DINESH KUMAR (HUF),GHAZIABAD vs. ITO, WARD-1(2), GHAZIABAD

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SHRI SATBEER SINGH, HON’BLE JUDICIAL MEMBER & SHRI NAVEEN CHANDRA, HON’BLE ACCOUNTANT MEMBER

ITA No. 368/DEL/2019; Assessment Year: 2015-16 Dinesh Kumar (HUF) Vs ITO Ward-1(2) C/o Akhilesh Kumar, Advocate 206-207, Ansal Satyam RDC, Ghaziabad Uttar Pradesh (APPELLANT) (RESPONDENT) PAN No. AAHHD2575C Assessee Represented by : Sh. Govind Agarwal, Adv. Department Represented by : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing: Date of Pronouncement: 03.02.2026 28.04.2026 ORDER PER NAVEEN CHANDRA [A. M]: The above captioned appeal is preferred by the assessee against the orders dated 31.10.2018, by Ld. CIT(A), Ghaziabad, u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for A.Y. 2015- 16.

“1. Because, the order of learned lower authority is bad in law & against the facts and circumstances of the case and hence is unsustainable. 2. Because, Id. CIT(A), grossly erred in law in sustaining the addition of Rs. 2969600/-, being the amount received against sale of shares u/s 69 of the Act Page 1 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF as unexplained investment while neither said amount is any investment of assessee nor source of said amount is under doubt and hence addition is beyond the scope of provision. 3. Because, on merits Id. C.I.T (Appeals) has erred in sustaining an addition of Rs. 2969600/- against claim of exemption u/s. 10(38) for Rs. 2859645/- earned on said sale of listed equity shares held in physical form duly tfd. and thereafter dematerialized in d-mat a/c, sold electronically through stock exchange, suffered STT, consideration is recd. through banking channel which is duly supported with contract note etc. and all the possible evidences without even allowing cost of acquisition and changing head of income while none of the evidences are rejected. 4. Because, Id. CIT(A) further failed to appreciate that, a) Neither anybody transaction bogus as specifically charged there is nor material/evidence against the transaction any b) Addition is based on surmises and conjectures based upon enquiry on some unrelated parties with ref. to general modus operandi. c) No material is ever supplied / confronted. d) Cases of CCL International Ltd. are accepted u/s 143(3) and revenue is generally accepting dealing in said script with identical facts. 5. Because Ld. CIT(A) grossly erred in sustaining addition of Rs. 40,00,000/- u/s 68 of the Act, being loan of Rs. 20,00,000/- Rs. 9,15,000/-, and Rs. 10,85,000/- against the provisions itself in as much as admittedly assessee is not maintaining books of accounts. 6. Because Ld. CIT(A) failed to appreciate the material placed on the record and summarily sustained the additions without considering the relevant material placed before her wrongly as assessee had fully discharged onus lay upon him. 7. Therefore, total addition of Rs. 6969600/- is prayed to be quashed.

Page 2 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF 4. In the course of assessment proceedings, the AO found that the assessee has claimed to have purchased 12500 shares of M/s CCL International Ltd on 17.8.2011, offline through broker M/s Narayan Securities, (Prop. Shri Om Narayan Sharma) vide Bill No. Nil dated 22.8.2011. The payment of Rs. 1,25,000/-, at an average price of Rs 10 per share, was made in cash. These shares were transferred in assessee’s name by RTA Agent M/s Alankit Assignment Limited, Delhi on 16.8.2012 and was dematerialised in his DEMAT A/c with Trustline Securities Ltd., Noida on 21.11.2012. 5. Out of 12500 shares, 8600 shares were claimed to have been sold on various dates on 3.4.2014, 24.9.2014, and 15.1.2015 for Rs.29,69,600/- i.e. at a range of Rs 178/- to Rs 496/- which works out to an average sale rate of Rs. 345.30 per share. The long term capital gain arising thereon of Rs. 28,59,645/- was claimed as exempt from taxation u/s 10 (38) of the Act. 6. The AO found that the entire purchase and sale of shares of M/s CCL International Ltd as a part of a scheme wherein accommodation entries were taken/provided for bogus LTCG through manipulation of stock market. The purchase of shares in physical form, consideration paid in cash, raised the AO’s suspicion who made enquiries with the assessee with respect to genuineness of the LTCG. The assessee was given several opportunities for examining the Karta of the assessee but

Page 3 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF the Karta always avoided the examination. The AO further issued notice to the broker M/s Narayan Securities, Sikandrabad who was found to be non-existent at the given address. The AO made detailed analysis of prices of the above said shares of M/s CCL International Ltd and found that unprecedented increase in prices were not backed by any financial fundamentals. Considering all the above factors, the AO disallowed the exemption u/s 10(38) and added the amount of Rs 29,69,600/- credited by the assessee out of the purported share sale receipts u/s 69 r.w 115BBE of the Act. 7. Further, the AO found that the assessee could not explain the loan of Rs 40,00,000/- and added the same as unexplained cash credit u/s 68 of the Act. 8. On appeal, the CIT(A) found that no sale bill in the name of the assessee was ever issued by M/s Narayan Securities for purchase of shares. The purchase was made in cash and the sale note dt. 22.08.2011 was issued by M/s Narayan Securities in the name of Shri Gaurav Goel. Further, the CIT(A) found that sale note has been issued on 22.08.2011 acknowledging date of transaction of purchase of shares by the assessee to be 17.08.2011. The CIT(A) also found that shares, in question, were issued to the seller (Manu Bathla 2500 shares; Gupta Umesh Kumar 2500 shares; Rivi Banerjee 5000 shares; and Ayub Khan 2500 shares) on 19.08.2011 meaning thereby the transaction of

Page 4 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF purchase of shares by the assessee have been entered into prior to issue of share certificate to the seller of these shares. 9. The CIT(A) also found that no evidence in support of genuineness of purchase of shares and justification of purchase price of share and evidence of holding them for more than one year was furnished by the assessee. The CIT(A) held that since the shares of M/s CCL International Ltd. were found to be one of the penny stocks involving manipulation of share market, even noted by SEBI and were found to be sham by DIT Investigation, Kolkata, and since the appellant has invested in these shares, the burden of proof and the onus of proving genuineness of transactions was not discharged by the assessee to substantiate genuineness of alleged share transactions in respect of long term capital gain u/s 10(38). 10. The CIT(A) also observed that on the one hand the assessee claims the company M/s CCL International Ltd. is a listed company, yet the shares of the same have been purchased without routing the transactions through any of the stock exchanges. The CIT(A) found that the payment for purchase of shares has been made much after the date of purchase and no evidence in support of price for purchase of shares of M/s CCL International Ltd. has been given by the assessee. The CIT(A) also noted that though the assessee has been harping upon the

Page 5 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF sale made through recognized stock exchange through a broker, yet no similar details in respect of purchase was furnished by the assessee. 11. The ld counsel of the assessee, before us, argued that Revenue has accepted LTCG with identical facts/allegation in the questioned Script in many cases. Further several evidences of Sale/purchase such as purchase bill; receipt of payment; share transfer letter; copy of share certificate; contract note of sale of shares; D-mat a/c; assessee’s account in ledger of broker and bank a/c was furnished before the lower authorities. The ld AR argued that the evidences have not been found defective and there is no material against the assessee or transaction. There is no allegation/statement of any against transaction/script. No Allegation by SEBI. Issue is covered by various decision of various high courts/tribunals.  PCIT V Smt. Krishna Devi 431 ITR 361(DEL)  Pr. CIT vs. Prempal Gandhi ITA No. 95 of 2017 dated 18.01.18 (P&H)  CIT vs. Sudeep Goenka (2013) 29 taxmann.com 402 (ALL)  Smt. Karuna Garg--ITA No.1069/2019 (DEL-A)- dt. 06.08.2019  Swati Luthra [2020] 115 taxmann.com 167 (Delhi - Trib.)

