MR. KUSH N. SHAH,MUMBAI vs. ITO, WARD-21(2)(1), MUMBAI

आदेश / O R D E R PER SANDEEP GOSAIN (JM): The present appeal has been filed by the assessee challenging the impugned order dt. 20.09.2023 passed under section 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2015-16. The assessee has raised the following grounds of appeal: -

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on account of sale of shares of GCM Securities. However, the said exemption sought by the assessee was denied by the Assessing Officer on the ground that the scrip M/s. GCM Securities was a penny stock and consequently, made addition u/s.68 of the Income Tax Act. Although assessee challenged the said additions before the ld. CIT(A), but the appeal of the assessee was rejected.

6.0 Second ground of the appellant relates to treating long term capital gain of Rs. 1,53,89,356/- as unexplained cash credit under section 68 and making addition under the head income from other sources. The relevant part of the submission is as under- "The appellant had filed his reform of income in Form ITR- 4 for AY 2015-16 disclosing total income of Rs. 7,97,130/- and exempt income of Rs. 1,56,91, 795/- which includes Profit from Partnership Firm, Dividend from shares and Capital Gain u/s 10(38). The appellant had made complete disclosure of all the transactions which were required while filing his return of income. Thereafter the case of appellant was selected for complete scrutiny and accordingly notices u/s 143(2) & 142(1) of the Income Tax Act 1961 were issued to the appellant in response to which the appellant had made all the compliances and provided all the details, explanations and submissions as desired by Ld. A.O. The appellant

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during the year under consideration had sold/shares of M/s GCM securities which were purchased by him during FY 2012-2013 through preferential allotment. Details of transactions (date wise) of GCM Securities shares are as follows: Sr. No. Particulars Date 1 Purchased 24,000 Share of Rs. 12/02/2013 10/- each for Rs. 20/-(including premium of Rs. 10/-) of GMC Securities Ltd. 2 Payment of Rs. 4,80,000/- 12/02/2013 made for Purchase of above mentioned shares 3 Sold 15,200 shares of GCM July 2014 to Securities Ltd. October 2014 4 Balance 8,800 shares of Rs. 30-10-2014 10/- each was subdivided into 88,000 shares of Rs. 1/- each 5 Sold balance 88,000 shares of November 2014 GCM Securities Ltd. to March 2015

From the above mentioned facts it is clear that the appellant had purchased 24,000 shares of GCM securities Ltd for Rs 4,80,000. The appellant is engaged in investments of shares crores as on 31st March, 2014 and since financial year 2000 and having a portfolio of Rs. 2.70 crores Fes 2.78 crores as on 31st March, 2015 The total Investment made by the appellant in the shares of GCM securities is only Rs. 4,80,000/- which is barely 2% of the entire portfolio of the appellant. The appellant during the year sold the shares of GCM securities Lid and had earned profit from sale of these shares, which any prudent investor would do. During the course of assessment proceedings a statement of the appellant

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was recorded. At the time of recording the statement, the appellant had also completely disclosed the facts that how he had purchased and sold the shares in the open market. However ignoring all the above facts and submissions made by the appellant during the course of assessment proceedings, the Ld A.O. has treated the said transaction done by the appellant as ingenuine and made addition of Rs. 1,53,89,356 as unexplained cash credits u/s 68 of the Income Tax Act, 1961 under the head income from other sources in respect of sale proceeds from sale of GCM securities Ltd shares during the year. The Ld. A.O. has treated the said sale of shares as non- genuine merely on the basis of finding of the search operations conducted by Income Tax Department, Kolkata Wing. Further the Ld. A.O. in his letter dated 18.12.2017, had mentioned that, "(1) You have invested in M/s GCM securities which was not even invested on Stock exchange, it was an off market transaction. (2) Even though you were aware of the financials of the scrip, you chose to invest. (3) You were also aware of the fact that this being an off market transaction the share would be allotted in the physical form only and then those would be required to be dematerialized though at the time of allotment of the share, you had demat account." In this regard, the appellant humbly submit that the allegation made by the Ld. A.O. is completely baseless. It is nowhere mentioned that any investor who wishes to invest in any shares is required to purchase the shares in dematerialized form only. (1) The appellant at the time of recording his statement has mentioned that the shares of GCM securities limited was purchased under preferential allotment and received the shares in physical form. The appellant had purchased 24000 shares of Rs. 20 each for a total consideration of Rs. 4,80,000/- for which payment was made from HDFC bank of the appellant. Further there is no mandatory requirement under the Company Act that the shares cannot be issued in physical form. It is wholly at the

