ITO(IT)-2(3)(1), MUMBAI, MUMBAI vs. SUBRAMANIA SREENIVASAN GANESHNATH, MUMBAI

The present appeal preferred by the Revenue is directed against the order, dated 09/02/2024, [read with Corrigendum, dated 13/02/2024] passed by the Commissioner of Income Tax (Appeals) - 56 [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had allowed the appeal against the Assessment Order, dated 24/05/2022, passed under Section 147 read with Section 144C(3) of the Act for the Assessment Year 2017-18. Assessment Year 2017-2018

The Revenue has raised following grounds of appeal :

Whether the Ld. CIT(A) erred in holding that Assessing Officer has not pointed out that the sale consideration is found to be recorded in the books of account of assessee ignoring the fact that in case of individual who is not required to maintain books of account in sufficient and satisfactory to hold that such sum is credited into books of account.”

The relevant facts in brief are that the Assessee is a non-resident individual working in Muscat and deriving salary income. During the relevant previous year, the Assessee filed return of income on 19/05/2021 declaring income at INR.52,04,970/-. Reassessment proceedings under Section 147 of the Act were initiated in the case of the Assessee on the ground that the Assessee was one of the beneficiaries of bogus capital gain accommodation entry. In response thereto, the Assessee filed return of income on 19/05/2021 declaring, inter alia, Short Term Capital Gain of INR.7,99,040/-. In response to the notice under Section 142(1), dated 27/01/2021 and show cause notice dated 23/02/2022, the Assessee filed documents including Bank Statements, Computation of Income, reconciliation of income with Bank Statement and 26AS etc. along with the details of the purchase/sale transactions undertaken by the Assessee in respect of equity shares of Kushal Limited [formerly known as Kushal Tradelink Limited (BSE Code: 536170)]. Placing reliance upon the Investigation Wing, the Assessing Officer concluded that Kushal Limited was a penny stock company which has been used by the operators and entry/exit providers for introducing unaccounted cash in the books of accounts of the beneficiaries entering into bogus purchase/sale transactions resulting in pre-determined capital Assessment Year 2017-2018

Being aggrieved, the Assessee preferred appeal before CIT(A) which was allowed vide order, dated 09/02/2024, read with Corrigendum dated 13/02/2024 passed by the CIT(A).

Being aggrieved by the above relief granted by CIT(A), the Revenue has preferred the appeal before the Tribunal on the ground reproduced at paragraph 2 above.

We have heard the rival submissions and perused the material on record.

On perusal of the impugned order passed by the CIT(A) we find that the findings returned by the Assessing Officer were overturned by the CIT(A) in the following manner:

1. On perusal of the assessment order, it is seen that the assessing officer has relied upon the statement of one Shri Ashish Pannalal Shah recorded under section 131 of the Act by the Investigation Wing of the Department during the course of action under section 132 of the Act in the case of Kushal Group. As per the assessing officer, Shri Ashish Pannalal Shah had accepted that he was providing market manipulation services to companies and thereby rigging the share price to a certain level as desired by companies and for that he had received commission from these companies. As per the assessing officer, Shri Ashish Pannalal Shah had also accepted that he had used accounts of others for his market manipulation work. The assessing officer finally added the sale consideration amount of Rs.3,86,67,529/- as unexplained cash credit under section 68 of the Act. The assessing officer also made addition of Unexplained expenditure of Rs. 11,60,026/- under section 69C of the Act to the total income of the appellant.

2. The appellant is an NRI. The transactions are claimed to have taken place from the NRE Account of the appellant. The appellant has furnished statement on transactions in Kushal Scrips, bank statement, statement of capital gain from broker. The Short Term Capital Gain on the sale of shares has been offered to tax by the appellant. The appellant had purchased the shares which were transferred to his Demat Account, and, no specific Assessment Year 2017-2018

3 The ratio of the decision of the Hon'ble Supreme Court in the case of Pr. CIT Vs. Renu Aggarwal (WP for SLP Nos. 13033 of 2023 dated 03/07/2023 and the ratio of the decision of the Hon'ble Bombay High Court in the case of Pr. CIT Vs. Indravadan Jain, HUF (ITXA No. 454 of 2018) dated 12/07/2023 as relied upon by the appellant is found to be applicable to the present appellant's case.

4 In view of the above, it cannot be said that the purchase and sale of the shares of Kushal Limited/Kushal Group was bogus in nature and the transactions of purchase and sale were sham transactions.

5 In addition to above, it may also be mentioned here that the amount of sale consideration on sale of shares of Kushal Limited/Kushal Group is not pointed out by the assessing officer that the same was found recorded in the books of account of the appellant. Hence, one of the conditions to invoke provisions of section 68 of the Act in the case of the appellant is not found to have been satisfied by the assessing officer.

6. Cumulatively considering the facts & circumstances of the case, and the legal position prevailing over the issue, as discussed above, addition made under section 68 of Assessment Year 2017-2018

As regards Ground No. 2 raised by the Revenue is concerned, we find that the issue raised therein has been rendered academic and therefore, dismissed.

In the result, the appeal of the Revenue is dismissed in terms of paragraph 8 and 9 above.

अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file.