ALKA RAJESH VANIGOTA,MUMBAI vs. COMMISSIONER OF INCOME TAX (A)-52, MUMBAI

6. The learned Assessing Officer observed that the assessee’s LTCG transaction was part of a premeditated and manipulated arrangement entered into with certain operators, allegedly to launder unaccounted money and evade taxes. Relying substantially on the report of the investigation wing and statement of such operators in the report, the AO treated the LTCG of Rs.85,48,487/- as unexplained income under section 69A. He further added a sum of Rs.42,749/- as alleged commission paid for executing the said transaction, thereby making a total addition of Rs.85,91,229/- under section 69 of the Act.

7. It has been stated before us by the ld. Counsel of the assessee that such addition was made despite the assessee having submitted voluminous documentary evidence during the course of the assessment proceedings. These documents included the demat account statement, share allotment letter, dematerialisation request slip, bank statements evidencing payment for purchase and receipt of sale proceeds, relevant contract notes for purchase and sale, as well as a detailed written submission explaining the nature and genuineness of the transaction.

8. However, in the assessment order dated 18/08/2021, the Assessing Officer merely reproduced the contents of the investigation report and the statement of the director of M/s.

“1.Preferential allotment of 150000 shares of M/s. Greencrest Financial Services Private Limited, a penny stock company was made to the assessee @ Rs.1.20 on 11.02.2013. Such preferential allotment was made in offline so that transaction of such shares is limited between closed group of people who opted to launder their unaccounted money in the form of pre- arranged bogus LTCG Hence contract notes are also not available for such purchase 2. 31550000 shares had been allotted on preferential basis among 81 persons only. That means shares had been allotted within closed group of people who opted to launder their unaccounted money in the form of pre-arranged bogus LTCG. In this respect statement of sushil parekh, Director of the company is very pertinent which is reproduced below "Sir, M/s. Greencrest is a penny stock traded in the stock exchange, the benificiaries who wanted to route their unaccounted income in the form of LTCG used to purchase the scrip offline at a very low price and then the entry operator used to raise the price of the scrip by way of rigging without any financial rationale of the company M/s. Greencrest Financial Services Private Limited 1. Regarding reason for investment the assessee stated, "Greencrest Financial Services Ltd is engaged in the business of providing financial services. The financial results of the company showed steady growth which made me invest in the company The Financials are also attached for your reference. On going through the financial results for FY 2012-13 it is seen that the company had undergone cumulative financial loss to the tune of Rs.20.43 Lacs in the FY 2012-13 The principal business of the company is investment in shares and Alka Rajesh Vanigota securities. However out of total investments of Rs. 183,976,109 made in FY 2012-13 most of the investments were made in unquoted shares to the tune of Rs. 17,54,77,400. Such financial results do not show steady growth of the company instead it showed a bleak feature of the company. Hence assessee's statement in this respect is not tenable 2. Regarding source of information in respect of M/s Greencrest Financial Services Private Limited the assessee replied, "With regards to the specific source from whom the information was received is from various social gatherings from various people whom we meet once in a year where such things are discussed and there is no specific person, name or information is available. Many a times information is also available in newspapers and which newspaper had advised and on which date cannot be practically remembered." Such statement of assessee does not indicate any specific source from where information regarding M/s. Greencrest Financial Services Private Limited is available. Actually assessee is one of the members of the closed group of people who opted to launder their unaccounted money in the form of pre-arranged bogus LTCG. Hence the assessee failed to provide the specific source of information regarding M/s Greencrest Financial Services Private Limited.

