JAYESH SOJPAR KARNIA HUF,MUMBAI vs. INCOME TAX OFFICER-WARD 30(1)(5), MUMBAI

“7. We further observe that Hon’ble Gujarat High Court in PCIT-1 Vs Divyaben Prafulchandra Parmar {R/TAX Appeal no. 812 of 2023 decided on 02-01-2024} (Citation 2024(1) TMI 800) has also dealt with same scrip i.e. M/s. Sunrise Asian Limited as involved in this case and ultimately affirmed the decision of the Hon’ble Tribunal in deletion of the identical addition, by observing and holding as under:

[13] Feeling aggrieved by the order passed by the Tribunal, the appellant - Revenue has preferred this Tax Appeal on the proposed substantial questions of law narrated hereinabove.

[14] Learned Senior Standing Counsel Mr. Karan Sanghani for the appellant reiterated the submissions made before the Tribunal and submitted that the Assessing Officer, after analyzing the data made available from the Bombay Stock Exchange, came to the conclusion that the price of script, which the assessee sold, was fluctuating by 24 times and after sale of shares made by the assessee, the price has reduced to Rs.0.49. It was, therefore, submitted that the Assessing Officer, taking into consideration the volatility of the share price of the script sold by the assessee, was justified in relying upon the report of the Investigation Wing of Kolkata as well as the fact that the SEBI has suspended the transaction of the said script for some time and accordingly, the Assessing Officer was justified in making addition of unaccounted income of the assessee on the ground of accommodation entries availed by the assessee.

[15] It was further submitted that the CIT(A), after considering the documents available on record, has upheld the view taken by the Assessing Officer. It was submitted that the Tribunal, after considering the submissions made by the assessee and the Departmental Representative, allowed the appeal. It was submitted that the Tribunal, therefore, contrary to the facts and evidence on record, has allowed the appeal without considering the findings of the Assessing Officer and the CIT(A) in its true perspective.

[16] Considering the contentions raised on behalf of the Revenue, the Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the assessee cannot be doubted as bogus and exemption under Section 10(38) of the Act was rightly availed by the assessee. The Tribunal has also concluded that the presumption drawn by the Assessing Officer was not corroborated by any evidence to establish the alleged non-genuine transaction by the assessee. It was, therefore, rightly held by the Tribunal that the claim of the assessee for exemption of Long Term Capital Gains under Section 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. The Tribunal has also considered that the assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai (supra), wherein this Court has held as under:

"5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span”.

6.1 On the facts of case, no question of law much less substantial question of law arises.

8. The Tribunal in the case of Haresh Dilip Vora Vs. ITO Ward 25(2){4} Mumbai {ITA no. 3646/M/2024 decided on 10.9.2024} has also dealt with identical scrip and while following aforesaid judgments, ultimately deleted the identical addition, as involved in this case, by observing and holding as under:

7.2. The ld. CIT(A) in impugned appeal order respectfully relied on the order of Hon'ble Calcutta High Court in the case of CIT Vs Swati Bajaj[2022] 446 ITR 56 (Calcutta) where on same set of facts related taxability of LTCG on sale of shares considered as manipulated penny stock & the action of the ld. AO is confirmed. But the related to scrip "Sunrise Asian Ltd" the assessee is covered by the order of the Hon'ble Gujrat High Court. Accordingly, the same would prevail on the issue before this Bench. In the present case, the decision of the Hon'ble Non- Jurisdictional High Court carries only an influence. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon'ble Non-Jurisdictional High Court.

Considering the impugned assessment order, the ld. AO has not provided any evidence even worth a name that Assessee’s own money has been routed back to him. There is no nexus with the Assessee with price rigging and no adverse observation from stock exchange. The addition simply on third party statement is uncalled for. We respectfully relied on the order of Hon'ble Supreme Court in PCIT vs Smt. Renu Aggarwal [2023] 456 ITR 249 (SC).

We respectfully rely on the orders of the Hon'ble Apex Court, Jurisdictional High Court and Coordinate Bench of ITAT Mumbai which has similar in the factual matrix with the impugned issue. The grounds of appeal of the assessee are upheld. We set aside the impugned appeal order. The additions amount to Rs. Rs.47,51,164/- U/s 68 of the Act and amount to Rs. 50,061/- U/s 69C are quashed.

9. As we observed above that the Assessee purchased the share through banking channel and held the same for around 17 months and sold the same through online platform and banking channel. The Assessee by filling relevant documents such as purchase bills of shares, bank account statement, DP statement and some broker notes in order to establish his claim of LTCG, has discharged prima- facie onus cast u/s 68 of the Act. Further, the AO had no base or foundation/corroboration to make the addition in the hands of the Assessee but he simply relied on the investigation report of the Kolkata Directorate and the SEBI report and usual rise in the price, in which the Assessee has not played any role and it is a fact that no action has ever been taken by the SEBI or any investigation agency against the Assessee herein and therefore it goes to show that the AO made the additions under consideration simply, on the conjecture and surmises, and therefore the additions in view of the above facts and circumstances and decisions, are not sustainable, thus the same are deleted.

6. As the Assessee has been able to discharge his prima-facie onus cast u/s 68 of the Act and the Revenue Department has not rebutted the documents and/or claim of the Assessee by producing any corroborating material concerning directly and therefore respectfully following the judgment of the Co-ordinate Bench of the Tribunal in the aforesaid case and the judgment of the Hon’ble Gujarat High Court, wherein the identical scrip was involved, this Court is inclined to delete the addition of Rs.25,15,320/- u/s 68 of the Act.

7. As the substantive addition has been deleted and therefore the addition of Rs. 1,00,613/- being commission @ 4% of Rs.25,15,320/- made on account of commission made u/s 69C of the Act also collapsed, consequently, the same is also deleted.

Order pronounced in the open court on 01.05.2025.