BHAWNA KAPOOR,NEW DELHI vs. ACIT CIRCLE-62(1), NEW DELHI

Being aggrieved, appellant-assessee preferred present appeal. Being aggrieved, appellant-assessee preferred the application for condonation of delay of 349 days. Through application dated 27.05.2025 assessee preferred additional grounds of appeal. As per directions dated 15.10.2025, assessee submitted original and revised grounds consolidated as under:-

Ld. Departmental Representative submitted that, the issue of arranging capital gains out of transaction was made in the penny stock. The transactions pertaining to purchase of share by assessee of Cressanda Solutions Limited was found to be a bogus transaction by holding that it was a penny stock. Reliance was placed on:-

From examination of record, in light of the aforesaid rival contention it is crystal clear, that Ld. CIT(A) vide order dated 21.12.2018 dismissed the appeal of the assessee and confirmed the addition of Rs.33,97,009/- made by the Ld. AO. The addition was related to denial of exemption claimed u/s 10(38) of the Act relating to transactions of shares of M/s Cressanda Solutions Limited.

A coordinate Bench in & 2625/Del/2022 titled as Archit Gupta Vs. ACIT

We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documen tation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL.

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

Mr. Walve placed reliance on a judgment of the Apex Court in Principal Com-missioner of Income-tax (Central)-1 v. NRA Iron & Steel (P) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different.

In our view, the Tribunal has not committed any perversity or applied in-correct 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." 9. Further, the Hon'ble Delhi High Court in the case of Pr. CIT-12 v. Smt. Krishna Devi ITA 125/2020 dated 15.01.2021/[2021] 126 taxmann.com 80/279 Taxman 148/431 ITR 361 (Delhi) held as under: - P a g e | Bhawna Kapoor (AY 2014-15) "8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the invest-ments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453.

Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd. under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips.

We have heard Mr. Hossain at length and given our thoughtful consider ation to his contentions, but are not convinced with the same for the reasons stated hereinafter.

On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified: the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert un- accounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre- planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his con-clusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Section 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this P a g e | Bhawna Kapoor (AY 2014-15) entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unac-counted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from demat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.

Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create and proof, and not on suspicion alone. The theory of human behaviour and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns ITA 125/2020 and connected matters Page 10 of 10 on its own specific facts. The abovestated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue.

The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order.

Accordingly, the present appeals are dismissed."

Therefore, we respectfully follow the ratio of the above decisions. In this case also, the Assessing Officer and Ld. CIT(A) has applied the concept of human probabilities and held the above said scrips to be a penny stock without bringing on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed by the Hon'ble Bombay High Court in the case of Ziauddin A Siddique (supra). Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non- genuine. Therefore, we are inclined to allow the ground raised by the assessee. Accordingly the grounds raised by the assessee are allowed.

In the result, appeal filed by the assessee is allowed

In view of above material facts, by following the judicial precedent the grounds of appeal Nos. 1 to 5 are accepted.

In the result, application for condonation of delay of 349 days in filing appeal and appeal filed by the assessee are allowed.