Alka Rajesh Vanigota 4. The assessee sold 132700 shares in 10 different dates starting from 30.06.2015 and ending on 09.10.2015. In this respect the assessee stated " sold the shares in staggered manner because I wanted to make more gain with price increase. Later i felt that the prices might go down so I sold the shares on different dates." The assessee sold 15000 shares Rs.66 75/-on 30.06.2015 and 15000 shares @ Rs.66.15 on 01.07.2015 If she felt that prices might go down on and after 01.07.2015 then she should sell all the remaining shares on 03.07.2015. But she kept 102700 shares for sell on 01.07.2015 and waiting for three long months sold such shares on 8 different dates upto 09.10.2015 at different lower prices starting from Rs.65.90 to even at lowest price of Rs.64.50. Such incidents clearly indicate towards specific bogus capital gain to the tune of Rs.8548487/- which the assessee required to launder her unaccounted money in the form of pre-arranged bogus LTCG On the basis of detailed investigation report as discussed above alongwith statement of Sushil Parakh director of Greencrest Financial Services Pvt Ltd (scrip code 531737) involved in organized racket of money laundering and from the detailed discussion above it is evident that scrip Greencrest Financial Services Pvt Ltd (scrip code 531737) had been used to give rise to pre-arranged bogus long-term capital gains to various beneficiaries. In the instant case the assessee traded the Greencrest Financial Services Pvt Ltd (scrip code 531737) and claimed bogus long-term capital gains for trading such scrip. An organised money-laundering racket had been in operation over the period who rigged the price of penny scrip Greencrest Financial Services Pvt Ltd (scrip code 531737) to give rise to organised tax evasion scam. In the instant case the assessee traded the Greencrest Financial Services Pvt Ltd (scrip code 531737) and claimed bogus LTCG and evaded taxable income equivalent to Rs.8548487/-(8,707,727- 159,240). The assessee laundered her unaccounted money to the tune of Rs.8548487/- in the form of pre-arranged bogus LTCG. Thus Rs.8548487/- is hereby added with the returned income u/s 69A of the IT Act as unexplained money in the form of pre-arranged bogus LTCG.

Alka Rajesh Vanigota 5. Although no specific adverse comments have been made by the Assessing Officer with regard to the purchase of shares particularly the mode of payment, dematerialisation, and the holding period, the Assessing Officer nevertheless proceeded to treat the entire sale proceeds of Rs.87,07,727.40 as unexplained income under section 69A. This was done on the premise that the sale transaction was fictitious and formed part of a premeditated arrangement to launder unaccounted money. No deduction was allowed even towards the cost of acquisition, thereby taxing the gross sale consideration as unexplained income.

Name of scrip: Marigold Glass Industries Limited now known as Greencrest Financial Services Limited), a SEBI verified scrip. Date of No. of Date of Ratio of No. of Purchase shares split of split of shares after Purchased shares shares split 11.02.2013 1,50,000 05.06.2014 1:10 15,00,000/- Alka Rajesh Vanigota Particulars Amount / Value / Dates Date of Sale 30/06/2015 to 09/10/2015 Sale Consideration Rs. 87,07,727.40/- Cost of Purchase Rs. 1,80,000/- Long Term Capital Gain Rs.85,27,727.40 exempt under section 10(38) of the Act

8. Before us, the learned counsel for the assessee submitted that the addition is premised solely on the investigation reports of the Directorate of Investigation, Mumbai and Kolkata, and the responses received from certain entities alleged to be ‘exit providers’ in the scrip of M/s. Greencrest Financial Services Ltd. It was contended that the Assessing Officer, in complete disregard of the voluminous evidentiary record submitted by the assessee, proceeded to treat the transaction as sham merely on the basis of third-party statements and information. No independent enquiry or material was brought on record to establish any nexus of the assessee with such operators or to prove that the transaction was not genuine.

9. The learned counsel then took us through various documents placed in the paper book and highlighted several key facts, inter alia, that the assessee is a regular investor; the subscription to the preferential allotment was duly approved by SEBI; payment was made by account payee cheque; shares were held in demat form post allotment; sold through a recognised stock exchange after payment of statutory taxes; and that no link between the assessee and any operator has been established. He emphasised that there Alka Rajesh Vanigota is no evidence to show that the assessee gave any cash or engaged in any colourable device. The transaction was fully routed through banking and capital market systems, supported by verifiable documentation.

10. During the course of hearing, a specific query was posed to both the learned Authorised Representative and the learned Departmental Representative as to whether any SEBI order had been passed in relation to the scrip in question or against the brokers through whom the assessee had executed the impugned transactions. It was categorically submitted that while a SEBI order does exist in relation to broader market-wide surveillance matters, there is nothing therein which records any adverse finding either against the scrip of M/s. Greencrest Financial Services Limited or, at any point of time, against the assessee or the broker through whom the transactions were routed. Furthermore, it was brought to our notice that even after the relevant period of sale, the scrip continued to be traded regularly on the recognised stock exchange and remains active till date.

11. The learned Departmental Representative, however, relied upon the findings of the Assessing Officer and submitted that the pattern and circumstances of the transactions indicate a pre-designed arrangement intended to convert unaccounted income into exempt capital gains.

15. We also note that this very issue, involving identical facts and circumstances, had come up for consideration before the Tribunal in the assessee’s own case for the Assessment Year 2017–18, wherein the Tribunal, after an elaborate examination of the evidentiary record, decided the matter in favour of the assessee. The relevant findings are reproduced and discussed hereunder.

Alka Rajesh Vanigota 5. We have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities.

6. From the records we noticed that based on the information received from DDIT (Inv) that the assessee had obtained accommodation entries in the form of bogus long term capital gain, AO on the basis of statement of operator Alka Rajesh Vanigota, Mumbai of M/s Green Crest Financial Services Pvt Ltd., (previously known as M/s Marygold Glass Industries Ltd) and on his admission of bogus entry provider, treated long term capital gain as unexplained income of the assessee and consequently made additions u/s 69A of the Act which were also uphold by Ld. CIT(A).

7. We noticed that the name of the scrip M/s Mary Gold Glass Industries Ltd., (now known as Green Crest Financial Services Ltd), which is "SEBI verified script" and the assessee had sold part shares and earned long term capital gain the details of which are given below: Particulars Amount / Value / Dates Date of Sale 12/05/2016 to 02/08/2016 Sale Consideration Rs. 61,88,587/- Cost of Purchase Rs. 1,19,160/ Long Term Capital Gain Rs. 60,69,427/- exempt under section 10(38) of the Act

10. Admittedly the shares were sold through recognized stock exchange on which the respondent had paid Security Transaction Tax (STT) and other statutory taxes. It is well known fact that when the shares are sold at online platform the stock exchange, the seller of the shares does not know as to whom the shares are being sold. The shares are transferred in DMAT form to the stock exchange clearing house and the seller only receives sales consideration from the stock exchange through the share broker. Therefore, neither the seller knew the purchasers, nor the purchasers knew the seller. Therefore, in absence Alka Rajesh Vanigota, Mumbai of any corroborative evidence that both Seller and Purchaser have indulged into some clandestine transactions, there is not even a remote possibility of hobnobbing. Therefore, under these circumstances the assessee cannot be said to be a part of the group indulging into rigging of share prices of the script as has been by the AO.

12. We also noticed that not only the sale of shares was evidenced from transaction undertaken through registered stock at a specific trade time in BSE and even after the sale of shares, the net receipts had also been credited to Alka Rajesh Vanigota, Mumbai the assessee's bank account. Hence, the nature of the transaction was clearly purchase and sale of shares and the source of the credit, from the material facts on record were quite evident that it was from the sale of shares. As there was no tangible material brought on record to convert these transactions then it is very difficult to treat the sale proceeds of the shares as unexplained cash credit to be added under deeming provisions of section 68. Throughout the assessment proceeding there was no evidence or any whisper Alka Rajesh Vanigota that some unaccounted money had been routed and hence, sale proceeds should not be added.

