M/S. PUSHPA NAVRATAN RANAWAT,MUMBAI vs. INCOME TAX OFFICER-18(2)(5), MUMBAI

आयकर अपीलीय अिधकरण “ए” "ायपीठ मुंबई म"। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI माननीय "ी अमरजीत िसंह, "ाियक सद" एवं माननीय "ी मनोज कुमार अ"वाल ,लेखा सद" के सम"। BEFORE HON’BLE SHRI AMARJIT SINGH, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM (Hearing through Video Conferencing Mode) आयकरअपील सं./ (िनधा"रण वष" / Assessment Year: 2014-15) Ms. Pushpa Navratan Ranawat Income Tax Officer-18(2)(5) बनाम/ Room No.306, 3rd Floor 32/33, Dagina Bazar Mumbadvi Road, Mumbadevi Earnest House, NCPA Marg Vs. Mumbai-400 002. Nariman Point, Mumbai-400 021. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAFPR-3149-E (अपीलाथ"/Appellant) (""थ" / Respondent) : Assessee by : Shri Rajeev Khandelwal-Ld. AR Revenue by : Shri Sunil Deshpande-Ld. DR सुनवाई की तारीख/ : 03/12/2020 Date of Hearing घोषणा की तारीख / : 16/02/2021 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 contest the order of Ld. Commissioner of Income Tax (Appeals)-29, Mumbai [CIT(A)], Appeal No.CIT(A)-29/626/ITO-18(2)(5)/2016-17 dated 22/07/2019. The assessment was framed by learned Assessing Officer u/s 143(3) vide order dated 28/12/2016.

, however in sum and substance, the assessee is aggrieved by confirmation of certain additions as unexplained investment / expenditure in view of the fact that the exemption claimed u/s 10(38) with respect to Long-Term Capital Gains (LTCG) earned on sale of certain shares was denied to the assessee and the gains so earned as well as estimated commission allegedly paid against these transactions was added to the income of the assessee. Upon further appeal, Ld. CIT (A) not only confirmed the impugned additions but enhanced the same by denying cost of acquisition of Rs.9 Lacs. However, marginal relief was granted to the assessee on account of estimation of commission.

3. It is admitted position that the facts as well as issues in this appeal are pari-materia the same as in the case of related assessee namely Smt. Chhaya Hasmukhlal Ranawat V/s ITO (ITA No.3278/Mum/2019) which has been adjudicated by this very bench vide order dated 03/02/2021. During the course of hearing, both the sides converged on the point that our adjudication in shall, mutatis- mutandis, apply to this appeal also. In the said background, we proceed to adjudicate the appeal in the subsequent paragraphs. Proceedings before Ld. AO 4.1 While framing an assessment u/s 143(3) vide order dated 28/12/2016, the assessee was denied exemption u/s 10(38) on certain Long-term capital gains (LTCG) earned on sale of shares of an entity namely M/s Sunrise Asia Limited (SAL). The said gains were ultimately added to the assessee’s income as unexplained investment or alternatively as income from other sources. The assessee was also saddled with estimated commission @0.5% allegedly paid against these transactions.

