YOGESHKUMAR PRAVINKUMAR SHAH,MUMBAI vs. ASSTT. COMMISSIONER OF INCOME TAX 19(3), MUMBAI, MUMBAI

The ld. AR submitted that the assessee is a regular investor and has purchased the shares in M/s Sunrise Asian Ltd as part of his regular investment activity. The ld. AR in this regard drew our attention to the broker statement and the share certificate (page 91 to 93 of PB). The ld. AR further submitted that these shares were demated and subsequently sold in the market. The ld. AR also submitted that all the transactions of purchase and sale have bee routed through banking channel and in this regard took us through the various documentary evidences (page 27 to 73 of PB). The ld. AR submitted that the AO while holding the impugned transaction as non-genuine did not record any adverse finding with regard to the various documentary evidences submitted by the assessee. The ld. AR further submitted that the AO has merely reproduced the various findings in the report of the Investigation Wing and the statement recorded but has not recorded any finding as to how the assessee is linked to the alleged price rigging. The ld. AR also relied on the decision of the Co-ordinate Bench in the case of Lalitaben Pravin Shah vs. CIT (ITA No. 2008/Mum/2023 dated 05.04.2024) where under identical facts of sale of M/s Sunrise Asian Ltd. the Co-ordinate Bench has given relief to the assessee.

We notice that the assessee has furnished reply to the notice issued by the AO and the AO could not find any adverse features from the said reply. Further, the AO also could not disprove the share transactions by bringing any material on record. 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.

The Ld D.R placed his reliance on host of case laws to contend that addition relating to penny stock transactions has been confirmed in those cases. There should not be any dispute that the purchase and sale of shares reported by the assessee is a factual matter and each of the case has to be examined on the basis of facts prevailing therein. In respect of decisions rendered by co-ordinate Mumbai benches, we notice that they did not refer to the jurisdictional Bombay High Court decisions.

It is noticed that the AO did not establish any link between the assessee and the reports of investigation wing. At this stage, we may refer to the decision rendered by Hon’ble Supreme Court in the case of Adamine Construction P Ltd (99 taxman 45), wherein, while dismissing the appeal of Revenue, the Hon’ble Supreme Court has referred to the following observations made by Hon’ble Delhi High Court:- “What is evident is that the AO went by only the report received and did not make the necessary further enquiries – such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO.” The ld A.R placed his reliance on the decision rendered by Hon’ble jurisdictional Bombay High Court in the case of Shyam Pawar (54 taxmann.com 108)(Bom), wherein the Hon’ble Bombay High Court has observed as under:- “3. Mr.Sureshkumar 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 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 Yogeshkumar Pravinkumar Shah 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.Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted.

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.

We have perused the concurrent findings and on which heavy reliance is placed by Mr.Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in 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 Yogeshkumar Pravinkumar Shah 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 present Assessee utilized the scheme.

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.

As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar 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.

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 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.” 12. We may also refer to the decision rendered by Hon’ble Bombay High Court in the case of PCIT vs. Ziauddin A Siddique (Income tax Appeal No. 2012 of 2017 dated 4th March, 2022), wherein the Hon’ble Bombay High Court has observed as under:- “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.

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.

We notice that, in the instant case, the AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee. Hence the ratio laid down in the above said cases by the jurisdictional Hon’ble Bombay High Court shall apply to the facts of the present case. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the addition made by the AO. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the addition of sale proceeds of shares made u/s 68 of the Act.” 8. In the light of the above judicial precedence, when we examine the facts in the present case we notice that facts are identical. The assessee in the present case has discharged the onus by submitting the relevant details and the AO has not recorded any adverse findings with regard to the details submitted. Though the AO has elaborated the modus operandi and the findings of investigation wing, the AO in the assessment order did not record anything that links the assessee to the exit providers or entry operators or the assessee's involvement in price rigging. It is also relevant to notice that the assessee during the year under consideration has sold other shares and from the details of investments submitted, we see merit in the submission that the assessee is a regular investor. (page 18 to 20 of paper book). According we are of the considered view that the ratio laid down in the above case would apply to the present assessee also and therefore we direct the AO to delete the addition made with regard to the sale of shares of Sunrise Asian Ltd and the brokerage / commission thereon.