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF  Vijay Kumar V ITO-ITA 2483/2015-Order dt. 27.11.18(DEL-F)  Inder Singh V ITO-ITA 1931/2016 -order dt. 5.12.18(DEL-B)  Smt. Shanta Devi V Cit (1987) 171 ITR 532 (P&H)  Jitendra Kumar Yadav - ITA ΝΟ. 1808/D/2016 (Del-F) 13. The ld AR further relied on the following where with identical facts case is squarely covered by various co-ordinate benches of hon'ble ITAT allowing claim u/s 10(38) by holding script genuine and not penny stock:  Sarika Bindal V ITO Ward -1999/D/2020  Reeshu Goel V ITO -1691/D/2019  Mukta Gupta/Mohan lal V ITO-2766-2767/D/2018  Anchal Gupta/ v ITΟ -501-504/2019/LKW/2019  Gaurav Goel V ITO -369/2019

Page 7 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF in cash. Out of 12500 shares, 8600 shares were claimed to have been sold in FY 2014-15, at average rate of Rs. 345.30 per share for total consideration of Rs.29,69,600/-. The assessee claimed Rs. 28,59,645/- as exempt long term capital gain u/s 10 (38) of the Act. In such facts and circumstances, we are called upon to adjudicate upon the issue of the genuineness of LTGC claim including purchase of shares of M/s CCL International Ltd by the assessee. 17. The assessee has furnished before us documents relating to purchase of shares and plethora of case laws in favour of assessee for claim of LTCG. With regard to purchase of shares of M/s CCL International Ltd, we first notice, from the perusal of the orders of the CIT(A) and the assessee’s submission, that the purported purchase of shares of M/s CCL International Ltd was made by the assessee in physical form and the payment for the same is made in cash and not through regular banking channel. From the explanation furnished by the assessee, we find the following details which are not adequately and satisfactorily addressed by the assessee: i) We find from the documents and evidences filed by the assessee with regard to purchase of shares of M/s CCL International Ltd, that the shareholders (Manu Bathla; Gupta Umesh Kumar; Rivi Banerjee; and Ayub Khan) of the aforesaid shares, themselves received the shares certificate of M/s CCL International Ltd, on 19.08.2011. Whereas the

Page 8 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF date of transaction recorded by the broker Narayan Securities, for sale of said shares to the assessee, is 17.08.2011 i.e., two days prior to the ownership of shares by the original shareholder. ii) The sale note of the broker Narayan Securities dated 22.08.2011 before the CIT(A), is in the name of Gaurav Goel, with address J-58, Nehru Nagar-II, Ghaziabad, Uttar Pradesh-201001 while the assessee produced before us the same sale note of Narayan Securities dated 22.08.2011 but in the name of Dinesh Kumar(HUF), with the same address J-58, Nehru Nagar-II, Ghaziabad, Uttar Pradesh-201001. We have reproduced the two ‘sale note’ for ready reference below:

Page 9 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF

iii) Similarly, we note that the assessee, as a proof of purchase, submitted before the lower authorities, a payment receipt from the

Page 10 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF broker Narayan Securities, of Rs 1,25,000/- dated 17.08.2011 in the name of Gaurav Goel, the person to whom the sale note was issued. The said payment receipt, submitted before us, however shows the name of Dinesh Kumar (HUF) with same amount of Rs 1,25,000/- and same date 17.08.2011. iv) The AO made enquiries with respect to whereabouts of the broker M/s Narayan Securities by issuance of notice u/s 131 of the Act and found that the broker does not exist on the given address. The AO further noted that the PIN code of the Sikandrabad, the address on which M/s Narayan Securities was located, is 203205 whereas the PIN code in the sale note of the M/s Narayan Securities is given as 203001 which is that of Bulandshahr. v) The CIT(A) has given a finding of fact, which is also reflected from the documents/evidence submitted before us, that the purchase of shares of M/s CCL International Ltd by the assessee have been entered into a date prior to the date on which the shareholder was issued the share certificates. The transaction of sale was entered into by the assessee was 17.08.2011 whereas the share certificate was issued to the shareholder, who were selling the shares, on 19.08.2011. vi) There is no evidence in support of price for purchase of shares of M/s CCL International Ltd. has been given by the assessee and no

Page 11 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF evidence of holding them for more than one year was furnished by the assessee. vii) We find that the CIT(A) has pointed out that though the assessee claims the company M/s CCL International Ltd. is a listed company, yet there is no explanation as to how and why the shares of the same have been purchased without routing the transactions through any of the stock exchanges. We also note that the assessee has emphasised that the sale is made through recognized stock exchange through a broker, yet no similar details in respect of purchase was furnished by the assessee. viii) The AO’s several attempt to examine the Karta of the assessee, regarding the purchase/sale of shares of M/s CCL International Ltd in person, remained uncompiled. 18. In the above factual matrix of the instant case, we find that the entire enquiry by the Assessing Officer revolved around the genuineness of claim of Long Term Capital Gain from sale of shares. Evidences collected by the AO and the CIT(A), described above, fairly leads to conclusion that the purchase of shares is a result of manipulation and fabrication of purchase documents, and therefore bogus. It would be fair to say that the assessee is one of the participants of organised scam of evasion of tax by way of bogus LTCG. The burden of proof and the onus of proving genuineness of share transactions, in respect of

Page 12 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF long term capital gain u/s 10(38) of the Act, was upon the assessee which in the instant case has not been satisfactorily discharged by the assessee. In the above factual matrix of the instant case, we reiterate that the purchase of shares in physical form and the payment being made in cash, non-existent broker, coupled with the fact of manipulation and fabrication of purchase documents, establishes that the purchase of shares of M/s CCL International Ltd itself was not genuine and assessee is one of beneficiaries of accommodation entry receipts in form of long term capital gains. Once we consider the genuineness of purchase of shares of M/s CCL International Ltd, as not established, the capital gain earned from the sale transaction of the same shares cannot be lent credence to. We refer to the decisions of hon’ble Supreme Court in thew case of Sumati Dayal v CIT (1995) 214 ITR 801(SC) and CIT Versus Durga Prasad More (1971) 82 ITR 540 and the decision of hon’ble Delhi High Court Udit Kalra ITA 220/2009 and Suman Poddar (2019) 112 taxmann.com 330(SC) dismissing the SLP arising out of the decision of Hon’ble Delhi High Court in the case of Suman Poddar (2019) 112 taxmann.com 329(Del). Consequently, there is no interference called for in the decision of the CIT(A). Ground 1 to 4 is dismissed. 19. As far as the reliance of the assessee on several case, we find that the peculiar facts of the instant case distinguishes itself from the

Page 13 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF facts of the plethora of case laws relied upon by the assessee. In the case of Sarika Bindal V ITO (supra); Reeshu Goel V ITO (supra); Mukta Gupta (supra), relied upon, the purchase of shares were made through banking channel and there was no discrepancy found in the sale notes. In Gaurav Goel V ITO (supra), the purchase payment was made from disclosed source of income and no discrepancy found in the sale notes. In the instant case purchase of share are in cash, in offline mode and the sale note of the shares and payment receipts for the shares, from a non-existent broker, are manifestly manipulated/fabricated. 20. The assessee’s technical objection that wrong Section 69 was invoked, whereas the transaction being receipt of money and not of any investment, therefore could have been added u/s 69A, is rejected. It is a settled principle of law that the mere mention of a wrong section is not fatal to the assessment nor it invalidates addition if substance and intent of the order is unambiguous so long as the power to tax exists or the ingredients of the correct provision are satisfied and the Assessee was fully cognizant of the nature of the inquiry. Reference is made to the hon’ble Supreme Court decision of Pruthvirajsinh Nodhubha Jadeja (D) By LRs. v. Jayeshkumar Chhakaddas Shah (2019). 21. With respect to ground no 5 and 6 regarding addition of loans added as unexplained cash credits u/s 68 of the Act, the assessee has

Page 14 of 16

368/DEL/2019 AY 2015-16 Dinesh Kumar HUF filed additional documents/evidences to explain the cash credits. We find that the assessee has now filed the details of parties such as their ITRs, Balance sheets and bank statements of the lenders. In such a situation, we find it appropriate to set aside the issue of genuineness of loans to the file of the CIT(A) for a fresh adjudication. The ground 5 and 6 are allowed for statistical purposes. 22. In the result, the appeal of the assessee in ITA 368 /Del/2019 is partly allowed. Order pronounced in the Open Court on 28.04.2026. Sd/- Sd/- (SATBEER SINGH GODARA) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 28.04.2026 Pooja Mittal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi

Page 15 of 16