4.2 In support of these transactions, the assessee furnished sale contract notes issued by the brokers, demat statement and bank statements evidencing movement of shares from assessee’s account as well as receipt of sale proceeds through banking channels. In support of purchase transactions, copy of allotment advice and bank statement highlighting payment of purchase consideration through banking channel was also enclosed. On the strength of these documents, the assessee maintained that the transactions were genuine in nature and eligible for exemption u/s 10(38). 4.3 However, in the background of investigation carried out by Kolkata / Mumbai investigation wing in the matter of penny stocks, it was alleged by Ld. AO that profits earned by the beneficiaries were beyond human probabilities. After analyzing the price movement, trades in shares, financials of M/s SAL, it was concluded that the scrip was penny stock being manipulated by the hawala operators and promoters of the company. 4.4 An opinion was also formed by Ld. AO that the shares prices were being manipulated and not in response to normal market demand. Reliance was placed on the confessional statements made by various hawala operators wherein they admitted to manipulating the shares. The manipulation in prices was further corroborated by analysis of share prices and financials of the company. Therefore, the sale consideration as received by the assessee could not be said to be genuine but only a colorful device. 4.5 In the background of all these facts, the assessee was examined on oath u/s 131 on 08/12/2016 which is extracted at para-5 of the assessment order. However, the assessee maintained that she was habitual investor since past 15-20 years. The investments were stated to be made on the advice of her son. However, rejecting the same, Ld. AO opined that the assessee was not genuine purchaser of shares rather the shares were purchased only as a part of hawala entry to get the benefit of bogus long-term capital gains. 4.6 Finally, the difference between the cost price and sale price was added to the income of the assessee as unexplained investment or alternatively as Income from other sources. The commission allegedly paid by assessee against these transactions was estimated @0.5%. Proceedings before Ld. CIT(A) 5.1 Before Ld CIT(A), the assessee maintained that the findings of investigation wing and the observations of Ld. AO were general observation without any specific reference to the transactions of the assessee. These findings had no connection or relation with assessee’s case and do not have direct evidentiary value. The adverse statements being relied upon by Ld. AO were never confronted to the assessee nor any opportunity of cross-examine the person making those statements was ever provided to the assessee. The opinion formed by Ld. AO was without any basis. The stock prices fluctuate widely in the secondary stock market and the prices would be determined by market forces. There was no reference to assessee in the statement made by Shri Anil Agarwal u/s 132(4). The assessee never entered into transactions with any of these parties making the adverse statement. Further, the statement would have no value unless the cross examination of persons making those statements was provided to the assessee. The attention was drawn to the fact that the shares were sold in online mechanism i.e. BOLT of BSE which is monitored by Bombay Stock Exchange. The assessee also denied having any link with Shri Vipul Vidur Bhatt since the shares were sold in online mechanism through authorized stock broker of BSE. It was submitted that the allegation of price manipulation was based on mere suspicion and guess work without any basis or evidence on record. The attention was also drawn to the subsequent retraction statement made by Shri Vipul Vidur Bhatt. Rather, the assessee prima-facie discharged the onus to prove the genuineness of acquisition and sale of shares and the transactions were genuine transactions. To disregard the same, there must be something more than mere suspicion to support the assessment as per the decision of Hon’ble Apex Court in Dhakeshwari Cotton Mills Ltd. V/s CIT (26 ITR 775). The assessment should not be based merely on suspicion or guess work but on legitimate material from which reasonable inference of income could have been drawn. In the said background, the additions so made by Ld. AO were vehemently contested. 5.2 However, the said arguments could not convince Ld. CIT(A) who chose to confirm the action of Ld. AO by observing that the assessee has mis-utilized the provisions of Sec.10(38). None of the parameters which were essential for increase in price of shares was present. The Ld. AO established the manipulation in trading of shares as it was categorically admitted by the key persons that M/s SAL was a penny stock and its prices were rigged to provide bogus LTCG to various beneficiaries. Finally relying upon the findings of Ld. AO, the impugned additions were not only confirmed but the assessment was further enhanced to the extent of purchase price paid by the assessee towards acquisition of these shares. However, the estimated rate of commission was reduced to 0.4%. Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and Adjudication 6. After going through factual matrix as enumerated in the preceding paragraphs as well as after perusal of orders of lower authorities, we find that the facts as well as issues in this appeal are pari-materia the same as in the case of related assessee namely Smt. Chhaya Hasmukhlal Ranawat V/s ITO (ITA No.3278/Mum/2019) which has been adjudicated by this very bench vide order dated 03/02/2021. During the course of hearing, it was admitted position that adjudication in shall, mutatis-mutandis, apply to this appeal also.