The Pr. Commissioner Of Income Tax 1 vs. Shri Bankat Nyati

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ITA/41/2022HC Madhya Pradesh30 May 2024Bench: HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI2 pages
For Petitioner: Veena Mandlik
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court noted that this appeal was part of a bunch of appeals, and the main case was ITA No.56 of 2021. The Court had already dismissed the appeals filed by the Revenue in that main case vide a common order dated 30.04.2024. Therefore, in view of the aforesaid, the present appeal was dismissed, and the order passed in ITA No.56 of 2021 was made applicable mutatis mutandis to the facts and circumstances of the present case. The specific reasoning of the ITAT that led to the deletion of additions, or the findings on each of the substantial questions of law, were not detailed in this order as it relied on a previous common order. The operative direction was the dismissal of the appeal.

What were the facts?

The Principal Commissioner of Income Tax (Revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 02.08.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bench Indore. The appeal pertains to Assessment Year 2014-15 and challenges the ITAT's deletion of additions made by the Assessing Officer. The dispute involves the assessee, Shri Bankat Nyati, claiming Long Term Capital Gain (LTCG) exempt under Section 10(38) of the Act, allegedly derived from transactions in M/s Sunrise Asian Ltd., a company identified by the Investigation Wing, Kolkata, as a bogus penny stock script. The SEBI had also confirmed price manipulation and provision of accommodation entries by this company, leading to its trading suspension.

What were the issues?

The Tribunal was asked to decide the following substantial questions of law: 1. Whether the ITAT was justified in deleting the addition made by the Assessing Officer, disregarding the finding that M/s Sunrise Asian Ltd. was a bogus penny stock company used for claiming bogus LTCG exempt under Section 10(38)? (Section 10(38)) 2. Whether the ITAT was justified in not appreciating that M/s Sunrise Asian Limited was involved in price manipulation and accommodation entries for bogus LTCG, as confirmed by SEBI, and that trading in the script was suspended? (Section 10(38)) 3. Whether the ITAT was justified in deleting the additions without categorically determining the issue of price rigging in the penny stock company, as per Section 260A(6)? (Section 260A(6)) 4. Whether the ITAT was justified in not appreciating the test of human probabilities, as per the Apex Court judgment in Sumati Dayal V/s CIT, concerning the astronomical price increase without substantial business activity? Assessee's contentions: Not recorded. Revenue's contentions: The revenue argued that M/s Sunrise Asian Ltd. was a bogus penny stock company involved in price manipulation and accommodation entries, leading to bogus LTCG claims. They relied on findings of the Investigation Wing, Kolkata, SEBI's confirmation, and the suspension of trading in the script. They also invoked the principle of human probabilities as laid down in Sumati Dayal V/s CIT.

Which sections of the Income-tax Act were involved?

Section 260A,Section 10(38),Section 260A(6)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF MADHYA PRADESH AT INDORE BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SHRI JUSTICE GAJENDRA SINGH ON THE 30th OF MAY, 2024 INCOME TAX APPEAL No. 41 of 2022 BETWEEN:- THE PR. COMMISSIONER OF INCOME TAX 1 THE PR. COMMISSIONER OF INCOME TAX 1 AAYKAR BHAWAN, NEAR WHITE CHURCH (MADHYA PRADESH) .....PETITIONER (BY MS. VEENA MANDLIK-ADVOCATE) AND SHRI BANKAT NYATI 4, NYATI HOUSE, MANDI ROAD, DHAMNOD (MADHYA PRADESH) .....RESPONDENTS (BY SHRI YATISH KUMAR LAAD-ADVOCATE) This appeal coming on for orders this day, Justice Sushrut Arvind Dharmadhikari passed the following: ORDER This appeal is filed by the appellant under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') being aggrieved by the order dated 02.08.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bench Indore in ITA No.509/Ind/2018 for the Assessment Year 2014 - 15 proposing following substantial question of laws in this appeal:- 1] Whether on facts and within the legal spectrum of the case, the ITAT was justified in law in deleting the addition made by the Assessing Officer, ignoring the findings of Investigation Wing, Kolkata that M/s Sunrise Asian Ltd. was clearly established as a bogus penny stock script 1 Signed by: PRAVEEN Signing time: 30/05/2024 7:23:36 PM Signature Not Verified (S. A. DHARMADHIKARI) JUDGE (GAJENDRA SINGH) JUDGE company which was used for claiming bogus Long Term Capital Gain as exempt U/s 10(38) of the Income Tax Act, 1961 ? 2] Whether on facts and within the legal spectrum of the case, the ITAT was justified in law not appreciating that the script M/s Sunrise Asian Limited has been involved in manipulation of prices and for providing accommodation entries, so that Bogus Long Term Capital Gain could be yielded and that such aspects have been duly confirmed by SEBI and that trading in the script ' Sunrise Asian Limited' had been suspended ? 3] Whether on facts and within the legal spectrum of the case, the ITAT was justified in law in deleting the aforesaid additions without determining the issue of price rigging categorically entailed in the aforesaid penny stock company and hence substantial question of law arises as per section 260A(6) of the Income Tax Act, 1961 ? 4] Whether on facts and within the legal spectrum of the case, the ITAT was justified in law in not appreciating the spirit and substance of the test of human probabilities as per the judgment of Hon'ble Apex Court in the case of Sumati Dayal V/s CIT (1995) 80 Taxman 89 (SC) in the instant case vis a vis astronomical increase in price of share and that too without any substantial business activity of profit earning apparatus ? 02. This issue came up for consideration in bunch of appeals, main case is ITA No.56 of 2021 and this Court has dismissed the appeals filed by the revenue vide common order dated 30.04.2024. 03. In view of the aforesaid, the present appeal is dismissed and the order dated 30.04.2024 passed in ITA No.56 of 2021 shall be applicable mutatis mutandis in the facts and circumstances of the present case also. Praveen

2 Signed by: PRAVEEN Signing time: 30/05/2024 7:23:36 PM Signature Not Verified

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