MEENA HASMUKH SAVLA,MATUNGA MUMBAI vs. ASSESSMENT UNIT, NATIONAL FACELESS ASSESSMENT CENTRE

Against these additions assessee preferred appeal before Ld. CIT(A), however, the said appeal of the assessee was dismissed. Therefore, aggrieved by the order of Ld. CIT(A) assessee has preferred the present appeal before me, on the grounds mentioned herein below:

The Assessment Order passed under section 147 r.w.s144B is against the provision of Income Tax and liable to be quashed on account of the following.-

All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of CIT(A) in upholding the additions made by AO u/s 68 of the Act and also on account of addition of commission paid @ 3% of the LTCG. Therefore, I have decided to take up all the grounds together and adjudicate the same through the present consolidated order.

The Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before the lower authorities and also relied upon the written submissions mentioned herein below: 1.1 The appellant is an individual deriving income from Salary and Other Sources. Return of Income for the Assessment Year under consideration was filed on 24/06/2016 declaring total income at Rs.11,34,200/-, and the same was processed under section 143[1] of Income Tax Act, 1961. 4 Meena Hasmuch Savla, Mumbai

2 Subsequently, the assessment was reopened by issuing notice under section 148 of Income Tax Act, 1961 on 22/07/2022. In response to notice under section 148, the appellant had filed return of income on 20/08/2022. The Appellant objected the reopening of the assessment proceedings vide her letter dated 30/01/2023 which was not considered by the Assessing Officer and rejected summarily.

3 Thereafter, notice under section 143(2) and 142[1] was issued on the Appellant, in response to the said notices the appellant furnished all the necessary documents, evidences with explanation from time to time.

4 The assessment was completed under section 147 r.w.s.144B of the Income Tax Act, 1961 on 15/05/2023 assessing the total income at Rs.34,19,425/- after making the following addition to the total income of the appellant.

ASSESSMENT PROCEEDINGS

1 The appellant had shown Long Term Capital Gain of Rs.21,69,150/- and has claimed the same as exempt under section 10[38] of the Income Tax Act, 1961. Ongoing through the working of the capital gain the Assessing Officer has observed that the appellant has shown purchased of 5,100 shares of M/s. Ojas Asset Reconstruction Co. Ltd. on 02/04/2014 for Rs.51,000/-, These shares were brought at the face value of Rs.10/- per shares. During the year under consideration the appellant had sold these 5,100 shares during the period 09/09/2015 to 16/09/2015 netting a gain of Rs.21,69,150/-.

2 The Assessing Officer was received the information that, the Appellant had sold shares in scrip M/s. Ojas Asset Reconstruction Co. Ltd [new name is Toyam Industries Ltd]. In the meanwhile, the Director of Investigation Wing, Delhi had carried out country wide investigation in order to unearth the organized racket generating Long Term Capital Gain which is exempt from Income Tax.

3 The Assessing Officer, after the examination of the information provided by the Investigation Wing and return of income of the Appellant, the case of the Appellant was reopened under section 147 of Income Tax Act, 1961 and notice under section 148 was issued on 22/07/2022. 2.4 Thereafter, various notices under section 143(2) and 142[1] was issued on the Appellant, in response to the notices issued by the Assessing Officer, the appellant had furnish the complete details and evidence including contract note for purchase and sale of shares, demat account, Bank statement, Broker Ledger etc. in respect of Long Term Capital Gain which has been claimed exempt under section 10[38] of Income Tax Act, 1961. 2.5 Thereafter, the Assessing Officer had issued a show cause notice dated 06/05/2023 to the appellant which contents various observation and allegation which are very much general in nature and also without any reference to the appellant. The appellant had given detailed reply in response to the show cause notice issued by the Assessing Officer. The appellant has also requested for the cross verification of the persons on whose statement the Assessing Officer was relying for making addition.

6 The Assessing Officer after pursuing and analyzing the various submissions made by the appellant, Investigation by various Directorates, facts of the case and investigations conducted, the Assessing Officer concluded that LTCG claimed is prearranged, therefore, bogus and is required to be rejected and the entire sale proceeds received on sale of shares was added as taxable income u/s.68 of the Act, without any eligibility of exemption u/s. 10[38] of the Act.

7 The Assessing Officer then completed the assessment by making addition of Rs 22,85,225/- on account of Long-Term Capital Gain of Rs.22,20,150/- and 3% commission of Rs.65,075/-,

8 Being aggrieved by the abovementioned addition the appellant had preferred the abovementioned appeal before your Honour to get justice on the basis of facts of the case and law on the subject.

9 The Appellant is challenging the Assessment Order in this Appeal on following grounds: -

APPELLANT'S SUBMISSIONS

1 The Appellant had purchased 5100 shares of M/s. Ojas Asset Reconstruction Co. Ltd. for Rs.51,000/- on 02/04/2014 through Shreenath Commercial & Finance Ltd. Following documents were submitted in support of the purchase of these shares.

2 The Appellant has sold 5,100 shares during the 09/09/2015 to 16/09/2015 on Bombay Stock exchange through Broker M/s. Prabhudas Liladhar Pvt. Ltd., which is a leading public sector stock broker at the prevalent market rates then. In support of the sale the appellant has furnished the following detail to the Assessing Officer during the course of Assessment proceedings.

3 Since, the period of holding of equity shares was more than 12 months, capital gain earned was long term in nature subject to STT and therefore exempt under section 10[38] of the Income Tax Act, 1961. 3.4 On perusal of the above-mentioned documents it is evident that the purchase transactions have taken place through banking channels and that the shares sold were scrftubjected to securities transaction tax and have been sold through a recognized stock exchange, leaving no scope for share price manipulation by the appellant. Hence, the appellant has precariously followed the prescribed procedure, from the stage of purchase till the shares are dematerialized and sold, leaving no room for doubt or suspicion that the transactions are not genuine.

5 Further, the appellant has sold the shares of M/s. Ojas Asset Reconstruction Co. Ltd. not in one stroke. Thus, it cannot be inferred that appellant colluded with operators for obtaining alleged bogus long-term capital gains.

6 respetusal of the Assessment Order will highlight that the claim of the appellant in followings, Long-Term Capital Gain has been that ded mainly on account of - i] Investigation done by Director of Investigation [Delhi]

7 It is respectfully submitted that, in none of the above Investigation, the appellant has been named as either operator or accused of converting black money into white. In fact, the appellant has been named as 'beneficiary' above reports which itself are general in nature [not pointing out at the appellant in particular was available with the Assessing Ont peito reject the claim of the No other evidence except the appellant in respect of Long-Term Capital Gain. There are no circumstantial as well as direct evidence against the appellant to prove that, Long-Term Capital Gain shown by the appellant is not natural one but arranged one. Hence the addition made by the Assessing Officer is arbitrarily and unjustified.

8 The Assessing Officer has stated "the quantum of long term capital gain was found suspicious and detailed investigation of this issue was undertaken. Various tools available were examined including ITD data, BSF data, moncy-control website, taxmann, court rulings, internet as well as investigation wing's report and findings of the SEBI. In this respect the finding of Investigation Wing, Delhi in which Penny Stock has been discussed and investigated at length, is worth mentioning which is being reproduced as under ". Thus, the impugned addition has been solely on the ground that the name of scrip sold appears in the penny stocks investigated by Investigation wing. There is no other evidence except the above reports/findings which are general in nature [not in any way pointing to the Appellant in particular] was available with the Assessing Officer to reject the claim of the Appellant in respect of Long-term capital gain. There are no circumstantial as well as direct evidence against the Appellant to prove that Long term capital gain shown by the Appellant is not natural but arranged

9 The fact that these shares have appreciated in value to a great extent does not mean that the capital gain earned is bogus. It may be appreciated that the purchase transactions have taken place through banking channels, shares are in dematerialized form and the sale transactions have taken place on recognized stock exchange which have been subject to securities transaction tax. It may be appreciated that the market price of an equity share on the stock exchange cannot be controlled by an individual and the market prices keep fluctuating depending upon various factors. Thus, there is no question of the capital gain being bogus

10 The Assessing Officer has not brought any cogent evidence on record to prove that transactions were not genuine and that the appellant is a beneficiary of accommodation entry. The Assessing Officer has proceeded to arrive at his conclusion that the appellant has obtained accommodation entry solely based on assumptions and presumptions, which Courts have held have no place in framing an assessment under the Income-tax Act. The Assessing officer has brushed aside all the positive evidences filed by the appellant to prove the genuineness of transactions.

11 The modus operandi explained by the Assessing Officer is general and devoid of facts in the case of the appellant. He has not mentioned that cash has gone from the coffers of the appellants. Also, there is no corroborative evidence available on record that cash has been exchanged.

12 The Assessing Officer falsely presume that the Appellant is not at all acquittance with share market or absence of any regular share activity and therefore the Appellant has bought shares of M/s. Ojas asset with sole aim to bring back unaccounted money into the system. The appellants submit that no addition could be made merely on the basis of assumptions and presumptions. The appellants submit that the Honourable Apex Court in Umacharan Shaw & Bros (37 ITR 271) has held that no addition could be made on presumption; suspicion however strong cannot take place of proof.

13 The appellant has duly discharged the onus that lies on him by establishing the identity, creditworthiness and genuineness of the transactions, by way of submissions made by her during the assessment proceedings, and that being so, it is for the revenue to disprove the claim of the appellant, by bringing on record the evidence to the contrary. The ordinary rule is that apparent state of affairs is real unless contrary is proved and the burden of proving contrary lies on the person who asserts it.

14 Your Honour's kind attention is invited to judgment of Hon'ble Delhi High Court in the case of I. T. Α.125/2020, Ι.T.A. 130/2020 and I.T.A.131/2020. The Hon'ble High Court has dismissed the appeal of ITAT stating that, Court has to decide an issue on the basis of evidence and proof and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the respondent. It e citturther held by Court that, reliance placed on Suman Poddar vs. ITO and Suvas Dayal vs. CIT is of no assistance and held that this case is quite different fromatthe factual matrix at hand. Similarly, the case of Suman Dayal vs. CIT [Supra] tomums on its specific facts. It was held that there cannot be addition without any cogent material on record. Statements relied by the Assessing Officer in the assessment proceedings were not recorded by the Assessing Officer but they were preexisting statements recorded by the Investigation Wing and the same cannot be sole basis of assessment without conducting proper enquiry and examination during the assessment proceedings itself. In our humble opinion, neither the Assessing Officer conducted any enquiry nor has brought any clinching evidence to disprove the evidences produced by the assessee. The report of the Investigation Wing is much later than the dates of purchase / sale of shares and the order of the SEBI is also much later than the date of transactions transacted as void.

15 Thus, the appellant contend that the impugned order of assessment is a nullity since it is framed in utter disregard to the principle of natural justice and for this proposition, the appellant place reliance on the following decisions.

16 Without prejudice to the above, it is submitted that, Tax authorities should not disregard documentary evidences due to some hearsay or merely on basis of unreliable verbal evidence or confession of some persons which might have been given by fearful persons to avoid his own harassment by tax authorities some time called entry operator or accommodator. Perhaps confessional statement might have been made by some people for gaining some personal advantage from tax authorities like reward or soft corner towards such persons making confession which can avoid harassment of such people. It is not clear as to what action has been taken by department against such persons who made some confession which is being used as a tool by tax authorities against other assesses.

17 Merely because assesse is getting a tax benefit under simplified scheme of taxation, the tax authorities must not adopt attitude of doubting and disbelieving transactions of assesse in securities resulting into gains already taxed by way of STT. 3.18 Investment in companies are made based on some expectations, news even rumours heard from others or on TV in news, read on websites, newspapers, social groups, discussion forum etc. A fortunate person may gain substantially, whereas an unfortunate person may suffer loss. There should not be a doubt on these.

19 The Assessing Officer have coined a name for some stocks called 'penny stocks' because price of such stock was very low at some time and very high at some other time. Tax authorities are disbelieving deals in such stocks and trying to brand them bogus or not genuine. It is found that even some of NAVRATNA and MAHARATNA PSU have been traded at very low price some times and where penny stock, if the price or ratio between high and low price is considered from the point of view as adopted by tax authorities in relation to many such stocks. The following table shows life time high and low price of shares of some companies in different segment of business. These companies are PSU / some companies have become Private sector companies but still stake of government is quite high.

20 Hence the upward trend in respect of the prices cannot be a circle to treat the capital gain as non-genuine.

21 The genuineness of the transaction has been clearly proved by the appellant beyond doubt by submitting the following documents; - i. Contract notes issued by the broker which are system generated and which clearly mentions the following details- a] Details of the broker b] DP ID c] Client ID d] Contract number with trade date, order no, order time, trade no.

22 Reliance is also placed on the decision of High Court of India in the case of PCIT v. Parasben Kasturchand Kochar [130 taxmann.com 176 of 2020): -

This appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act 1961") is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench dated 20-2-2020 in the ITA No.549/Ahd/2018 for the A.Y. 2014-15. The Revenue has proposed the following question of law for the consideration of this Court:

We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:

Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee.

In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No.62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. Vs. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee."

Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income Tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant.

We take notice of the fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under Section 260-A of the Act, 1961. 5. In the result, this appeal fails and is hereby dismissed.

23 Reliance is also placed on the decision of Supreme Court of India in the case of PCIT v. Parasben Kasturchand Kochar [130 taxmann.com 177 of 2021]: -

24 Further, we also rely on the Juri ictional High Court Decision of Mumbai High Court in the case of PCIT v. Ziauddin A. Siddique [Income tax Appeal No 2012 of 2017]: -

Therefore we find nothing perverse in the order of the Tribunal.

In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law

The appeal is devoid of merits and it is dismissed with no order as to costs."

25 We are enclosing herewith a latest order of Honble, CIT[A] NFAC, Delhi has received in the case of Sulochanadevi A. Agrawal wherein on the identical facts and circumstances, the Hon'ble CIT[A] has deleted the addition made after following observations: -

26 Recently the order dated 08/03/2024 of the Honourable CIT[A] NFAC, Delhi has received in the case of Ankur Agrawal wherein on the identical facts and circumstances, the Hon'ble CIT[A] has deleted the addition made after following observations: - "Therefore, in view of the above factual matrix and circumstances in respect of purchases and sales of shares of M/s JMD Telefilms Ltd. and M/s Splash Media & Infra Ltd. by the Appellant and also in view of the decisions of Hon'ble Supreme Courts and various High Courts including binding decisions of the juri ictional High Courts and a plethora of decisions of various benches of ITATs including binding decision of juri ictional ITAT, as discussed in foregoing paragraphs, I find that the addition of Rs. 25,14,62,940/- in respect of LTCG claimed on sale of shares of M/s JMD Telefilms Ltd. and Rs. 1,55,70,963/- in respect of LTCG claimed on sale of shares of M/s Splash Media & Infra Ltd. u/s 68 of the IT Act made by the AO is unsustainable and unjustified and therefore, the said additions of LTCG made by the AO are hereby deleted and is directed the AO to accept the LTCG income shown as exempt u/s 10(38) of the Income Tax Act. Accordingly, the Appellant gets relief and thus, ground nos. 3, 4, 5 & 6 of appeal are allowed."

27 Further, latest order dated 28/02/2024 of the Honourable CIT[A] NFAC, Delhi has received in the case of M/s. Comfort Intech Limited wherein on the identical facts and circumstances, the Hon'ble CIT[A] has deleted the addition made after following observations; -

28 Further, latest order dated 03/01/2024 of the Honourable CIT[A] NFAC, Delhi has received in the case of Mr. Keshavji Nongha Shah wherein on the identical facts and circumstances, the Hon'ble CIT[A] has deleted the addition made after following observations:-

29 Further, order dated 28/08/2023 of the Honourable CITIA] NFAC, Delhi has received in the case of Mr. Keshavji Nongha Shah wherein on the identical facts and circumstances, the Hon'ble CIT[A] has deleted the addition made to total income of the appellant. Copy of the decision is enclosed herewith