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option of the company that whether the shares are to be issued in physical or dematerialized form. (2) Some financial advisor had advised the appellant that the GCM securities Limited had expanding its business activities in near future. On the advice received, the appellant had invested meager amount i.e. 2% of the entire portfolio. Further it is nowhere a mandatory requirement for the investor that the company should have business activities at the time of investments. Also investments in new startup company are made on the basis of their future plan and business prospective. Therefore it is clear that there is no requirement, that there needs to be good financial track record in order to make any investment in the company. (3) The appellant had invested in the shares and received the same was dematerialized in his demat account maintained with HDFC bank. Thus the allegation of the Ld. A.O. that just because the appellant had received the shares in physical form the transaction was done by the appellant to introduce his unexplained money into books of accounts is purely on basis of assumptions, incorrect and bad-in-law Further the transactions done by the appellant is on the floor of Bombay Stock Exchange through a SEBI registered members/ share brokers on thee trading platform of the exchange. The appellant has also paid STT on the said transactions. The payment was made to and received from the brokers through banking channel, which are properly reflected in the bank statements as well as in the ledger account of the broker. The appellant has earned the LTCG from sale of GCM securities Limited shares during the year and also claimed LTCG as exempt u/s 10(38) of the Income Tax Act, 1961. The appellant during the course of assessment proceedings had submitted various documents before the Ld. A.O. to support the genuineness of the transactions which are as follows:

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a) Copy of Computation of Income (Page No. 24). b) Copy of Bank Statement (Page No 30 to 42) c) A detailed working of Long Term Capital Gain (Page No. 43 to 44). d) Copy of Contract Noles (Page No. 45 to 65). e) Ledger copy of Broker (Page No. 66 66.to to 69) f) Copy of Scrap wise Transaction Report (Page No. 70 The appellant had submitted all the supporting documents to prove the transactions as genuine in nature and to justify his claim as exempt income u/s 10(38) of the Income Tax Act, 1961 For claiming the benefit of exemption u/s 10(38) three conditions are required to be fulfilled by the appellant.  First the share should be held for more than one year,  second it should be listed and sold on recognized stock exchange and  third on the said sale, necessary security transaction tax (STT) has been paid On perusal of the above details provided by the appellant during the assessment proceedings it is clear that the appellant has fulfilled all the 3 conditions to claim the LTCG as exempt u/s 10(38) of the Income Tax Act, 1961. The action of the Ld. A.O. for treating the transaction of the appellant as non- genuine and bogus LTCG is bad in law. The Ld. A.O. has considered the sale transaction of the above shares as non-genuine by made an addition of Rs. 1,53,89,356/ u/s 68 of the treating the shares as penny stock and made Income Tax Act, 1981. The appellant has done all the transactions on the floor of BSE through arty reflected in the bank a registered share broker Le. Pune Stock Broking Pvt. Ltd. The payment was made to and received from the brokers

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through banking channel, which are property statements as well as in ledger account of the broker. The assessee has earned the LTCO from sale of these shares and claimed LTCG as exempt w's 10(38) of the Income Tax Act, 1951 The sale of shares cannot be disputed as the same have been undertaken through the recognized share broker and also on the floor of Bombay Stock Exchange and STT was also paid thereon. The Sale consideration is also received in the bank account through proper banking channels from the stock broker during the year. The appellant and the buyer of shares sold has not done any private contract since the shares are sold on the floor of recognized stock exchange ie. Bombay Stock Exchange where the said shares are listed. The appellant does not know who is the buyer and to whom the shares have been sold. The transaction was undertaken through the recognized share broker and the appellant was concerned with the sale consideration which has been received through the share broker. The Ld. A.O. has treated the script of GCM Securities Limited as penny stock. The shares of the said script are still listed on stock exchange. There has been regular trading of shares after the allotment of shares to the appellant. The following details of the said company are as under: From the analysis of the above facts, it is clear that if any above that if any wrong doing was revealed in this From the analysis of the share of GCM Secunties Lte duing the investigation carried out by the Income Tax department, then why the shares of this company are continued to be listed since then and also normal trading has been allowed till the date on the floor of BSE. Therefore, the allegation that the amount of Rs. 1,53,89,356/- claimed as exempt income on account of Long Term Capital Gain is unaccounted money/ income of the appellant for which a colorable device of bogus LTCG was used to evade tax is not correct. The Ld. A.O. has made the above additions totally in mechanical manner without application of mind, with his own

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permutation and combination and assumption and presumption basis without considering the facts of the case & submissions made by the appellant on record during the course of assessment proceedings. We rely on the following judicial decisions. Aparna Misra v. ITO, Ward-23(4), Kolkata, (ITAT Kolkata) "We further note that the Id. D.R. except relying heavily on the orders of the lower authorities could not bring to our attention any material to show that the documents placed before us were sham, bogus or there was any factual infirmity therein. The Id. D.R. also could not controvert the Id. A.R's submissions that the disallowance was made solely on the basis of the report of the Investigation Wing in the shares of M/s KAFL. The Id. D.R. could not bring to our attention any material or evidence from which one could infer that the transactions in shares of M/s GCM Securities Limited were either manipulated or sham or that any enquiry was conducted either by the Investigation Wing or by the AO in respect of assessee's transactions in shares of M/s GCM Securities Limited.. Aparna Misra v. ITO, Ward-23(4), Kolkata, (ITAT Kolkata) "The fact that investigation was conducted by the Investigation Wing of the IT Department in the shares of M/s KAFL. Further, as per the concluding findings of the assessment order, the assessee's claim was for exemption in respect of shares of M/s GCM Securities was rejected on the ground that the Investigation report proves that the transactions in shares of M/s KAFL was bogus. In the assessment order it was found that except for making reference to the material report of M/S. KAFL AO did not bring on record any tangible material on the basis of which he could hold that the appellant's transaction in M/s GCM Securities Ltd was bogus or sham. No worthwhile enquiry was conducted by the AO before drawing adverse inference against the appellant. Even though the shares were sold through registered stock broker no attempt to make enquiries from the said broker was made by the AO but based on suspicion & surmise prompted by the material/report of Investigation Wing in transactions of M/s. KAFL, the AO

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presumed that the appellant's transactions in shares of M/s GCM Securities Limited was also bogus. Therefore there was no independent and objective application of mind by the AO in respect of the appellant's transactions in the shares of GCM Securities Limited and the ultimate disallowance was prompted solely based on the facts discussed by the AO in respect of transactions in M/s KAFL shares." Vijayrattan Mittal vs DCIT [01.10.2019] 3311/Mum/2019 (ITAT-Mumbai) "S. 10(38)/68: Bogus LTCG from penny stocks. The fact that a scam has taken place in some penny stocks does not mean that all transactions in penny stocks can be regarded as bogus. In deciding whether the claim is genuine or not, the authorities have to be guided by the legal evidence and not on general observations based on statements, probabilities, human behavior, modus operandi etc. The AO has to show with evidence the chain of events and live link of the assessee's involvement in the scam including that he paid cash and in return received exempt LTCG gains (Sanjay Bimalchand Jain 89 TM 196 (Bom) distinguished)" Meghraj Singh Shekhawat vs. DCIT ITA 443 & 444 (Jaipur - Trib.) "Where assessee had produced relevant record to show allotment of shares by company on payment of consideration by cheque and assessee dematerialized shares in D-mat account and Assessing Officer had not brought any material on record to show that assessee had paid over and above purchase consideration, I could not be held that assessee had introduced his own unaccounted money by way of bogus long- term capital gain." Vidhi Malhotra vs ITO [2019] 101 taxmann.com 361 (Delhi-Trib.) "Where once purchase and sale of shares had been made through Bombay Stock Exchange and routed through DMAT account, sale proceeds had to be reckoned from sale of such shares and would be treated as explained credit or investment,

