ANIKET SINGAL,NEW DELHI vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, CHANDIGARH

Since the grounds raised in all the above appeals are common and the appeals were heard together, they are being disposed of by this consolidated order for the sake of convenience.

Firstly, we shall deal with the appeal of the assessee in ITA No. 1145/Chandi/2025 for the Assessment Year 2017–18, wherein the assessee has raised the following grounds:

That order passed u/s 250(6) of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals)-3,Gurgaon is against law and facts on the file in as much as he was not justified to uphold the action of the Learned Assessing Officer in making an addition of Rs. 28,30,02,558/-representing sale proceeds of equity shares held by the appellant for more than 12 months by invoking the provisions of Section 68 of the Income Tax Act, 1961 and subsequently denying claim of exemption u/s 10(38).

That the Learned Commissioner of Income Tax (Appeals) further gravely erred in upholding the action of the Learned Assessing Officer in making an addition of Rs. 1,76,33,254/- on account of alleged commission expenses allegedly paid by the appellant for arranging alleged entries in respect of long- term capital gain by invoking the provisions of Section 69C ofthe Income Tax Act, 1961. 3. That the Learned Commissioner of Income Tax (Appeals) was further not justified to uphold the action of the Learned Assessing Officer in treating the transactions relating to purchase and sale of equity shares as sham transactions.

Briefly, the facts of the case are that the assessee in her Income Tax Return, has claimed exempt income in the form of Long Term Capital Gain ("LTCG") of Rs. 27,12,80,840/- from sale of shares of M/s Meenakshi Enterprises, M/s Shantanu Sheorey Aquakult Ltd and M/s Sunstar Realty Development Ltd. From the assessment record of the assessee and her family members for AYs 2011-12 to 2017-18, it was observed by the Assessing Officer that the assessee/her family members have indulged in taking accommodation entries in the shape of bogus "LTCG" against cash consideration through accommodation entry providers.

1 The details of the long-term capital gains arising to the assessee in the period covered under the appeal are as follows:-

6 For this purpose, commission at the rate of 5% to 6% was charged from the beneficiaries by such operators. The statements of Shri Shrish Chandrakant Shah and Shri R.K. Kedia recorded under Section 132(4) of the Act were also supported by the seizure of a large number of incriminating documents during the course of search proceedings conducted in their cases on 09.04.2013 and 13.06.2014 respectively, including cash books reflecting the flow of unaccounted cash from the beneficiaries, including the appellant, to such accommodation entry providers. 4.7 On the basis of these facts, the Assessing Officer held that the accommodation entries taken by the appellant and her family members for AY 2016–17 and 2017–18 and earlier years were bogus credits introduced into their bank accounts in the garb of bogus long-term capital gains from the sale of listed securities of paper companies. 4.8 During the year under consideration, the assessee sold shares of “Meenakshi Enterprises” between 14.10.2016 and 10.03.2017, which had been purchased during the financial year 2013–14. The assessee claimed the resultant long-term capital gain (LTCG) of Rs. 7,91,34,944/- arising from the sale of these shares during the year as exempt under section 10(38) of the Act. Similarly, the appellant sold shares of “Shantanu Sheorey Aquakult” between 27.10.2016 and 16.03.2017, which had been purchased during the financial year 2012–13, and earned exempt LTCG of Rs. 18,94,33,739/-. Further, the appellant sold shares of “Sunstar Realty Development Limited” between 05.10.2016 and 14.10.2016, which had been purchased during the financial year 2013–14, and earned exempt LTCG of Rs. 27,12,157/-. Thus, the total long-term capital gains accruing to the appellant amounted to Rs. 27,12,80,840/-, and the aggregate sale proceeds from the sale of these shares were Rs. 28,30,02,560/- (details of the calculation of LTCG are at pages 8–10 of the paper book).

9 During the course of the assessment proceedings, the Assessing Officer, vide notice issued under section 142(1) dated 16.11.2019 (pages 164 to 172 of the Paper Book), asked the assessee to furnish details of the exempt long- term capital gains and, inter alia, to provide reasons and justification for the purchase along with documentary evidence, as well as the following details: (i) Since when assessee is dealing in shares and commodities etc. (ii) Whether assessee is a trader or investor in stocks (iii) Give the name and complete address of the assessee’s DP (iv) Details how the assessee came to know about the various companies in which investments are made (v) Name and complete address of the share brokers whose services has been used (vi) How the order are placed through personal visit or over phone (vii) How the decision about investing in shares of a particular company was made (viii) Do the assessee know the business of the companies in which the investment was made (ix) What is the business and location of the companies in which investment is made (x) When was the first time assessee heard about the company in which investment made (xi) Name and complete address of the broker at the time of investment (xii) How the order for sale transaction was placed, provide details with evidence (xiii) How many transactions with the said broker was made in the past through whom the investment was made 4.10 The Assessee vide letter dated 23.12.2019 (Pages175-176 of the PB) provided the reply to the specific queries raised alongwith the following details:- (i) Copy of allotment letter, share certificate, contract note, DEMAT statement and bank statement evidencing purchase through bank mode (pages 22-34 of PB) (ii) Scrip wise details of sale of shares and contract notes evidencing sale of shares through brokers (pages 35 -153 of PB) (iii) Copy of bank statement evidencing receipt of proceeds of sale of shares (pages 154 – 163 of PB)

1 The please that similar additions in earlier years were deleted by the Hon’ble ITAT does not advance the appellant’s case. Each assessment year is a separate unit and res judicata does not apply to income-tax proceedings. The appellant has not demonstrated that the fact and scrips are identical, that the evidentiary lacunae flagged here were absent there, or that the coordinate bench decisions turned on a legal principle that compels allowance here despite the present factual matrix. In any event, appellate findings in other years neither bind the AO nor this authority when confronted with distinct, year-specific trades exhibiting classic penny stock badges. I therefore, distinguish the earlier relief and decline to apply it mechanistically.

2 Furthermore, the record reflects issue of notice under section 143(2) on 23.08.2018 and repeated questionnaires under section 142(1) during the course of scrutiny. The queries squarely adverted to the impugned share transactions, sought detailed explanations, and warned of adverse inference in the absence of satisfactory evidence. The law does not mandate a ritualistic, separate show cause if the appellant has already been put to notice of the precise issues and the afforded meaningful opportunity to explain. The appellant responded but failed to cure material deficiencies. There is thus no violation of natural justice. In any case, before me the appellant received full opportunity to fie further evidence or seek cross-examination with justification; none was effectively availed. No prejudice is shown.

3 The thrust of the appellant’s argument is that the sale consideration was received by cheque on which STT was paid and, therefore, the LTCG earned was genuine. This cannot be accepted in view of multiple adverse evidences collected by the revenue and the appellant cannot be treated as a passive beneficiary of the transactions. The Supreme Court held in the case of Rakhi Traders (P) Ltd (supra) that in trade transactions with huge price variations of the transactions, it will be too naïve to hold that the transactions were through screen based trading and hence anonymous. According to the Apex Court, such conclusion would be overlooking the prior meeting of minds involving synchronization of buy and sale order and that such transactions were manipulative/deceptive device to create a desired loss and/or profit.

4 In view of the detailed discussion as above and based on data obtained from various sources and made available on record, the exemption u/s 10(38) claimed on account of said LTCG by the appellant is held to be a sham transaction only to bring its own unaccounted money in the guise of exempted LTCG and only paper work was done to give a colour of authenticity to the transactions by creating a façade of legitimate transactions.

