M/S RARITY AGENCIES LIMITED,KOLKATA vs. ITO, WARD 9(1), KOLKATA

order

: 21-October-2025 ORDER

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

1. This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2015-16 dated 09.03.2023, which has been passed against the assessment order u/s 143(3) of the Act, dated 16.12.2017. None appeared on behalf of the assessee and the appeal was heard with the assistance of the Ld. DR.

“5. Decision: I have carefully perused the grounds of appeal

, facts of the case and the submission made by the appellant and the evidences on record. 5.1 Grounds No 1, 4, 5 and 6 are general in nature and therefore needs no adjudication. 5.2 Ground No 2 and 3 relates to the AO adding Rs 24,38,500 as bogus long term capital loss u/s 68. "The facts of the case are that the assessee filed the return for the assessment year declaring total income of Rs 10,501/-. The brief fact of the case is that the appellant had filed return of income claimed exemption of Rs 24,38,500/- being long term capital loss on sale of listed shares of Unishire Urban Infra Ltd. under sec. 10(38). The AO made assessment u/s 143(3) by treating the sale as bogus and added back the entire traded value as unexplained cash credit uls 68 of the I.T. Act. The appellant submitted that the appellant purchased shares of Unishire Urban Infra Ltd. Rs. 10.70/- each (at prevailing market price) totaling to Rs. 23,57,459.03/- during the above assessment year. The appellant then had long term capital loss of Rs. 24,38,500/- during the year under consideration. The appellant submitted that the payment was also received by account payee cheque and submitted Copy of the Contract Notes. Bank Statement, DEMAT Statement showing credit and debit of shares. Share Purchase and Sale details. 5.3 The appellant has submitted that the AO while making the addition has not at all applied his mind but that the Ld. AO has treated the entire transaction as sham only on the basis of an investigation report available with the department on sham penny stock transaction wherein a number of shell companies were involved in providing bogus gains to customers for a commission. The appellant has claimed that there was neither any independent application of mind by the AO nor any material was brought on record to show that the transaction made by the assessee was a sham or bogus transaction or any cash has been paid to earn the aforesaid trading loss. The appellant has submitted that all the evidences have been filed to prove the genuineness of the transactions which were carried out through the exchange, the transactions were carried out through DEMAT account and purchase and sale were through normal banking channels and that the AO did not find any documents to be false or fabricated or that SEBI has either debarred the scrip from being traded or the broker for conducting transaction. The appellant also submitted that the AO neither made 5.6 The ratio laid down by the Hon'ble Jurisdictional High Court has been considered elaborately in the decision of the Coordinate Bench in the case of Shyam Sunder Bajaj in and others vide order dated 17th October, 2022 and after placing reliance on the judgment of Hon'ble Jurisdictional High Court in the case of Swati Bajaj & Others (2022) 139 taxmann.com 352(Cal.) pronounced on 14.06.2022, observed as under:-

4. All the present cases were selected for scrutiny u/s 143(3) through CASS and the issue in all of them for selection relates to ‘suspicious long term capital gain on shares’. In all the above appeals, according to the ld. AO, LTCG reported by the assessee in respective return was bogus and the entire transactions were done with the objective to introduce unaccounted money of the assessee in the books by using the route of LTCG which was exempt from tax u/s 10(38) of the Act, except in one case, where the assessee has booked trading loss on transaction of shares of two Companies, which have been treated as penny stock. Thus, ld. AO held that the said LTCG loss are fabricated/engineered transactions by the respective assessees, sale of which falls under the category of penny stocks and the same were treated as bogus which were added in the total income by treating it as unexplained cash credit

5. Recently on 14.06.2022, the Hon'ble jurisdictional High Court of Calcutta passed a judgment in the case of Swati Bajaj and others [2022] 139 taxmann.com 352 (Cal) dealing with set of cases with similar fact patterns as narrated above for the present appeals under consideration before us. Hon'ble jurisdictional High Court by taking the report of the Directorate of Investigation of the Department as the basis, gave its observations and findings, which are summarized hereunder.

5.1. There are two category of cases dealt with by the Hon'ble High Court, viz. first category being those arising out of the order of Tribunal dated 26.06.2019 in which 90 appeals filed by the assessees were allowed and second category is of those cases where assessee has challenged the assumption of jurisdiction by CIT under section 263 of the Act. In the present set of appeals before us, we are concerned with the first category whose relevant observations and findings by the Hon'ble High Court are noted below: