on Seema Narendra Bapna (ITA No-1120/MUM/2024) and Smt. Bhavna Lalit Jain (ITA No-1016/Mum/2024) where same scrip was involvedand the ITAT had inter alia considered the SEBI orders and decided the issue in favour of the assessees.

10. We notice from the statement recorded by the AO from the assessee u/s 131 of the Act that the assessee herein is a Chartered Accountant. In the statement, the assessee has specifically stated that he is a long term investor, meaning thereby, he would not be watching the share price movements on day to day basis. Hence, we are unable to understand as to how that AO could observe that the assessee herein was ignorant of stock market operations. We also notice that the assessee has (a) purchased these shares by paying consideration through banking channels (b) dematerialized the shares and kept the same in the Demat account. (c) sold the shares through stock exchange platform (d) received the sale consideration through banking channels.

Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. As noticed earlier, the AO has not brought on record any material to show that the assessee was part of the group which involved in the manipulation of prices of shares. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee.

11. We may now refer to certain decisions rendered by Hon'ble Bombay High Court on identical issue. In the case of Shyam Pawar (supra), the Hon'ble Bombay High Court has observed as under:- "3. Mr. Suresh kumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding A.Y. 2014-15 Narendra Shantilal Bapna that findings of fact concurrently rendered by the Assessing Officer and the Commissioner are perverse. The Tribunal proceeded on the footing that onus was on the Department to nail the Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr. Suresh kumar, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted.

4. Mr. Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed.

6. It is in that regard that we find that Mr. Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present 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 carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 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 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 and 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 para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either.

7. As a result of the above discussion, we do not find any substance in the contention of Mr. Suresh kumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.

8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being A.Y. 2014-15 Narendra Shantilal Bapna converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law."

"2. We have considered the impugned order with the assistance of learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against the assessee that it has participated in any price rigging in the market on the shares of RFL.

3. Therefore we find nothing perverse in the order of the Tribunal.

4. Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different.

5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. In the case of CIT vs. Jamnadevi Agarwal (supra), the Hon'ble Bombay High Court held that the transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. In the case of PCIT vs. Indravadan Jain (HUF) (supra), the broker through whom, the assessee had carried out the transactions have been alleged to have been indulged in price manipulations and the SEBI had also passed an order regarding irregularities and synchronized trades carried out in the shares by the said broker. However, the evidences furnished by the assessee with regard to A.Y. 2014-15 Narendra Shantilal Bapna purchase and sale of shares were not doubted. Under these set of facts, the Hon'ble Bombay High Court held as under:- "....The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instruction slips and also received payment from Kolkata Stock Exchage. The cheque received was deposited in respondent's bank account. In view thereof, the CIT(A) found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The Tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal." In the instant case also, we noticed that the evidences furnished by the assessee to prove the purchase and sale of shares, payment made/received, entry/exit of shares in the demat account of the assessee etc., were not doubted with.

13. In the case of PCIT vs. Smt Krishna Devi (supra), the Hon'ble Delhi High Court has noticed that the reasoning given by the AO to disbelieve the capital gains declared by the assessee, viz., astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. Accordingly, the Hon'ble Delhi High Court affirmed the decision rendered by ITAT in deleting the addition of capital gains.

A.Y. 2014-15 Narendra Shantilal Bapna 15. We noticed earlier that the AO has assessed the Sale consideration of shares as unexplained cash credit u/s 68 of the Act. It is pertinent to note that the purchase of shares made in an earlier year has been accepted by the revenue. The sale of shares has taken place in the online platform of the Stock exchange and the sale consideration has been received through the stock broker in banking channels. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of sec. 68 of the Act.

16. Since we have held that the sale transactions of shares cannot be doubted with, the addition made by the AO with regard to estimated commission expenses is also liable to be deleted.

“6. We have duly considered the facts of the case, the contents of the assessment order, detailed submissions of the assessee as also various case laws. We also find that the co-ordinate benches of ITAT, Mumbai have in several cases considered similar cases of addition of LTCG arising out of Investigation wing Kolkata report in such penny shares.6. We note that transactions for purchase was undertaken in an off- line mode which is an acceptable mode and that of the sale of the Rama Rajiv Jagdale., AY 2014-15 aforesaid shares were undertaken on the stock exchange platform through the SEBI registered broker on which STT was levied and the consideration was routed through normal banking channel. The entire flow of these transactions is corroborated by relevant documentary evidences placed on record. While making the addition, there are no discrepancies pointed out by the Assessing Officer in the documents and the details furnished by the assessee. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, Ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case.

7. On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the company. According to him, sharp movement in the share prices of the aforesaid scrip is not justified. He has relied upon the search and survey operations conducted by the investigation wing of the Department at various locations in respect of alleged penny stock which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the ld. Assessing Officer of implicating the assessee is un- supported by any cogent material on record. The finding arrived at by the ld. A.Y. 2014-15 Narendra Shantilal Bapna Assessing Officer is thus purely Rama Rajiv Jagdale., AY 2014-15 an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged her burden by submitting the relevant documents, details of which are already extracted above, forming part of the paper book. 7.1. For our observations and findings, we place reliance on the decision in the case of CIT vs. Jamnadevi Agrawal [2012] 20 taxmann.com 529 (Bom), wherein it was held that transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon'ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Hon'ble Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 7.2. Reliance placed by the ld. Assessing Officer on the report of investigation wing without further corroboration based on cogent material does not justify the conclusion that the impugned transaction is bogus, sham and part of racket of accommodation entries. It does not prove that the assessee has carried out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of share prices. In absence of any such material, enquiry and examination, the addition made pertaining to receipt of sale consideration of the impugned transaction cannot be sustained. In our considered view, ld. Assessing Officer has not established that the assessee was involved in price rigging.

8. We note that ld. Assessing Officer has observed about the so called purchasers of shares sold by the assessee who have not been identified even though notices were issued u/s.133(6) of the Act. In this context, it is worth noting that impugned share sale transactions undertaken by the assessee are on the online digital trading platform of stock exchange of BSE which is a regulated market under the aggies of a regulator viz. SEBI. There is nothing on record from the market regulator SEBI for the relevant period which establishes the 'tainted' status of the scrip involved in the present case, so as to hold the share sale transactions as bogus/accommodation entry as alleged by the ld. AO. It is also important to note that the operations and modus operandi of this regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. Further, sale proceeds are received through the stock market process into the pre-identified bank account of the seller i.e., the assessee which cannot be tainted as 'unexplained or unaccounted or undisclosed' money for the addition made u/s. 68 by the ld. Assessing Officer.

A.Y. 2014-15 Narendra Shantilal Bapna 8.1. Section 68 of the Act essentially requires the assessee to explain the nature and source of the sum credited in his books of account to the satisfaction of the ld. Assessing Officer. Time and again, Hon'ble Courts have held the requirement of establishing the identity and creditworthiness of the party and genuineness of the transaction to meet the said requirements of section 68. In the present set of facts, as already stated above, operations and modus operandi of the regulated stock markets (BSE) does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. Meeting this requirement is an act of impossibility of performance expected from the assessee for the transaction executed on SEBI regulated, digitally operated stock exchange. For the third limb of genuineness of the transaction, sale proceeds are received through the stock exchange process into the pre- identified bank account of the seller i.e., the assessee. Further, it is not a case of mere book entry where a possibility of tainting it as bogus or sham exists but it is a case where actual movement of dematerialised shares has taken place from the DMAT account of the assessee. In our considered view, assessee cannot be put to the rigors of section 68 in respect of sale proceeds received for sale of shares on the stock exchange (BSE) and gain arising thereon.