5 The Investigation Wing and the AO has brought on record sufficient material to support the findings that appellant has introduced unaccounted money by camouflaging the share transactions with good paper work. The appellant has not discharged the initial onus of proving the genuineness of share transaction as despite being specifically asked details of share transactions vide notice u/s 142(1) alongwith questionnaire, the appellant failed to produce the parties who purchased the shares of such dummy companies lacking any fundamentals. Similarly, the appellant also failed to give details of mode of payment received/paid to the brokers. The findings stated by the AO co-relates with the statement of accommodation entry providers in a separate search action by the Investigation Wing in if the case of Shri Shrish Chandrakant Shah, Shri R.K. Kedia and Shri Manish Arora. It is clearly held that on the requirement of beneficiaries to infuse their unaccounted cash into their business without having to pay any tax on the same, accommodation entries were provided to them Shri RK Kedia has admitted that the accommodation entries of LTCG might appear to be genuine prima facie, as the payment of cheques while investing in shares or selling of hares is through stock exchange and brokers, but these entities are minutely managed, supervised and controlled by entry/exit operators for earning commission income. The seized record as per Annexure A-23 and copy of cloned seized documents from the premises D-45, Saraswati Garden, New Delhi of LTCG accommodation entries given to the Singals of M/s Bhushan Power and Steel Group using the scrips detailed above. The seized record of 14 pen drives and 3 external hard disk at residence of Shri Manish Arora at D-45, back side GF, Saraswati Garden, New Delhi -110001 on 13.06.2014 provided accommodation entry was being provided to route in unaccounted money as commission basis in this case. Thus, it is not necessary that having contract notes, demat accounts and bank statements, the transactions carried out on stock exchange cannot be manipulated as admitted by the entry operator. Thus, it is seen that the appellant failed to explain the nature and source of credits in the bank account.

Accordingly, the appellant has not discharged the statutory onus under section 68; the explanation offered is improbable and unsubstantiated by independent evidence; exchange and banking cannels are not conclusive of genuineness; prior group relief is distinguishable; there is no breach of natural justice; estimation of commission is reasonable; and section 115BBE applies. The additions of Rs. 28,30,02,558/- under section 68 r.w.s. 115BBE of the Act ad Rs.

Against the order of the Ld. CIT(A), the assessee preferred an appeal before us. 7. During the proceedings before us the submissions made before the CIT(A) were reiterated and it was emphasized by the AR on behalf of the Assessee that:- (i) The entire payment for purchase of shares has been made through banking channels;

1 The AR has also emphasized the fact that the entire case of the Assessing Officer is based on the findings and conclusions in the assessment proceedings for earlier years with no specific evidence or finding for the year under appeal which action is not sustainable given the fact that each year is a separate unit of assessment and the findings/conclusions cannot by themselves and ipso-facto be extrapolated to another year. Before us it has also been argued with respect to the addition u/s 69C that no addition can be made for any assumed/notional expenditure u/s 69C since that section can be invoked only when an expenditure is found to have been incurred and of which the source has not been substantially explained.

2 The AR has also emphasized that there is nothing adverse with respect to both the legs of the transactions i.e. purchase/allotment and sale of shares which can lead to any doubts as regards the legal validity, procedural compliance and genuineness thereof. In that view of the matter since there is no doubt with respect to any of the components giving rise to "LTCG", the legality and acceptability thereof can also not be doubted. 7.3 The AR has accordingly stated that the share transactions were genuine entitling the Assessee to exemption u/s10(38)of the Act on long-term capital gains arising on sale of shares. He has also relied upon the decisions of the coordinate Benches of the Chandigarh Benches and Delhi Bench in the case of the appellant and her family members, viz., Shri Brij Bhushan Singal, Smt. Uma Singal, Smt. Ritu Singal, Sh. Neeraj Singal, Aniket Singal, and Sanjay

2 In particular, while reviewing the facts of the particular appeal in the backdrop of the findings of the Coordinate Benches, we observe that the assessee made investments in the various companies as a prudent investor at a reasonable price, which were held for a substantial period and thereafter sold off on a recognised Stock Exchange as soon as the price reached what the assessee felt was the optimal level

3 Moreover, the fact that the assessee made the investments in the said companies as a prudent investor at a reasonable price, which were held for a substantial period and were thereafter sold on a recognized stock exchange and on which STT has been paid, stands duly supported by the following contemporaneous/unrebutted documents/material placed on record:– - Shares were allotted by way of preferential allotment directly by the company and the shares were allotted and always held in Demat form by the assessee;

4 Insofar as reliance has been placed on the statement of Sh. R.K. Kedia, it remains undisputed that Sh. R.K. Kedia is totally unconnected to the 15

5 Merely because information is received by the Assessing Officer that someone is alleged to be an entry provider, this cannot lead to a conclusion that the transaction of the assessee is not genuine, when there is nothing on record to even suggest, let alone establish, a link between the so-called entry provider and the transaction of the assessee.

6 As regards the allegation of the Assessing Officer with regard to the so- called circumstantial evidence to draw the inference that the share transactions undertaken by the assessee were sham and a colourable device to evade taxes and introduce unaccounted money in her books, the Assessing Officer has failed to appreciate that the market price of any share/scrip on the stock exchange is not simply based on the financial results in any particular year(s); rather, it is based on numerous complex factors, like the nature of business and the product dealt in, the prevailing competitive environment, the future potential of the sector in which the company operates, the positioning of the company in the sector it operates, Government and statutory regulations, international markets and sentiment, the future potential of investment by PE/Investment funds, the perception in the market, the future expected cash flows, etc.

7 The CIT(A), in particular, has also relied upon the doctrine of preponderance of probabilities and normal human conduct to allege that the transactions undertaken by the assessee were not genuine and that whatever seems apparent is not real. It is a settled position in law, and as also held by the Coordinate Benches, that the onus of proving that the transaction is not real is on the person who alleges it to be so. It is not open to the Revenue to simply allege that the transaction is not real in a given case without bringing on record any tangible material to establish the same.

8 In this regard the following paras of the order dated 08.10.2024 passed by Coordinate Bench in ITA No. 655/CHD/2023 and 610/CHD/2023 merit attention:- 31. It is not possible to comprehend as to how the transactions under consideration can be said to be against human conduct. As a matter of fact, it is quite normal for an investor to invest in shares and exit after holding the shares for considerable period, as and when favourable market conditions exist. In fact, the movement in the share market is totally outside the control of the assessee/ investor and therefore, it is not possible for the investor/ appellant to plan the exit price.

The Assessing Officer entirely failed to appreciate as to how and on what basis the shares of an investee company are categorized as “penny stock”. In fact the investee company herein is an existing company and, therefore, there is no warrant to doubt the transaction undertaken by the appellant.

1 The concept of preponderance of probabilities does not connote that the decision itself can be based thereupon, without bringing on record any material/ evidence in support of such allegation. Any assessment of income in the hands of the assessee has to be made on the basis of material/ evidence and not merely on basis of mere suspicions and surmises [refer: Lalchand Bhagat Ambica Ram vs. CIT: 37 ITR 288 (SC); Dhakeshwari Cotton: 26 ITR 775 (SC)]

2 It is also settled law that suspicion, howsoever strong, cannot take the place of hard proof and that assessment under the Act has to be made on the basis of mere material/evidence and not on the basis of assumptions/presumptions [refer J.J. Enterprises vs. CIT 254 ITR 216 (SC), Assam Tea Co. vs. ITO: 92 ITD 85 (Asr.) (SB), Faqir Chand Chaman Lal vs. ACIT: (2004) 1 SOT 914 (Asr.) (Appeal dismissed by P&H High Court in 262 ITR 295 and SLP dismissed by SC in 268 ITR), CIT vs. Paras Cotton Co.: 288 ITR 211 (Raj.)]

In the present case, the entire case of the Assessing Officer is based on merely conjectures and surmises, without any tangible material being brought on record to controvert the cogent documentary, contemporaneous material/ evidences placed on record by the appellant. The Assessing Officer has proceeded solely on assumptions and presumptions, and has neither controverted the comprehensive direct / corroborative documentary evidence filed in support of the genuineness of the transaction, nor has attempted to bring on record any independent corroborative material/ evidence to establish that the transactions were bogus.

9 To summarize, in the case of the Assessee the shares were acquired by way of preferential allotment directly by the Company for which payment made through banking channels, and which stands duly evidenced by allotment letters issued by the Company sold through the online platform of the Stock Exchange for which payment was received through banking channels after holding them for more than one year and "STT" was duly paid there on, deliveries for shares were taken/given from the DEMAT A/c and transactions for sale duly evidenced by contract notes. Given these facts and the compliance of legal provisions and regulatory compliance, there is no cause or reason to treat the entire scenario as bogus and the transactions as sham.

10 In this connection, reference may be made to the following extract(para 44 and 45 of the PB)from the order dated 08.10.2024 passed by our coordinate Bench "B" Chandigarh in ITA No. 655/CHD/2023 and 610/Chd/2023 which reads as follows:-

1 In the case of the appellant, shares were acquired by way of preferential allotment directly by the Company and not from any broker. Payment was made through banking channels. Deliveries were taken in the DEMAT account, where shares remained for more than one year. Contract notes were issued and shares were also sold on a recognized stock exchange. The SEBI has nowhere held the investee company to be a bogus or sham company.

11 The CIT(A) as well as the Assessing Officer have referred to the past history of the case and investigations made in earlier years, which by themselves cannot support the case of the Department. It is a trite and uncontroverted principle of law that the Assessing Officer cannot treat a transaction as bogus only on the basis of suspicion or surmise. The Assessing Officer has to bring tangible material on record to support his finding that 18

12. It is observed that the Department has not brought on record any fresh facts for the year under appeal and has simply relied upon the findings and arguments of the earlier years. Each year being an independent year of assessment, specific evidence or facts have to be brought on record to sustain any adverse action against an assessee. Moreover, the transactions for the sale of shares giving rise to “LTCG” have actually taken place after the searches during which the various statements, which form the pivot of the case of the Assessing Officer, were recorded.

13 In view of the same and the following the orders of the coordinate Chandigarh Bench of the ITAT in earlier years the grounds raised by the Assessee are allowed and we hold that the CIT(A)erred in upholding the action of the Assessing Officer:

Consequently, grounds of appeal raised are accepted, the appeal is allowed and the order under appeal is reversed. 11. Now we shall deal with appeal of the Assessee in ITA No. 939/CHANDI/2025 - AY 2016-17 in the case of Aniket Singal 11.1 In this appeal the Assessee has challenged the action of the Assessing Officer in making an addition of Rs 30,87,54,841/- representing sale proceeds of equity shares held by the assessee for more than 12 months by invoking the provisions of section 68 of the Act and making an addition of Rs 1,94,81,340/- u/s 69C on account of alleged unaccounted commission paid@6.5%forthe purpose of earning capital gains. During the year the details of the long term capital gains arising to the Assessee are as follows:-

2 The facts and grounds in this appeal filed by the assessee are, mutatis mutandis, identical to those in ITA No. 1145/Chd/2025 in the case of the Smt Aarti Singal. Accordingly, our above observations, findings and conclusion made in ITA No. 1145/Chd/2025 shall, mutatis-mutandis, apply in this appeal also. 12. Accordingly, herein also the grounds of appeal raised are allowed and the order under appeal is reversed. 13. Now we shall deal with the appeal of the assessee in ITA No 1146/Chd/2025 for A/Y 2017-18 in the case of Aniket Singal 13.1 In this appeal the Assessee has challenged the action of the Assessing Officer in making an addition of Rs 4,46,06,135/- representing LTCG on equity shares held by the assessee for more than 12 months by invoking the provisions of section 68 of the Act and making an addition of Rs 28,99,400/- u/s 69C on account of alleged unaccounted commission paid @6.5% forthe purpose of earning capital gains. During the year the details of the long term capital gains arising to the Assessee are as follows:-

2 The facts and grounds in this appeal filed by the assessee are, mutatis mutandis, identical to those in ITA No. 1145/Chd/2025 in the case of the Smt Aarti Singal. Accordingly, our above observations, findings and conclusion made in ITA No. 1145/Chd/2025 shall, mutatis-mutandis, apply in this appeal also. 14. Accordingly, herein also the grounds of appeal raised are allowed and the order under appeal is reversed. 15. In the result, all the above appeals are allowed. Order pronounced in the open Court on 13/03/2026. राजपाल यादव

अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File