13. Under the above circumstances, we place reliance upon the following decision:……………………………………………………..

14. We are also of the view that AO has been very imprecise about the statements provided by the operators basis which the scrutiny assessment has been conducted. Since assessee has mentioned name of the operators in the Assessment Order, but none of those are related to the Company in which the assessee has invested. This goes to show that the AO was unclear about Alka Rajesh Vanigota, Mumbai the statements of the operators which is the key evidences on which AO has relied and based on which the entire assessment is conducted. Since there was no clarity about the key evidences, therefore the assessment order should is not sustainable. We have gone to the extent of appreciating the fact that additions made on the basis of third party statement have also been deleted and in this regard, we rely upon the decision in the case of Hon'ble Supreme Court in the case of Omar Salav Mohamed Sait reported in (1959) 37 ITR 151 (S C), wherein it was held that no addition can be made on the basis of surmises, suspicion and conjectures, the Hon'ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT 37 ITR 271 held that suspicion however strong, cannot take the place of evidence and Hon'ble Calcutta High Court in the case of CIT vs. Bhagwati Prasad Agarwal in dated 29.04.2009 at para 2 held as follows: 15. At the end we conclude that AO has placed nothing on record to suggest that Traded Shares (Scrips) were not listed on stock exchange. Traded Shares (Scrips) are of bogus companies. Demat /Bank account not in the name of assesse or do not exist. Enquiry with Depository Participant ie NSDL/CDSL As share is purchased and sold through Stock Exchange.

Alka Rajesh Vanigota Alka Rajesh Vanigota, Mumbai 16. Therefore we are of the view that assessment in the present case was made on suspicion, whims, assumption and surmises without providing the copy of material relied upon. Therefore in our view the additions were made in violation of the principles of natural justice and in this regard we placed reliance upon the decision of ……………………………………………………………………………… 17. We have further noticed that the name of the company is mentioned at Noticee-12 in the SEBI adjudication. The same has been disposed in the SEBI adjudication order without imposing any penalty and the relevant portion has been reproduced herein below: "Para 59. In view of the aforesaid facts and circumstances of the case, I, hereby, dispose of the SCN dated December 20, 2017 in respect of Notices no. 12, 13, 14 and 15 without imposition of penalty."

18. That at the end another important aspect was brought to our notice that the Coordinate Bench of ITAT had Alka Rajesh Vanigota, Mumbai already dealt with in detail with regard to the "same script" and have allowed the appeals of the respective assessee in the case of Minkal K. Doshi Vs. ITO, in wherein relevant portion of said order reproduced herein below: "11. I find that in the case at hand before me, relevant evidence were produced to suggest that the transactions (purchase and sale of shares) were undertaken and thereaf ter the same was reflected in the Demat Account; and the transactions have taken place through banking channel and through registered broker of Stock Exchange; and there is no evidence to disprove these relevant documents which support the claim of assessee (LTCG). Therefore, the claim of LTCG on the scrip under question cannot be disallowed based on general enquiry conducted by department unless the involvement of assessee is shown in the illegal activities, without which, the impugned action to disallow the claim of assessee cannot be sustained.

Alka Rajesh Vanigota 13. Therefore, in view of the decisions of the jurisdictional High Court and other decisions of Tribunal, and in the factual back ground discussed (supra), I find that the addition of Rs.24,66,000/- under section 68 of the Act made by the AO is unsustainable and therefore direct the AO to delete the same and allow the LTCG income of Rs.24,58,602/- as exempt under section 10(38) of the Act. Assessee gets relief as afore-stated. And consequently the brokerage charge added of Rs 12,730/- is also deleted. Ground nos.lis allowed.

by the assessee are allowed.

16. Having regard to the totality of facts and evidences on record, and in light of the judicial pronouncement rendered in the assessee’s own case for the Assessment Year 2017–18 by a coordinate Bench of this Tribunal, we are of the considered opinion that the facts and circumstances prevailing in the present assessment year are materially identical and indistinguishable. The documentary evidences furnished by the assessee such as the allotment letter, demat statements, contract notes, and bank records remain consistent, and there is no emergence of any new or contrary material on record which would justify a deviation from the earlier Alka Rajesh Vanigota decision. Hence, respectfully following the binding precedent and applying the principle of consistency, we hold that the addition of Rs.85,48,487/- made under section 69A, being disallowance of exemption under section 10(38) on alleged bogus long-term capital gain, is unsustainable in law and on facts, and the same stands deleted.

Order pronounced on 24th July, 2025.