BIRENDRA SINGH NIRBHAY,SIRSI ROAD JAIPUR RAJASTHAN vs. ITO WARD 3(1) JAIPUR, NCRB INCOME TAX DEPARTMENT STATUE CIRCLE JAIPUR RAJASTHAN

आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES,’’SMC” JAIPUR

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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;djvihyla-@ITA No. 704/JPR/2024
fu/kZkj.ko"kZ@AssessmentYear : 2015-16
LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.: ABXPN 5973 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby :Shri Deepak Sharma, CA jktLo dh vksjls@Revenue by: Shri Shri Gautam Singh Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing

: 18/09/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: : 09 /10/2025

vkns'k@ORDER

PER: RATHOD KAMLESH JAYANTBHAI, AM

This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax, National Faceless Appeal Centre,
Delhi[ for short CIT(A)] dated 30.03.2024 for the assessment year 2015-16
raising therein following grounds of appeal.
‘’1. Rs. 2787561/- The Id. CIT(A) has erred in law as well as on the facts of the case in confirming the long-term capital gain as unexplained cash credit amounting Rs. 27,87,561/ The provisions so invoked and confirmed by CIT(A), being contrary to the provisions of law and facts of the case may kindly be quashed and the consequent addition of Rs.27,87,561-may kindly be deleted.
Alternatively and without prejudice to above the Id. CIT(A) erred in law as well as on the facts of the case in confirming the addition of Rs. 27,87,561/ In the matter

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SHRI BIRENDRA SINGH NIRBHAY VS ITO, WARD 3(1), JAIPUR it is hereby submitted that the assessee has shown income from long term capital gain of Rs 27,87,561 which was claimed as exempted income under section 10(38) of the Act. In the case, the equity shares were allotted to the assessee by making payment through account payee cheque in favour of Company "Channel Nine Entertainment Limited The equity shares so acquired have duly been sold online through Bombay Stock Exchange at real time price after paying the Security Transaction Tax (STT). It is also not in dispute that the purchase and sale of the shares were routed through banking channel. Moreover the name of assessee is no where enumerated by any investigation. Hence the addition so made and confirmed by the CIT(A) is contrary to the provisions of law and facts and hence the same may kindly be deleted in full

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SHRI BIRENDRA SINGH NIRBHAY VS ITO, WARD 3(1), JAIPUR of credit, mere proof of identity of creditor or that transaction was by cheque, is not sufficient. Addition u/s 68 was justified. Similar views have been taken in the following cases:
Commercial & Industrial Co.(P) Ld. (Cal) 187 ITR 596

V FINDINGS OF THE CIT(APPEALS)

"The Tribunal in the case of Vijay Proteins Ltd. vs. CIT has observed that it would be just and proper to direct the Assessing Officer to restrict the addition in 5
SHRI BIRENDRA SINGH NIRBHAY VS ITO, WARD 3(1), JAIPUR respect of the undisclosed Income relating to the purchases to 25% of the total purchases. The said decision was confirmed by this Court as well. On consideration of the matter, we find that the facts of the present case are identical to those of Mis. Indian Woolen Carpet Factory (supra) or M/s. Vijay
Proteins Ltd. In the present case the Tribunal has categorically observed that the assessee had shown bogus purchase amounting to Rs. 2,92,93,288/- and taxing only 25% of these bogus claim goes against The principles of section 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transactions have been found to be bogus. The Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/-represented alleged purchases from bogus suppliers it was not Incumbent on it to restrict the disallowance to only Rs.
73,23,322/"

The above para analyses the case of Vijay Proteins Ltd and it is further held that when the purchases are treated as bogus, there is no point in restricting it to a certain percentage and a disallowance of 100% should be done.

During the course of investigation, it was also emerged that the syndicate of entry providers charged commission from the beneficiaries in lieu of providing bogus entries. The beneficiaries Sh.Ajit Gupta of Delhi have categorically admitted in his statements recorded u/s 132(4) that he paid commission of 5-6%
in cash in lieu of bogus entry of Long Term Capital Gains shown from artificial trading in penny stock bogus company. The assessing officer estimated an amount equivalent to 6% of the bogus Long Term Capital Gains entry, which is restricted to 4% which comes to Rs 123686 rounded to 123680. Commission paid in lieu of entry of bogus Long Term Capital Gain was added to the total income for the year under consideration u/s 69C of the Income Tax Act, 1961
being unexplained expenditure incurred by way of commission paid to arrange bogus entry of Long Term Capital Gains. The addition is restricted to 123680

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‘’GROUND OF APPEAL
1. Rs 2787561/- The Id. CIT(A) has erred in law as well as on the facts of the case in confirming the long term capital gain as unexplained cash credit amounting Rs.
2787561/-. The provisions so invoked and confirmed by CIT(A), being contrary to the provisions of law and facts of the case may kindly be quashed and the consequent addition of Rs.2787561/-may kindly be deleted. Alternatively and without prejudice to above the Id. CIT(A) erred in law as well as on the facts of the case in confirming the addition of Rs. 2787561/-.

