INCOME TAX OFFICER, MUMBAI vs. SURENDRAKUMAR AGARWAL, MUMBAI

This appeal by the revenue is preferred against the order of the ld. CIT(A)-48, Mumbai [hereinafter ‘the ld. CIT(A)’] dated 01/07/2024, pertaining to AY 2015-16.

The sum and substance of the grievance of the revenue is that, the ld. CIT(A) erred in deleting the entire disallowance of long-term capital gains of Rs.2,70,64,182/- being claimed as exempt u/s 10(38) of the Act. 3. Briefly stated the facts of the case are that during the course of scrutiny assessment proceedings the AO noticed that the assessee has claimed exempt income u/s 10(38) of the Act to the tune of Rs.2,70,64,182/- on sale of shares of Surabhi Chemicals and Investment (SCIL). On the basis of the information received from the Directorate of 2 Investigation, Kolkata, the AO formed a belief that shares of SCIL are nothing but Penny stock and is a part of a large scam of tax evasion to defraud the revenue by claiming the bogus long-term capital gain on sale of shares of penny stock. Having formed such belief, the AO declined the exemption u/s 10(38) of the Act and added the entire long-term capital gain of Rs.2,70,64,182/- as unexplained credit u/s. 68 of the Act and further added Rs.8,11,925/- as alleged commission to obtain be accommodation entry. 4. The assessee challenged the assessment order before the ld. CIT(A) and it was strongly contended that shares of face value of Rs.10/- each of SCIL where are acquired in FY 2012-13 relevant to AY 2013-14, directly from the company under SEBI approved private placement at premium of Rs.5/- per share. The payment was made by account payee cheque. 10 lakh shares where allotted on 01/01/2013 by the company in Demat form and the same were credited in the Demat account with Samurai Securities Pvt. Ltd.. Subsequently 10 lakh shares were split into 1 lakh shares on release of lock-in period. 4.1. During the year under consideration, out of 10 lakh fully paid equity shares, the assessee sold 3,24,500 shares as 6,75,500 shares were already sold during AY 2014-15. On this fact, the ld. CIT(A) found that the Tribunal vide order dated 29/04/2024 in the case of the assessee for AY 2014-15, has accepted the sale of shares sold in FY 2013-14 relevant to AY 2014-15, wherein the Tribunal has held that long-term capital gain earned on sale of shares cannot be assessed as unexplained cash credit u/s 68 of the Act. The relevant findings are extracted in para 5.6. at page