10. We note that ld. Assessing Officer has not brought on record any material to show that assessee was part of any group which was involved in the manipulation of share A.Y. 2014-15 Narendra Shantilal Bapna prices. Suspicion by the ld. Assessing Officer on the purchase and sale of shares is baseless. We also note that ld. Assessing Officer did not allow the assessee to cross examination the parties whose statements were relied upon by him for drawing the adverse conclusion. Such an approach adopted by ld. Assessing Officer is not in compliance with the provisions of section 142(3) of the Act which is a statutory mandatory procedural requirement for making a valid assessment. We note that the required compliance with section 142(3) has not been met.

12. For our observations and to arrive at the findings, we find force of binding nature from the decisions of Hon'ble High Court of Bombay being a jurisdictional High Court: i) Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3- 2022] held as under:- "1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was DMATed and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?"

3. Therefore we find nothing perverse in the order of the Tribunal."

5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

13.1. However, we note that there are several decisions of Hon'ble Jurisdictional High Court as stated supra which are in favour of the assessee. Ld. Counsel had also placed A.Y. 2014-15 Narendra Shantilal Bapna on record the decision of Coordinate Bench of ITAT, Mumbai in the case of Chirag TejPrakash Dangi vs. ITO in dated 20.02.2024 wherein the decision was held in favour of assessee in respect of long term capital gain earned by him on the same scrip, i.e.Surbhi Chemicals & Investments Ltd. as in the present case for which the claim of exemption u/s. 10(38) was allowed. Accordingly, the same would prevail on the issue before this Tribunal in the present case. Further, decision of the Hon'ble Non-Jurisdictional High Court carries only a persuasive value. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon'ble Non-Jurisdictional High Court. Hon'ble Supreme Court emphasised therein that the orders of Tribunal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher appellate authorities. The Hon'ble Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline.

13.2. Respectfully following the same, we deem it fit and appropriate to follow the decisions of Hon'ble Jurisdictional High Court of Bombay referred supra which carries force of binding nature, wherein the impugned issue is decided in favour of the assessee. Moreover, when there are conflicting decisions of various High Courts on the same issue, the Hon'ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC) had held that construction that is favourable to the assessee should be adopted. Hence by following this principle, reliance placed by ld. Sr. DR on the above referred decisions do not hold their fort. Further in the present case, we find that assessee has duly established the nature and source of credit representing sale proceeds of shares of Surbhi Chemicals & Investments Ltd.

14. Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as Rama Rajiv Jagdale., AY 2014-15 discussion and observations made herein above, we uphold the finding arrived at by the ld. CIT(A) and accordingly delete the addition made u/s 68 towards proceeds of sale of listed shares of Surbhi Chemicals & Investments Ltd. which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the Revenue in this respect are dismissed.

8.1 Before parting, we may also refer to the order of hon’ble Calcutta High Court in the case of Swati Bajaj(supra) in which similar claims have been upheld in favour of the revenue. However, as stated in the preceding para, there are several contrary decisions of the jurisdictional High Court in favour of the assessee where the issues are same. We have already relied on the said ratio laid down by the Hon'ble Bombay High Court which has binding effect.

9. Considering the above discussion, the facts on record and the legal position emerging out of catena of decisions of the jurisdictional High Court and direct decisions rendered by the co-ordinate benches of Mumbai, ITAT(supra), and respectfully following them, we hold that the addition made by the AO u/s 68 of the Act in the year under consideration is not justified and devoid of any merit. The claim of the assessee u/s 10(38) of the Act has been based on facts which could not be rebutted by the AO. The documentary evidences could not be rejected without bringing on record any substantial A.Y. 2014-15 Narendra Shantilal Bapna piece of evidence and not on the basis of admission of certain individuals. Apparently, the ld.CIT(A) in the appellate order has, in a preconceived manner dittoed the assessment order rather than adjudicating by way of independent application of mind on his part. We have no hesitation in deleting the addition. The AO is therefore, directed to delete the impugned addition made thus, allowing the grounds of appeal.

Order pronounced in the open court on 18/11/2025.