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and, thus, long-term capital gain shown by assessee was genuine and consequently, liable for exemption under section 10(38) Mahavir Jhanwar vs. ITO ITAT Kolkata - dated 01.02.2019 "S. 10(38) Bogus long-term capital gains from penny stocks: If the assessee has filed evidences for (a) purchase of shares, (b) payment by account payee cheque, (c) balance sheet disclosing investments, (d) demat statement (e) evidence of sale of shares through stock exchange, (e) bank statement reflecting sale receipts, (1) brokers ledger, (g) Contract Notes etc, the gains cannot be treated as bogus on human probabilities, suspicion, conjectures and surmises." Commissioner of Income-tax-13 v. Shyam R. Pawar [2015] 54 taxmann. com 108 (Bombay HC) Where DMAT account and contract note showed details of share transaction, and Assessing Could not be treated as unaccounted income under Section 68 Officer had not proved sad transaction as bogus, capital gain earned on said transaction CIT Vs Shri Mukesh Ratilal Marolia (Bombay HC) "Fact that a small amount invested in "penny" stocks gave rise to huge capital gains in a short period does not mean that the transaction is "bogus" if the documentation and evidences cannot be faulted." Ramesh Kumar Jain (HUF) v. Deputy Commissioner of Income-tax [2013] 36 taxmann.com 524 (Jodhpur - Trib.) "Section 10(38), read with section 153C, of the Income-tax Act, 1961 Capital gains - Income arising from transfer of securities (Burden of proof) - Assessment year 2008-09 - Assessee-HUF derived long-term capital gain from sale of shares of two companies and such capital gains was claimed as exempt under section 10(38) Assessing Officer having found that alleged purchaser of shares from assessee was engaged in

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fraudulent billing activities, treated transaction of shares as bogus and accordingly denied exemption under section 10(38) Whether since entire proof of purchase and sale of these shares were found in books of account of assessee and sale of shares was found genuine when Assessing Officer made enquiries from stock exchange directly, addition on account of undisclosed income and denial of exemption under section 10(38) could not be sustained-Held, yes (Para 17][in favour of Income-tax Officer, Ward 2, Nizamabad vs Smt. Aarti Mittal [2014] 41 taxmann.com 118 (Hyderabad-Trib.) "Where assessee having purchased shares in physical form, converted them in D-Mat form and thereupon sale of those shares was carried out through recognized stock exchange after paying securities transaction tax, said transactions were to be regarded as genuine in nature and, therefore, assessee's claim for exemption under section 10(38) was to be allowed." Pratik Suryakant Shah v. Income-tax Officer, Ward- 10 (3), Ahmedabad [2017] 77 taxmann.com 260 (Ahmedabad Trib.) "Section 10(38), read with section 147, of the Income-tax Act, 1961-Capital gains - Income arising from transfer of long term securities (Bogus transactions) - Assessment year 2006-07- Assessee purchased 3000 Shares of company 'T' through a stock broker - These shares were transferred to assessee's demat account However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assessee was one of beneficiary of such accommodation entries Assessing authorities reopened assessment of assessee Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assessee, assessee's claim of exemptions of long-term capital- gain on sale of shares could not be denied on basis of submission of said broker- Held, yes (Paras 17 and 18] [In favour of assessee)"

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DCIT vs. Sunita Khemka (ITAT Kolkata) [2016-ITRV-ITAT- KOL-057] "The AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money A transaction of purchase and sale of shares, supported by Contract Notes and dermat statements and Account Payee Cheques cannot be treated as bogus" ITO vs. Indravadan Jain (HUF) Dt. 27/5/2016 (2016) 47 CCH 0303 Mum-Trib "Long-term capital gains arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiating an inquiry with regard to the Company & the broker if the shares are purchased from the exchange, payment is by cheque and delivery of shares is taken & given." Farrah Marker vs. ITO DE 27/04/16 (2016) 46 CCH 0535 Mum-Trib "When the addition under section 68 of the Act is made merely on presumptions, suspicions and surmises in respect of penny stocks; disregarding the direct evidences placed on record furnished by the assessee than the addition made is liable to be deleted. Long-term capital gains on sale of "penny" stocks cannot be treated as bogus & unexplained cash credit if documentation is in order & there is no allegation of manipulation by SEBI or BSE. Denial of right of cross examination is a fatal flaw which renders the assessment order a nullity Surya Prakash Toshniwal HUF vs. ITO (ITAT Kolkata) ITA No. 1213/Kol/ 2016 "Bogus capital gains from penny stocks: Long-term capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI

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norms and is not traceable does not mean that the assessee is at fault Ms Meenu Goyal Vs ITO, Ward-31(1) New Delhi (ITAT- New Delhi) "Bogus Capital gains from penny stocks Capital gains from penny stocks cannot be assessed as unexplained cash credit's 68 If the assessee has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not has not relevant if the same is substantiated. Smt. Pramod Jain Vs The DCIT Circle 3 Jaipur (ITAT Jaipur) "Bogus penny stock capital gains: Failure to provide a copy of the statement relied upon and of cross-examination renders the assessment order void. The claim of capital gains from penny stocks cannot be denied on presumption and surmises by disregarding direct evidences relating to the sale/purchase transactions of shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account." Sunil Prakash vs. ACIT (ITAT Mumbai) "S. 68 bogus gains from penny stocks: If the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment receipt of shares in and from the D-mat account, ate cannot be treated as Bogus transaction so as to attracts. Pr CIT vs. Prem Pal Gandhi (P&H High Court) "Bagus capital gains from Penny stocks: The fact that the appreciation in the value of the shares is high does not justify

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the transactions being treated as follows and the capital gains being assessed as undisclosed income (6) the shares are traded on the Stock Exchange, (b) the payments and receipts are routed through the bank, (c) there is no evidence to indicate if is a closely held company and (d) the trading on the Stock Exchange was manipulated in any manner. ITO vs Ramkrishna Reddy (ITAT Hydrebad) "Bogus Long-term capital gains: As neither the statement of Mukhesh Choksi was provided to the assessee nor cross- examination was allowed and it was not even placed on record, the action of the AO in treating the LTCG and STCG as income from other sources was not warranted." Prakash Chand Bhutorla vs, ITO (ITAT Kolkata) "S. 68 Bogus Capital Gains from Penny Stocks: 31000% increase in value of shares over 2 years is highly suspicious but cannot take the place of evidence. The addition cannot be made based on generalizations. Evidence collected from third parties cannot be used against the assessee without giving copy & an opportunity to rebut the same." OME TAX DEPAR Navneet Agarwal vs ITO (ITAT-Kolkata) "Bogus Capital Gains From Penny Stocks: In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of the assesee's action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assessee." ITO vs. Arvind Kumar Jain HUF (ITAT Mumbai) "Bogus capital gains from penny stocks: If the DMAT account and contract note show details of the share transactions and the AO has not proved the transactions to be bogus, the capital gains earned on the said transactions cannot be treated as

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unaccounted income u/s 68. The fact that the broker was tainted and violated SEBI regulations would not make assessee's transactions bogus." HUMBLE PRAYER In view of the above facts of the case and in law the appellant humbly submits that the addition of Rs. 1,53,89,356 should be deleted for which the appellant shall ever remain grateful and oblige."

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10(38) of the Income Tax Act. It was further submitted that the shares were held by the assessee for more than one year and those were listed and sold on recognized stock exchange and on the said sale, necessary security transaction tax (STT) has been paid. We further noticed that no fault has been found by the Assessing Officer in the documents relied upon by the assessee however, we noticed that the claim of the assessee was rejected merely by holding that the said scrip was penny stock. However, in this regard the Assessing Officer has not brought on record any evidence to prove that the said scrip was a penny stock and even otherwise we noticed that the said scrip was already scrutinized by different judicial authorities and the co-ordinate Benches of the Tribunals have held that when once the assessee has submitted all the documentary evidences to prove the genuineness of the transaction then, addition cannot be made merely because of some information received that there was price manipulation and without establishing the assesse’s involvement. In this regard reliance is placed on following decisions:

a. ITO vs. Mitesh Mehta HUF, ITA 2280/MUM/2024 (Mumbai Tribunal)

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“It is noted that transactions were undertaken through the SEBI registered broker Motilal Oswal on the stock exchange platform 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 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. The 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. [Para 7] On the perusal of records, it is discernible that the 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 Assessing Officer of implicating the assessee is un- supported by any cogent material on record. It is also a fact on record that assessee is a regular investor, more importantly, its karta being a professionally qualified Chartered Accountant, holding shares in large number of scrips. The finding arrived at by the Assessing Officer is thus purely an assumption based on conjectures and surmises. On a thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already noted above, forming part of the paper book. [Para 7.1] Reliance placed by the 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

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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. It is viewed that the Assessing Officer has not established that the assessee was involved in price rigging. [Para 7.1] The CIT(A) has made point wise elaborate exposition on each of the aspect alleged by the Assessing Officer. The CIT(A) has dealt with both, fact and jurisprudence relating to the transaction undertaken by the assessee. [Para 8] Taking into consideration the above fact based thoroughly analysed findings by the CIT(A) and the submissions made by the assessee corroborated by relevant documentary evidences, there is no reason to interfere with the said findings so arrived by the CIT(A).[Para 8.1] In addition to the above stated findings of the CIT(A), reliance was placed on the decision in the case of CIT v. Smt. Jamnadevi Agrawal [2012] 20 taxmann.com 529/328 ITR 656 (Bombay), 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. One draws force from the decision of the High Court of Delhi in the case of Pr. CIT v. Smt. Krishna Devi [2021] 126 taxmann.com 80/279 Taxman 148/431 ITR 361 (Delhi) wherein the High 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.[Para 9] Further, revenue in its ground of appeal has contended that issue is a covered matter by the decision in the case of Pr. CIT v. Swati Bajaj [2022] 139 taxmann.com 352/288 Taxman 403/446 ITR 56 (Calcutta). In the said decision, it was held that assessee had to establish the genuineness of rise in price of shares within a short period of time that too, when general market trend was recessive. However, it is noted that there are several decisions of the Jurisdictional High Court as stated supra which are in favour of the assessee. Accordingly, the same would prevail on the issue before this Tribunal. In the present case, decision of the Non-Jurisdictional High Court carries only a persuasive value. The law is very well settled by the Supreme Court in the case of Union of India v. Kamalakshi

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Finance Corporation Ltd. [1991] 55 ELT 43 (SC) that the decision of Hon''ble Jurisdictional High Court would have higher precedence value on the Tribunal than the decision of the Non- Jurisdictional High Court. The 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 Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline. Respectfully following the same, it is deemed fit and appropriate to follow the decisions of the Jurisdictional High Court of Bombay referred supra 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 Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 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 revenue on the decision of the Calcutta High Court in Swati Bajaj (supra) does not hold its fort. Further in the present case, it is found that the assessee has duly established the nature and source of credit representing sale proceeds of shares of GCM. Accordingly, grounds taken by the revenue in this respect are dismissed. [Para 11] Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as detailed analytical findings arrived at by ld. CIT(A), there is no reason to interfere with the first appellate order whereby addition made u/s 68 towards proceeds of sale of listed shares of GMC which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38) has been deleted. Accordingly, grounds taken by the revenue in this respect are dismissed.[Para 12] Addition made by the Assessing Officer on estimate basis towards commission for arranging alleged artificial capital gains @ 3% amounting to Rs. 2,97,549/- is consequential to the addition made towards receipt of sale proceeds of alleged penny stock. Since the deletion of the said addition towards sale proceeds of alleged penny stock is upheld in terms of above stated observations and findings, this consequential addition of commission also receives the same fate, affirming the finding of ld. CIT(A) to this effect. Accordingly, grounds taken by the revenue in this respect are dismissed. [Para 13]

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In the result, appeal of the revenue is dismissed.

b. DCIT vs. Indrakumar G. Agrawal, ITA 220//NAG/2023 (Nagpur Tribunal) “11. In the aforesaid case, the Ld. AO had treated the sale proceeds of shares as unexplained cash credit u/s. 68 of the Act and made further addition towards alleged commission expenditure u/s. 69C of the Act. The Tribunal, after examining the documentary evidences such as share allotment advice, demat account statements, contract notes and banking transactions, held that the sale proceeds arising from the sale of such shares could not be treated as unexplained cash credit u/s. 68 merely on the basis of general investigation reports or on the theory of human probabilities in the absence of any direct evidence linking the assessee with price manipulation or accommodation entries and accordingly allowed the exemption u/s. 10(38) of the Act in respect of the long-term capital gain arising from such transactions, while also deleting the addition made under section 68 & 69C of the Act. The facts of the present case are similar to the facts considered by this Bench in the aforesaid decision and (Indrakumar Ghisulal Agrawal) the scrip involved is also the same. Therefore, the findings recorded by this Tribunal in the said decision squarely applicable to the facts in the case at hand. Respectfully following the aforesaid decision of this Bench, we find no infirmity in the order passed by the Ld.CIT(A) in deleting the additions made by the Ld. AO u/s. 68 & 69C and allowing exemption under section 10(38) of the Act. 12. In the result, appeal by the Department stands dismissed. c. Rameshwarlal Mathuraprasad (HUF) vs. ACIT, ITA - 37/NAG/2025 (Nagpur Tribunal) “Considering the totality of facts and on examination of evidence on record, we hold that the assessee has explained the transaction of purchase and sale of shares satisfactorily. Transaction of sale of shares is hereby held to be genuine and bona fide considering the legal evidence available on record. Legal position on the subject discussed hereinabove fully

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supports the assessee’s case as to the addition made by the Assessing Officer is unjustified and unsustainable. In view of the foregoing discussions, we hold that he sale consideration received on sale of shares cannot be assessed as unexplained cash credit under section 68 of the Act. Long term capital gains declared in the return of income and exemption claimed hereby accepted as shown in return of income. Accordingly, we direct to delete the impugned addition made at Rs. 1,50,73,436. Hence, the grounds raised by the assessee are allowed.” d. Vishala Hitesh Loonia vs. ACIT, ITA 1668/AHD/2019 (Ahmedabad Tribunal) “6.2 We note that the facts of the assessee and the above cases are similar. The assessee has sold the shares of GCM securities Ltd, which were the shares of the same company in respect of which the above decisions have been rendered in favour of the assessee on similar set of facts. No specific allegation has been made by any of the entry operators alleging that the assessee has engaged in sham/bogus transaction on sale of the above shares. Nothing has been brought on record to substantiate that the assessee’s own unaccounted money was used to purchase the shares on which capital gains has been earned by the assessee. The entire case of the Revenue is based on the report of the Investigation Wing, however, no specific material/information has been found specifically implicating the assessee and the addition is based on the general modus operandi in connection with sale of shares to earn bogus capital gains. The assessee, admittedly has carried out or transactions through banking channels/DMAT account. The only allegation of the Revenue is that the scrip which the assessee sold was identified by the Directorate of Income Tax (Investigation), Kolkata in which large scale rigging was done to allow benefit of bogus LTCG entities to several beneficiaries. Therefore, respectfully following the decision in the case of Smt. Aparna Misra ITA 161/Kol/2019 and Smt. Rachna Agarwal 404/Kol/2021, which have been rendered on similar set of facts, we are of the considered view that Ld. CIT(A) has erred in facts and in law in in allowing the assessee’s appeal. 7. In the result, the appeal of the assessee is allowed.”

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e. Smt. Rachna Agarwal vs. ITO Ward, 28(4) Kolkata, ITA No. 404/Kol/2021 “24. In the present case we find that the entire addition is on the basis of some investigation report, the relevant portions of which is also not cited in the show cause or the assessment order, there is nothing against the assessee and no inquiry whatsoever has been done by the AO or the Ld CIT (A). In such circumstances the assessee having discharged her onus and nothing adverse being found against her, the addition cannot be sustained. 25. For the reasons set out in the foregoing therefore we hold that both the lower authorities were not justified in not allowing the appellant’s claim for exemption u/s 10(38) amounting to ₹77,78,476in respect of the profit derived by the appellant on sale of 120,000 shares of M/s GCM Securities Limited. We accordingly set aside the order of Ld. CIT(A) and direct the AO not to treat 25 ITA No.404/Kol/2021 Smt. Rachna Agarwal, AY 2015-16 the long term capital gain as bogus and delete the consequential addition and the AO is directed to allow the exemption u/s 10(38) of the Act as claimed by the assessee. 26. In the result, appeal of the assessee is allowed.”

f. DCIT vs. Anita Agarwal, ITA - 2670/Kol/2025 (Kolkata Tribunal) “10. Keeping in view the discussion made above, we are in this view that sale of shares undertaken by the assessee cannot be branded as bogus merely on account of suspicion arising from the fact that assessee earned asubstantial quantum of capital gain from trade in the said shares.The law is well settled that suspicion, however, strong cannot take the place of proof.In the present case assessee had duly discharged the primary onus cast upon it by furnishing complete documentary evidences including contract notes, Demat statements, bank statements and others relevant records and evidencing the genuineness of the transactions. It is further important to mention here that no

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material has been brought on record to suggest that there existed any collusion, connivance or prior arrangement between the assessee and the broker for the introduction of unaccounted income in the garb of Capital Gain. As I have already discussed that all the transactions were executed through registered stock brokers and on recognized stock exchange supported by proper dematerialization of shares and routed entirely through normal banking channels. Keeping in view the above discussions and considering the judgement passed by Anita Agarwal; AY 2015-16 the Kolkata High Court, we do not find any infirmity in the impugned order. Accordingly, appeal filed by the Revenue is hereby dismissed. 11. In the Result, the appeal of the Revenue is dismissed.” 7. After having considered the decisions of the Co-ordinate Benches and the facts of the present case, we find that the Assessing Officer has relied upon the statement of Shri Anil Agarwal, wherein he had admitted that the share price was artificially rigged. However, the Assessing Officer has nowhere independently verified or examined the validity of such statement. More importantly, the said statement was never confronted to the assessee, nor was any opportunity granted to the assessee to cross-examine Shri Anil Agarwal. Further, nothing has been placed on record to establish any direct connection of Shri Anil Agarwal with the assessee or with the said scrip. Thus, considering the totality of the facts and circumstances of the case, and also taking into consideration the decision of the Co-ordinate Bench of the Tribunal wherein, the same scrip was involved, we find it appropriate to follow the principles of judicial consistency and the binding nature of judicial precedents. Accordingly, and in the absence of any contrary judgment having been placed on record by the

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learned DR, we are of the considered view that the addition made by the Assessing Officer cannot be sustained. We further observe that the learned DR was not in a position to distinguish the facts of the present case from those involved in the decision relied upon by the assessee. Therefore, considering the overall facts and circumstances of the case, and keeping in view the discussion made hereinabove as well as the decisions of the Co-ordinate Benches of the ITAT involving the same scrip, we direct the Assessing Officer to delete the impugned addition. Consequently, Grounds Nos. 1 to 4 raised by the assessee are allowed.

Order pronounced in the open court on this 10/09/2026

Sd/- Sd/- (BIJAYANANDA PRUSETH) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai; Dated 10/09/2026 Karuna Sr.PS

26 ITA No.4387/Mum/2023 Mr. Kush N Shah

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//

BY ORDER,

(Asstt. Registrar) ITAT, Mumbai