SMT. KANTA BAI C. JAIN,,CHENNAI vs. ITO, NCW - 5 (1),, CHENNAI

आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2011-12 arises out of the order of learned Commissioner of Income Tax (Appeals)-5, Chennai [CIT(A)] dated 29-06-2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) r/w s. 147 of the Act on 11-12-2017. The sole issue in the appeal is addition of unexplained cash credit u/s 68 arising from the sale of penny stocks. 2. As per revised Form 36, there is delay of 513 days in the appeal, the condonation of which has been sought by Ld. AR which is supported by the affidavit of the assessee. The delay has been

ITA No.463/Chny/2020 - 2 - attributed partly due to the fact that there was change in address and partly due to the fact that the assessee was facing adverse medical conditions. Considering the contents of petition as well as affidavit, I condone the delay and admit the appeal for adjudication on merits. 3. The Ld. AR advanced arguments assailing the reassessment proceedings on legal grounds as well as on merits. The Ld. AR pleaded for deletion of addition. In the alternative, Ld. AR submitted that the addition of gains arising on sale of scrips of Union Bank of India and Carin India deserve to be deleted. The details of the transactions have been placed on record. The Ld. Sr. DR pleaded for dismissal of the appeal on the ground that the gains claimed to be exempt u/s 10(38) were on penny stocks which were not genuine. Having heard rival submissions, the appeal is disposed-off as under. Proceedings before lower authorities 4.1 The original return of income filed by the assessee was processed u/s 143(1). However, the case was reopened on the basis of investigation findings of investigation wing, Kolkata that the assessee obtained engineered gains on penny stock Bakra Prathishthan which was facilitated by operator Shri Ashok Kumar Kayan. This group indulged in trading of penny stock at the platform of Calcutta Stock Exchange for providing bogus Long Term Capital Gains to the clients. The assessee figured as one of the beneficiaries of such gains. Accordingly notice u/s 148 was issued on 07.03.2017 and reasons for reopening were communicated to the assessee. 4.2 The assessee purchase 3000 shares of Bakra Prathishthan on 16.05.2008 for Rs.0.60 Lacs through off-market transaction and the shares were dematerialized after 14 months. The assessee sold the

ITA No.463/Chny/2020 - 3 - same on a single day and earned gains of Rs.9.94 Lacs. However, no such exempt income was shown in the return of income. 4.3 The Ld. AO observed that the profits of Rs.9.94 Lacs came from small investment of Rs.0.60 Lacs in an unknown company with no track record. The shares were purchased at Rs.20/- per share which were old on a single day i.e., 28.07.2010 at exorbitant price of Rs.352.50 per share resulting into LTCG of Rs.9.94 Lacs which defy all logics. 4.4 The Ld. AO, referring to the findings of investigation wing, elaborate the entire process of generation of gains on penny stock. The Ld. AO also brought on record the financials of Bakra Prathishthan Ltd. for 4 years and it was noted that there was not any prospective growth in the net worth of the company. The share price sky-rocketed and the parameters essential for increase of price of shares were not present. The share price increased multifold without any semblance or any positive factor which clearly showed that there was artificial rigging by circular trading. The same was confirmed by the operators during investigation process. 4.5 The assessee also failed to establish the genuineness of the transactions. Finally, it was concluded by Ld. AO that the assessee entered into an engineered transaction to generate bogus long-term capital gains. Therefore, the entire sale consideration of Rs.11.74 Lacs was added u/s 68. A separate addition of estimated commission paid on this transaction was also made. 4.6 Before Ld. CIT(A), the assessee failed to appear and could not substantiate the transaction which resulted into confirmation of

ITA No.463/Chny/2020 - 4 - assessment order. Aggrieved, the assessee is in further appeal before us. My findings and Adjudication 5. Upon perusal of assessment order as well as impugned order, I find that Ld. AO has brought on record all the relevant facts which well support the conclusion that the transactions which resulted into exorbitant gains for the assessee within a short span of time were engineered transaction as facilitated by the operators of Kolkata. The genuineness of the transaction could not be established by the assessee. The ratio of recent decision of Hon’ble Calcutta High Court in Pr. CIT V/s Swati Bajaj (446 ITR 56; 14.06.2022) squarely applies to the facts of this case. In this case, the Hon’ble Court has confirmed the additions on such transactions under similar circumstances. 6. So far as the validity of reassessment proceedings is concerned, I do not find any illegality in the same. The case was reopened pursuant to receipt of specific information from investigation wing wherein the assessee figured as one of the beneficiaries of such penny stock transactions. Nothing more was required at this stage to reopen the case of the assessee. Therefore, the legal grounds stand dismissed. 7. Upon perusal of details, I find that sale consideration of penny stock was Rs.10,57,500/-. The remaining sale consideration of Rs.1,17,181/- arise on sale of listed scrips of Union Bank of India and Cairn India which surely are not penny stock. Therefore, I direct Ld. AO to reduce the addition to the extent of Rs.10,57,500/- and re-compute the income of the assessee. The appeal stand allowed to that extent.

ITA No.463/Chny/2020 - 5 -

Order pronounced on 19th September, 2022.

Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद) / ACCOUNTANT MEMBER

चे*ई / Chennai; िदनांक / Dated : 19-09-2022 EDN/- आदेश की Iितिलिप अ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF