SMT SUMITRA DEVI,UTTAR PRADESH vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PANAJI

PER BENCH : The captioned appeals filed by the different assessees are directed against the separate orders of ld.CIT(A)-2, Panaji arising out of respective Assessment Orders passed u/s.153A r.w.s.143(3) of the Income Tax Act, 1961 (in short ‘the Act’)

Assessee name A.Y. LTCG claimed u/s.10(38) Divya Mittal 2013-14 1,45,89,600.00 Divya Mittal 2014-15 65,31,120,00 Kumud Mittal 2013-14 1,64,19,500.00 Kumud Mittal 2014-15 43,15,080.00 Harshvardhan Mittal 2013-14 1,72,06,614,00 Harshvardhan Mittal 2014-15 89,87,090,00 Achintya Mittal 2014-15 1,17,32,910.00 Sumitra Devi 2014-15 74,40,285.00

Sl.No. Particulars Binding Nature of judicial pronouncement from co-ordinate Bench 1 Sayaji Iron & Engg. Co. vs. CIT, 253 ITR 749 Judicial pronouncement w.r.t. person who had traded in same scrip and whose capital gain was assessed as bogus 3 Priyanka Aggarwal VS. ITO, ITA No. 406/PAN/2018 4 Suresh Khandelwal vs. ITO, ITA No. 7/IND/2019 5 Swati Luthra vs. ITO [2020] 115 taxmann.com 167 (Delhi Trib.) 6 DCIT vs. Avinash Singla [2025] 170 taxmann.com 786 (Chandigarh - Trib.) [06-01-2025] 7 Puneet Singh R. Bhadoria vs. ITO [2024] 159 taxmann.com 1486 (Ahmedabad Trib.) [17-01-2024] 9 Simi Verma, New Delhi Vs ITO, ITA No. 3387/DEL/2018. 10 Srinivas Shah Radraraju vs DCIT, ITA No. 957/HYD/2019 11 Vipul Mittal vs DCIT, ITA No. 2850/DEL/2019 Importance of facts and evidence rather than general Investigation Report 12 PCIT vs. Sawankumar T Jajoo [2025] 171 taxmann.com 26 (Calcutta) 13 DCIT, Central Circle v/s Shri Sawankumar T Jajoo, ITAT Mumbai, 6489/Mum/2019] 'E' Bench [ITA No. PCIT vs. Smt. Krishna Devi, Hon'ble Delhi HC in ITA No. 125/2020 vide order dated 15/01/2021 17 Pr. CIT vs. Prem Pal Gandhi, (2018) 401 ITR 0253 (P&H) 18 HC) Order dt. 06/07/2022 21 PCIT vs. Ziauddin A Siddique, Hon'ble Bombay HC in ITA No. 2012 of 2017 vide order dated 04/03/2022

“Incomes not included in total income.

……………………….

………………………. (38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund 72[or a unit of a business trust] where— (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and (b) such transaction is chargeable to securities transaction tax under that Chapter :

Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB :

[Provided further that the provisions of this clause shall not apply in respect of any income arising from transfer of units of a business trust which were acquired in consideration of a transfer referred to in clause (xvii) of section 47.]]

Explanation.—For the purposes of this clause, "equity oriented fund" means a fund— (i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than sixty-five per cent of the total proceeds of such fund; and (ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D) :

Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;”

ITO – ITA No.10/NAG/2026 dated 25.03.2026 wherein the Tribunal adjudicated identical issue holding as under :

“5. I have heard the rival contentions and perused the record placed before me. I observe that the assessee is an individual and declared income of Rs.4,57,730/- in the e-return of income for A.Y. 2015-16 furnished on 22.03.2016. During the year, the assessee sold 1500 Equity shares of M/s. Kappac Pharma Limited and earned long term capital gain of Rs.8,41,056/- and claimed the exemption u/s.10(38) of the Act. Ld. Counsel for the assessee has referred to various documents filed in the paper book demonstrating the proof of purchase, demat account for holding the shares for more than a year and also the contract notes issued by the registered broker of SEBI showing that Equity shares have been sold on the online platform controlled by Securities and Exchange Board of India and Securities Transaction Tax has been paid on sale of Equity shares. I further find that under similar set of facts and circumstances, the issue came up in the case of husband of the assessee namely Vishnukumar Ramswaroop Agrawal and vide order dated 12.02.2026 the claim of exemption u/s.10(38) from sale of Equity shares of M/s. Kappac Pharma Limited has been held to be genuine and the finding of this Tribunal reads as under :

“5. I have heard rival contentions and perused the records placed before me. I observe that assessee is individual and declared income of ₹ 5,18790/- in the e-return for A.Y. 2014-15 furnished on 31.01.2015. After the case being selected for scrutiny under CASS followed by validly serving statutory notices, assessment proceedings have been carried out. Ld.AO observed that assessee has claimed LTCG of ₹16,48,270/- from sale of 2500 equity shares of M/s.Kappac Pharma Ltd. The gross sale consideration is ₹16,82,500/- and after deduction of brokerage and Security Transaction Tax (STT), net sale amount of ₹ 16,75,770/-. Assessee has purchased 4000 equity shares on 12.10.2012, out of which assessee has sold 2500 equity shares costing to ₹27,500/-. Ld.AO based on information received in the course of survey operations u/s. 133A of the Act at the office premises of M/s. Devshyam Stock Broking Pvt. Ltd., Kolkata came to a conclusion that M/s. Kappac Pharma Ltd. is a penny stock company and the market rate of these shares are not based on the business results of the company, but rather fluctuated by insider trading from negligent price to very high price and vice versa. Ld.AO concluded the proceedings making the addition u/s. 68 of the Act for the total sale consideration of ₹16,82,500/- and also made addition for unexplained expenditure u/s. 69C of the Act at ₹ 84,125/- for arranging of such alleged bogus LTCG. The assessee has failed to get any relief from Ld. CIT(A). Before me, learned counsel for the assessee has referred and relied on plethora of decisions wherein the decision referred by the Ld.DR duly stands considered.

“7. We note that the only issue before us is in respect of treatment of profit earned by the assessee on sale of shares as Long Term Capital Gain claimed by her or as Short Term Capital Gain as assessed by the ld. AO. If it is treated as Long Term Capital Gain, it is exempted u/s 10(38) of the Act and if it is considered as Short Term Capital Gain, it is subjected to tax under the Act. The relevant extracts from the order of ld. AO is reproduced as under: “During the course of assessment proceedings, it is noticed that assessee has earned an income of Rs.43,48,421/- as profit on sale of shares and claimed exemption of the entire income u/s. 10(38) of IT Act. The assessee’s AR was asked to furnish the details regarding date and cost of acquisition of the shares purchased and sold. The AR has stated that the share transactions are carried out through the broker M/s. Religare Securities Limited. He has furnished copy of ledger extracts and statement obtained from M/s. Religare Securities Ltd., in support of sale j of shares of M/s.Turbotech Engineering made through M/s. Religare Securities Ltd., with Account Code PS9735, but no proof in support of Securities Transaction Tax paid and also no documentary evidence regarding purchase of shares has been furnished. The AR has also produced contract note/ share transfer form for purchase and sale of shares and demat statement. Further it is stated that the shares purchased are in physical form and after transfer to demat account the same are sold in demat form. During the course of assessment proceedings the AR was asked to furnish the documentary evidence in respect of shares purchased are also the sources of investment in purchase of shares. The AR has submitted copy of share transfer deed, share certificates, debit note, receipt ledger extracts etc. Further, the AR has stated that assessee has purchased shares in FY 2011-12 in physical form, from M/s. Corporate Commodity Brokers Pvt. Ltd. The sources for the payment was from our regular income, gift received and savings for which we have also filed our income tax return. The assessee’s authorized representative has filed a letter dated 06.12.2016 enclosing the details of S.T.T. paid along with copies of Contract Notes/ share transfer form from Religare Securities Ltd. However, no proof or documentary evidence have been produced in respect of the sources of investments. It is clear that the shares have been purchased in cash however, sources of investment have not been proved. On verification of the website of stock brokers, there are no transactions on the said date of purchase made by the assessee. The assessee has stated that these shares have been purchased from recognized stock exchange through stock broker, however, as per SEBI laws, the broker is not empowered to accept cash in excess of rupees fifty thousand towards purchase. No documentary evidence have been produced by the assessee in support of her claim that shares were purchased in 2011-12. In view of the above, it is evident that the assessee has made the purchases during the year and not during the year 2011-12 and also has failed to explain the sources of investment. Considering the above facts and also based on the reasons for selection being “suspicious Long Term Capital Gains” the claim of the assessee regarding exemption u/s. 10(38) is disallowed and Rs.43,48,421/- are brought to tax under the head income from “Short Term Capital Gains”.

“7. Heard both the parties and perused all the relevant material available on record. There is a delay of 37 days in filing the appeal, for which, the reason given by the assessee appears to be genuine, hence delay is condoned. It is pertinent to note that in the present case the case, the assessee has purchased the shares offline at Rs.5/- per share (900 shares). Thus, in total the assessee purchased the shares for only Rs.45,000/-. The assessee purchased these shares through private placement with Vijay Bhagwandas & Co. Contract note Assessment Year: 2014- 15 was not produced related to Vijay Bhagwandas & Co. but the evidences related to transfer of shares through Vijay Bhagwandas & Co. who was share trading stock broker registered under SEBI was given by the assessee before the Assessing Officer. The assessee paid the amount for purchase of these shares through cheque and the certificate of the said shares were also taken on record. But at the same time, while selling of the said shares in the month of July 2013 prior to month of the said selling the assessee has converted the shares/dematerialised the shares on 29.05.2013 which is after 25 months from the date of purchase. The Assessing Officer in the Assessment Order at page no.13 has given the finding in respect of the assessee's purchase and sale activities wherein it was stated that the sale consideration is in fact first paid by the assessee in cash who has trusted confidence in broker but the said fact appears to be not correct. The Assessing Officer has not stated out as to how the assessee is involved in price variation of the said scrip of Turbotech Engineering Limited during that period while selling the said shares/scrip. Besides this, the suspension of the said scrip came much after selling of the said scrip carried out by the assessee. Therefore, the assessee has rightly claimed exemption under Section 10(38) of the Act. The Assessing Officer as well as the CIT(A) has not established that the assessee was involved in the price manipulation of the sales scrip and, therefore, this cannot be treated as unexplained money under Section 69A of the Act. As regards the reopening of the assessee's case, the reopening was properly done with proper procedure followed by the Assessing Officer and, therefore, ground no.2 in that respect is dismissed but on merit i.e. ground no.2 (actually 3) is allowed.”

Order pronounced on this 20th day of August, 2026. (VINAY BHAMORE) ACCOUNTANT MEMBER Panaji; दिन ांक / Dated : 20th August, 2026. Satish Divya Mittal and others Satish Kumar Madishetty Madishetty Date: 2026.08.20 18:45:18 +05'30'

आदेश की प्रतिलिपि अग्रेपिि / Copy of the Order forwarded to : अपील र्थी / The Appellant. 1. प्रत्यर्थी / The Respondent.