ITO 34 (2)(6), MUMBAI vs. MILIND R KADAM , MUMBAI

This appeal by the revenue is directed against the order of learned Commissioner of Income Tax (Appeals)-57 dated 06.08.2019 and pertains to assessment year 2011-12.

1 "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the transactions carried out by the assesses in penny stock are genuine, without appreciating the fact that the assessee was one of the beneficiaries in penny stock scam, where organized tax-evasion scam was detected through bogus Long Term Capital Gain/Short Term Capital Gain on penny stock through the unique modus operandi involved in the scam".

2. On the facts and circumstances of the case , the Hon'ble ITAT is requested to entertain this appeal though the tax effect is below the monetary limit prescribed in the CBDT's Circular No 17/2019 dated 08.08.2019 as an exception to the said Circular as the case is in the nature of organized tax evasion scam as mentioned in CBDT'S Circular No 23/2019 dated 06.09.2019". 3. "The appellant craves leave to add, to amend , alter, substitute or modify any of the above ground or add a fresh ground as and when found necessary either before or at the time of hearing."

“The facts of the case are the Assessing officer had received information that the penny scrip "SVC Resource Ltd." has been used for generating bogus LTCG/STCL by manipulating the transactions in the Stock Exchange in order to route the unaccounted money of the beneficiaries into their accounts. The Assessing officer on the basis of information that the assessee had Traded in "SVC Resource Ltd." amounting to Rs. 1,60,978/- reopened the case u/s. 147 of the IT Act. The Assessing officer has contended in assessment order that the assessee submitted the details including broker note, ledger copy of broker, global report & Bank A/c. However the Assessing Officer has come to conclusion that since the assessee has traded in penny scrip & as the Investigation wing has carried out investigation & various confessional statements of entries operators that it is a fictitious transaction the assessee's submission cannot be accepted & has added the amount u/s. 68 of the IT Act.

During the course of appellate proceedings the appellant filed documents in support of its claim that it was a genuine transaction. The appellant has submitted that it has filed its return of income for AY 2011-12 showing Salary Income of Rs. 1,60,978/- and has not claimed STCL of Rs. 36,398/-. It was further submitted that during the year he purchased 1300 shares of M/s. SVC Resource Ltd. for Rs. 2,61,099/- & sold the same for Rs. 2,62,428/- and earned Capital gains of Rs. 1329/-. All the transactions have been carried out by Demat Account. The appellant has also submitted before me global statement, Demat account for the period 01.04.2010 to 31.03.2011. From the perusal of the same I am of the considered opinion that considering the facts of the case the addition made by Assessing officer is not correct. It is true that a large scale of rigging has taken place in the penny stock scam. But we cannot treat all the purchase & sale of the scrip under scanner in the same table. Each case has to be analyzed with the facts of that particular case. In the instant appeal the appellant has carried out all purchases/sales through Demat account. Moreover the global Report shows that the appellant has been purchasing/selling many other scrips also. Short Term Capital Loss has not been claimed in return of Income & moreover the gain received from the purchase script SVC Resources is very meagre only Rs. 1329/-. Hence the assessing officer's assertion that loss/gain has been manipulated by the assessee does not seen to be correct. Hence the addition made by AO is not correct & the same is hereby deleted & appeal is allowed.”

Pronounced in the open court on 09.12.2021