30 The Honourable High Court, Mumbai in the case of PCIT vs Indravadan Jain vide their order dated 12/07/2023 [Income Tax Appeal No.454 of 20181, on identical facts and circumstances of the case has dismissed the appeal filed by the PCIT, Mumbai Copy of the decision is enclosed herewith

32 Reliance is also placed on the decision of Bombay High Court in the case of CIT v. Mukesh Ratilal Marolia [ITA No.456 of 2007]: -

32 Reliance is also placed on the decision of Bombay High Court in the case of CIT v. Mukesh Ratilal Marolia [ITA No.456 of 2007]: -

33 Attention is also drawn to another decision of the Juri ictional High Court in the case of CIT vs. Shaym R. Pawar, 229 Taxmann 256 [bom] where it was held that where 204 Taxman 177 [Punjab & Haryanal-

35 Attention is also invited to the decision of Udit Agarwal vs DCIT [I.T.A.No 1839/kol/2017] 26/12/2018-

36 Apart from the above referred decisions, reliance is also place in the following decisions of the various Appellate Authorities which will substantiate that the claim of the appellant. A] Bhavesh Shambulal Somani vs. ITO [ITA No.2263/Ahd/2015]

37 The equity shares were sold on Bombay stock exchange through the broker Prabhudas Liladhar Pvt. Ltd. It may be appreciated that when shares are sold on recognized stock exchange, the seller can never come to know as to who is the counter party purchasing the shares. Thus, the appellant has no control over the sales transaction once the shares are kept for sale under the exchange. Thus, there cannot be an iota of doubt that the said transaction is completely genuine.

38 Further, a general confession by a person that all his transactions are bogus or that he has indulged only in bogus transactions cannot be basis for additions in the case of an appellant who has transactions with this person. This is more particularly so when the appellant has not been specifically named in the confession. The Appellant would like to rely on the following judicial pronouncements in this regards: -

39 To sum up, the appellant has submitted the following document / information to prove the identity, creditworthiness and genuineness of the share transactions.

40 We also rely on the following case laws wherein addition has been deleted by various benches of ITAT:- Sr. No. Description Citation No. 1 Meghraj Singh Shekhawat ITA No. 443 & 444/JP/2017 2 Pramod Jain 3 Meena Goel 4 Mohit Hora-HUF 5 Surya Prakash Toshniwal – ITA No. 1790-1791/Kol/2019 11 ITA No. 3429-3428- 3427/Mum/2019 ITA No. 3311-3312-3313- 3314/Mum/2019 ITA No. 3264-3247-3265- 3248/M/2019 12 ITO No. 1937/Mum/2018 3.41 In view of the above, it is submitted that, Long Term Capital Gain carned by the appellant is completely genuine and addition made on this count may kindly be deleted and oblige.

B] ADDITION U/S.69C OF THE ACT IN RESPECT OF 3% COMMISSION PAID ON TRANSACTION VALUE OF LTCG.- RS.65,075/-

1 The Assessing Officer has made an addition of a sum of Rs 65,075/- on account of commission paid by the appellant at the rate of 3 per cent of sale consideration of shares during the year under reference by invoking the provisions of section 69 of the Act.

2 The appellant contends that -

3 The provisions of section 69C of the Act get triggered only when any evidence or tangible material is available on record to prove that the assessee is found to have incurred any expenditure and the same not recorded in their books of account. Therefore, the condition precedent as to the existence of expenditure must be conclusively established by evidence and/or material on record and hence, the primary onus is on the Assessing Officer. In the present case, the Assessing Officer has failed to prove that the appellant has incurred any expenditure in addition to the expenditure recorded in the books of account.

The Appellant trust the above submissions sufficiently clarify the facts and the Appellant's claims, contentions and grounds of appeal and request your Honour to consider the same at the time of deciding the appeal. However, in case your Honour desires any further information/clarification vis-à-vis any issue / grounds of appeal. Please let us know. The Appellant will be pleased to furnish the same.

From the facts of the present case I noticed that assessee had purchased 5100 shares of M/s Ojas Asset Reconstruction Co. Ltd, (Now M/s Toyam industries) for Rs. 5,100/- on 02.04.2014 through Shreenath Commercial & Finance Ltd., following documents were submitted in support of the purchase of these shares.

The assessee had sold the said shares during the year under consideration on Bombay Stock Exchange (BSE) through broker M/s Prabhudas Liladhar Pvt Ltd, and in support of sale of said shares the assessee had furnished assessment proceedings.

It was further submitted that the broker through whom the assessee had sold share on BSE one of the leading public sector stock broker and the shares have been sold at prevalent market rates. After having gone through the documents placed on record by the assessee, it is evident that the purchase transaction have taken place through banking channel and the shares were also sold through banking channel and the said sale was subjected to security transaction tax (STT) and have been sold through a ‘recognized stock exchange’, therefore apparently leaving no scope for share price manipulation by the assessee. From the facts I also gathered that the assessee had sold the said shares in tranches on different dates therefore prima-facie it can be inferred that assessee did not collude with operators for obtaining bogus long term capital gains. 8. In the order of assessment the exemption of long term capital gain was denied to the assessee mainly on account of the following reasons:

After evaluating and appreciating the records, I found that purchase transactions have taken placed through banking channel, shares are in dematerialized form and the sale transactions have taken placed on recognized stock exchange and the transactions have been subjected to ‘security transaction tax’. Whereas on the contrary the AO has not brought on record any cogent evidences to prove that the transactions were not genuine and that the assessee is a beneficiary of accommodation entry. Even modus operandi explained by the AO is general in nature and devoid of facts in the case of the assessee the AO has assessee has received / made payment in cash. There is no corroborative evidence on record that cash has been exchanged. 1518 to 1519/Del/2021 decided on 20.09.2023, the operative portion of the decision of the Coordinate Bench is reproduced herein below: 8. We have heard the rival contentions and perused the material on record. We have also given our thoughtful consideration to several contentions raised by the ld. Counsel along with judicial precedents referred by him. Fact of the case and detailed arguments made by the parties are all captured in the above paragraphs which are not repeated for the sake of brevity. We first look to the chronology of events which transpired in the present case, the same is extracted below: 8.1. In the above drawn by the ld. countered and m AO have been extracted. Ld. Co made detailed submission for eac 0/Mum/2024 avla, Mumbai conclusion unsel has ch of the observations and conclusion drawn by the ld. AO. We find it more meaningful and comprehensible to present the same in a tabulated form for better understanding to arrive at our finding. The chart presented by the ld. Counsel effectively summarises multiple contentions raised in support of the claim made by the assessee. The same is reproduced as under for ease of reference: Sr. No. Particulars Para of Assessmen tOrder (Page) Remarks i) Stake holders involved wereeither Bogusor devoidoffinancial capabilities 2.4 (2) GeneralObservation ii) CapitalTradelinkisengagedin theScamasrevealed bytheInvestig ationWingand SEBI 3 (3) NoreportofInvestigationwingorSEBIo nrecord,muchlessnosuch informationprovidedtoapp ellant.(Para17-17.2)

3. On a specific query by the Bench in respect of details of DMAT account in which the purchase of shares of CTL were credited, ld. Counsel furnished the DMAT statement with DP ID 12069800 and Client ID 00001312, issued by Rajgul Securities Pvt. Ltd., DP of Central Depository Services (I) Ltd. From the perusal of the said statement, it is noted that purchase of 5,00,000 shares of CTL were credited on 19.06.2014 in the DMAT account which were purchased off-market on 13.06.2014. Thus, in our observation, it is not a case where purchased shares are credited in the DMAT account just prior to the date of sale and remain in the pool account of the broker until then. Even though shares were purchased in an off-market transaction, the same were dematerialized and credited in the DMAT account at the earliest possible date, immediately after its actual purchase.

4. Further, from the perusal of the note from the office of Directorate of Income Tax (Invest), New Delhi, referred by the ld. DR in his submission and as extracted above, we find that it does not in way suggest that scrip of CTL is suspended or has failed to comply with listing requirements of the stock exchange so as to conclude on an adverse finding recorded by the authorities below. 8.5. Also, under section 142(3), it is incumbent upon the ld. AO to give an opportunity of being heard in respect of any material gathered by him and proposed to be utilised for the purpose of the assessment. We note that compliance of provisions of sec. 142(3) is a mandatory statutory procedural requirement in completing the assessment proceeding, failure of which may vitiate the entire assessment itself since this sub-section uses the word “shall”. The only exception to this requirement is where an assessment is made u/s 144 which is not so in the present appeal before us. In the present case before us, requirement mandated by section 142(3) has not been complied with by the ld. AO in completing the impugned assessment. 8.6. On careful reading of the show cause notice issued by the ld. AO as reproduced in the impugned assessment order, we observe that nowhere, ld. AO has mentioned any specific section under which the income is proposed to be added/disallowed. In the words of ld. AO, it is stated in para 4 as – “It is beyond no doubt that the price of the shares of Capital Trade Links were rigged & manipulated and were increased through circular transaction by unscrupulous elements. Keeping in view you are requested to explain why not gain (LTCG) amounting to Rs. 30305713/- to be assessed as undisclosed income while considering as escape assessment.” In para 5, ld. AO has again stated as – “Therefore, you are asked to show cause as to why the accommodation entries obtained amounting to Rs.3,03,05,713/- in shape of sale of shares of Capital Trade Links should not be added in your total income for the year under consideration.” Further, while drawing conclusion in para 7 for making the assessment, ld. AO again writes in similar manner as – “In view of the elaborate discussion made above, I hereby hold the amount of Rs. 3,03,05,713/- introduced/credited by the assessee in the shape of Long Term Capital Gain out of these purported share sale receipts during the financial year 2015-16 (A.Y. 2016-17) in his computation of total income (taxable at the rate of 60% as provided u/s 115BBE). This would resultant of addition of Rs. 3,03,05,713/- in the total income of the assessee.” Lastly, in para 8 while arriving at the total assessed income, ld. AO made the addition of Rs.3,03,05,713/- for which he noted as – “Bogus LTCG claimed u/s 10(38) held to be Income from Other Sources, as discussed above.” 8.6.1. From the above extraction of the impugned assessment order, it is not at all discernible whether the addition is made by applying provisions of section 68 or a disallowance is made of the claim of exemption of LTCG u/s 10(38) of the Act by the ld. AO. 8.6.2. Taxable rate of 60% u/s 115BBE is stated to be applied by the ld. AO on the addition made. From the perusal of section 115BBE, it is noted that the said section applies only when total income of an assessee includes any income referred to in section 68, 69, 69A to 69D. Considering this, if an inference is drawn that ld. AO has applied one of these specified sections for making the addition of LTCG on sale of shares of CTL, we find that in the entire assessment order, there is no whisper by him on the three vital limbs of establishing identity and creditworthiness of the buyers of the shares sold by the assessee and genuineness of the said transaction. We do not find any action taken by the ld. AO to enquire on these three vital aspects from the assesseeeither by issuing notices/summons under section 133(6) or 131 of the Act. 8.6.3. In this context, it is worth noting that impugned share sale transaction undertaken by the assessee is on the online digital trading platform of stock exchange of BSE which is a regulated market under the aggies of a regulator viz. SEBI. There is nothing on record from the market regulator SEBI which establishes the ‘tainted’ status of the scrip of CTL so as to hold the share sale transaction as bogus/accommodation entry by the ld. AO. Also, the operations and modus operandi of this regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of its shares and their creditworthiness. Further, sale proceeds are received through the stock market processing into the pre-identified bank account of the seller i.e. the assessee which cannot be tainted as ‘unexplained or unaccounted or undisclosed’. Thus, it cannot be inferred that ld. AO has made the addition under the specified sections of 68, 69 and 69A to 69D though he has stated to apply tax rate as per section 115BBE. 8.6.4. If the inference is drawn that ld. AO has made a disallowance of claim of exemption by the assessee u/s 10(38), then, first and foremost, his statement of applying the rate of 60% under section 115BBE does not hold good. Further, for claiming exemption under section 10(38) on the LTCG of equity share in a company, only two conditions are prescribed in the said section, viz. first, transaction of sale of such equity share should be entered into on or after 01.10.2004 and second, such transaction is chargeable to securities transaction tax (STT). In the present case, assessee has established compliance of both the conditions which is not in dispute even by the ld. AO. Also, in the show cause notice, while proposing for the addition as well as in the impugned assessment order, while making the addition, ld. AO has made no such reference to section 10(38) about its non-fulfilment. Thus, even this inference fails. 8.6.5. We note that while computing the total assessed income, ld. AO held the LTCG as ‘income from other sources’. It is important to take note of computation of LTCG mentioned in his show cause notice wherein full consideration stated is Rs.3,06,99,056/- from which cost of acquisition of Rs.3,93,343/- is deducted to arrive at LTCG of Rs.3,03,05,713/- which is in terms of section 45 and 48 of the Act. Assessee received Rs.3,06,99,056/- during the year under consideration which is the subject matter for seeking explanation by ld. AO from the assessee. However, ld. AO made the assessment by making an addition of Rs.3,03,05,713/-, giving deduction for cost of purchase of shares. Such an addition of amount computed under the head ‘income from capital gains’ by accepting the purchase giving its deduction and holding the balance as ‘income from other sources’ is not tenable. 8.7. Considering the totality of the facts and circumstances of the case, factual matrix and submissions of parties narrated above and judicial precedents relied upon as discussed as well as discussion and observations made herein above, we set aside the orders of the authorities below and delete the addition made towards Long Term Capital Gain on sale of shares of CTL. Accordingly, grounds taken by the assessee in this respect are allowed. 8.8. Also, addition made by resorting to enhancement of income by ld. CIT(A) towards brokerage/commission as unexplained expenditure u/s 69C by treating the LTCG as bogus and accommodation entry is deleted since it is consequent to the addition made towards LTCG. Accordingly, grounds taken by the assessee in this respect are allowed.

After having gone through the decision of the Coordinate Bench I found that the “same script” has already been dealt with by the Coordinate Bench and the appeal of the assessee in the said case was allowed thereby deleting the additions made on account of treating the long term capital gains as bogus and accommodation entries.

Even otherwise as per the facts of the present case the genuineness of the transaction has been clearly proved by the assessee by submitting all the required documents as discussed in the above paras which includes……. a] Details of the broker b] DP ID c] Client ID d] Contract number with trade date, order no, order time, trade no.

But still the additions have been made without controverting the above documents on the basis of surmises, which are bad in law. In this regard I found reliance from the decision in the case of Hon’ble Delhi High Court in ITA No. 125/2020, ITA. 130 & 131/2020, wherein the Hon’ble Delhi High Court specifically held that the “theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the respondent”.

In my view, since assessee had already discharged his part of initial onus by establishing identity, creditworthiness and genuineness of the transaction, therefore it was now revenues onus to disprove the claim of the assessee by proving on record the evidences to the contrary. Ordinary rule is that “appellant state of affair is real unless contrary is proved” and therefore burden of proving lies on the person who asserts it. Since in the decision of PCIT v. Parasben Kasturchand Kochar [130 taxmann.com 176 of 2020]: -

This appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act 1961") is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench dated 20-2-2020 in the ITA No.549/Ahd/2018 for the A.Y. 2014-15. The Revenue has proposed the following question of law for the consideration of this Court:

We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:

Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee 11. In support of its contention, learned A. R. also cited an order of Coordinate Bench in ITA No.62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. Vs. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee."

Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income Tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant.

We take notice of the fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under Section 260-A of the Act, 1961. 5. In the result, this appeal fails and is hereby dismissed.

In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

The appeal is devoid of merits and it is dismissed with no order as to costs."

Considering the totality of the facts and circumstances and legal proposition as discussed by me above, I am of the considered view that the long term capital gain earned by this ground is directed to be deleted.

In the result the appeal filed by the assessee is allowed. Order pronounced in the open court on 18.02.2025. Mumbai, Dated 18/02/2025

उप/सहायक पंजीकार ( Asst.