Brief facts of the order:
The assessee aggrieved with the order of the Ld AO has filed appeal with CIT (A) on 12/12/2017 The CIT(A) under faceless regime had issued notice of hearing on 01/11/2022 and 27/07/2023. The assessee has complied with the notice and submitted its detailed reply incorporating the facts and relevant information, whatever was able to provide under faceless regime, to justify the entire case and begged for justice. The Ld CIT(A) had neither asked for any clarification nor being allowed VC and passed the order under section 250 of the Income Tax
Act,1961 on 30/03/2024. The order at first instance was shocking for the assessee where-in, judgement was “Appeal dismissed”. Upon review of the order it came into knowledge that the Ld CIT(A) has given relief for an amount of Rs
61850/- in the addition made by the Ld AO on account of commission as unexplained expenditure by assuming commission @ 4% instead assumed by the Ld AO @6%. While going through the main contents of the order, it was really surprising for the assessee that the Ld CIT(A) has passed the order without considering any of the submissions even without giving any reference of the submissions made before him and the order seems to be passed like ex-parte order. The Ld CIT (A) while passing the order had copied the entire contents of the order of the Ld AO and even copied the findings of the Ld AO as it is, which seems to be the finding made by the Ld CIT (A) upon plain reading. Reference is 7
SHRI BIRENDRA SINGH NIRBHAY VS ITO, WARD 3(1), JAIPUR drawn on the relevant para of the order of the CIT(A) (Page no 2 of the order) at page no 30 of the paper book, which is reproduced here-under:-
“In addition to above observations, the undersigned has also gone through the reports of Investigation wing of New Delhi, Mumbai, Kolkata relating to actions conducted by them in cases of bogus LTCG/STCG/STCL/Loss entry providers and also in cases of beneficiaries of this arrangements.”

Apart from it, the Ld CIT (A)after making cut and paste had simply made new para V titled as “FINDING OF THE CIT (APPEALS)”, (at page No 7 of the order) at Page No 35 of the paper book, where-in, it had without discussing anything as higher authority had simply given reference of one of the Judgement as under:-
5.1 In a judgment in the case of N. K. Proteins Ltd. Vs. DCIT (SLA-CC No. 769 of 2017 dated16.01.2017) which is a judgment on bogus purchases, the Hon'ble
High Court of Gujarat has decided issue in favour of the revenue. The Ld CIT (A) had also put the para 6 of the aforesaid order , where-in, the entire purchases shown on the basis of fictitious invoices debited in the trading account is disallowed by the court.

It is ample clear that the aforesaid case law is no where relevant to the case under appeal. The Ld CIT (A) himself agreeing that the aforesaid judgment is on bogus purchases then it is again matter of question that how this judgement being applied in the instant case and solely based on this had dismissed the appeal.
It is worthwhile to mention that as per section 250 (5) and Section (6) of the act, which state that:
(4) The Commissioner (Appeals) may make further enquiry or direct the assessing officer to undertake further inquiry before disposing of the appeal and reports the results of the inquiry to the commissioner (Appeals)
(6) The order of the Commissioner (Appeals) shall state the point of determination, decision and the reasons for such decision while disposing of the appeal in writing.

From the plain reading of the above sections, the CIT (A) shall, by himself or through an assessing officer, make a necessary inquiry before dismissing the appeal. Further, the CIT (A) is under an obligation to decide on each point of the appeal, i.e. grounds on merits also need to be discussed even passing ex-parte order.
Reliance is placed in the case CIT v. Premkumar Arjunda(2107) 297 CTR 614
(Bombay) where-in, the court states that a plain reading of Section 251 (1) (a) and (b) & explanation of Section 251 (2) of the act mandates that CIT (A) shall apply its mind to all the issues which arise from the order before him, whether or not the appellant has raised the same before him. Therefore, it is held by the court that CIT (Appeal) has no power to dismiss appeal for non-prosecution.
In another case of Pawan Kumar Singhal v. ACIT, 2019, wherein the Delhi
ITAT holds the same views and held that CIT (A) has no power to dismiss appeal

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SHRI BIRENDRA SINGH NIRBHAY VS ITO, WARD 3(1), JAIPUR of the assessee for non–prosecution without deciding the case on merits through an order in writing, stating points for determination, decision and reason thereon.
The Delhi ITAT takes a similar opinion in the case of Swati Pawa v.
DCIT,2019, wherein it is held that in terms of Section 250, the CIT (A) has no power to dismiss appeal of assessee for non-prosecution and is obliged to dismiss the appeal only on the merits of the case by passing a speaking order.
In the case of Nisarhusen Amdali Lakhani, ITA 532/Ahd/2018, wherein the Ahmedabad ITAT has set-aside the order of the CIT (A) as the order shows that CIT (A) has failed to address various points of determination and dismissed the appeal of the appellant for his non–appearance. The Ahmedabad tribunal relies on Section 250 (6) of the act and states that the CIT (A) shall pass the order based on points of determination accompanying the reasons thereon. Thus, the CIT (A) has no power to dismiss appeal of assessee without deciding the merits of the case.

In the instant case, despite of submitting the detailed submissions, the Ld CIT (A) had not considered any one of the submissions and put the AO finding as it is and therefore failed to pass the speaking order. In view of it, the said order deserved to quash.
Without prejudice the above and before submitting the detailed submissions, we put the instant case in a summarized way as under:- a.
The Assessee is regular assessee under Income Tax Act, 1961 and filed its return of income tax by taking long term capital gain of Rs 2787561/- exempt u/s 10(38) of the I T Act,1961

b. The Assessee is not new for the share transactions and generate income or incur loss in the share market on year to year basis.

c. The assessee has subscribed for equity shares of the Company “Channel Nine
Entertainment Limited” and consideration was paid through banking channel and these shares have duly been credited in the Demat account with HDFC
Securities Limited.

d. The equity shares so acquired have duly been sold online through Bombay Stock
Exchange at real time price after paying the Security Transaction Tax (STT).

e. The Company “Channel Nine Entertainment Limited” is listed company with Bombay Stock Exchange, which was active and shares thereof were available for trade online at the time of assessment proceedings itself sufficient proof of 9
f. The shares of the company were available at online trading plate-form even at the time of assessment proceedings and the price thereof was Rs 12.12 on 17-
09-2019 The snap shot evidencing this trading was also submitted to the Ld CIT
(A) at the time of appelant proceedings.

g. The governing and regularity body ‘SEBI’ had issued an order dated 29/06/2015
and 04/01/2016, where-in it had restrained in the dealing of equity shares of various companies, which includes CHANNEL NINE ENTERTAINMENT
LIMITED. The SEBI had not pointed any violation of provisions of SEBI ACT and SEBI (Prohibition of fraudulent and unfair trade practices relating to Securities market) Regulation 2003 and had revoked the earlier order issued in the case.
In view of the above itself, there was no case of penny stock.
We are submitting the detailed submissions before the bench as under:-

GOA:-1Long term capital gain as unexplained cash credit amounting Rs.
2787561/-

In the matter it is hereby submitted that the assessee has shown income from long term capital gain of Rs 2787561/- which was claimed as exempted income under section 10(38) of the Act.
In the case, the equity shares were allotted to the assessee by making payment through account payee cheque in favour of Company “Channel Nine
Entertainment Limited”. The equity shares so acquired have duly been sold online through Bombay Stock Exchange at real time price after paying the Security Transaction Tax (STT). It is also not in dispute that the purchase and sale of the shares were routed through banking channel. Moreover the name of assessee is no where enumerated by any investigation.

As per Income Tax Act, the treatment of long term capital gain of equity shares is as given here-under as per section 10(38) :-

“Long-term capital gain arising on transfer of equity share or units of equity oriented mutual fund or units of business trust is not chargeable to tax in the hands of any person, if following conditions are satisfied:

The transaction i.e. the transaction of sale of equity shares or units of an equity oriented mutual fund or units of business trust should be liable to securities transaction tax.

Such shares/units should be long-term capital asset.

In the instant case, all the conditions have duly been fulfilled and was eligible to claim the benefit of long term capital gains as envisaged u/s 10(38) of Income
Tax Act,1961 as given here-in-after:- a.
The sale of equity shares were liable to securities transaction tax and also been paid.
b.
The equity shares sold was long-term capital asset.
c.
The Transfer of equity shares has taken place in the FY 2014-15 i.e. after
October 1, 2004. Now, it is also equally important to discuss in brief of entire journey of acquisition of shares and then sale thereof. The assessee has duly been applied for allotment of shares through public issue as usually made by the investors. The copy of duly filled application form is annexed at P.No 66. The assessee has applied for 6000 equity shares of Rs 25 each and made payment through account payee cheque No 0792280 drawn on HDFC Bank
Limited in favour of Company “Channel Nine Entertainment Limited” on 23/02/2013 Cleared from the bank on 26/02/2013 The copy of bank statement extracts evidencing of clearance of the cheque is annexed at P.No 67. The assessee was not dealing with any private broker rather he was having
Demat account with HDFC Securities Limited. The Company has allotted 6000
equity shares duly been made available in the Demat Account maintained by the assessee with HDFC Securities Limited. The copy of holding report of shares in the Demat account is annexed at P.No 68-69. The equity shares so acquired have duly been sold online through Bombay Stock
Exchange in the month of June 2014 , in phases at average rate of Rs 490.36
comes out at Rs 2937560/-. The sale consideration thereof has been credited in the bank account on 13/06/2014, 19/06/2014 & 27/06/2014 The copy of bank statement extracts evidencing of receipt of payment is annexed at P.No 70. The sale of shares has duly been made online through Bombay Stock Exchange and brokerage, STT & other charges (as collected in listed shares) have duly been paid evidencing from the bill as annexed at P.No 71-82. The shares are still available online and can be purchased / sold in Bombay Stock Exchange. The share price exist on 09/10/2024 is Rs. 12.12 per share. The snapshot of online share price is annexed at page no.69
(at http://money.rediff.com/companies/Channel-Nine-Entertainment-
Ltd/17040646?srchword=Channel+Nine+Entertainment+Ltd.&snssrc=sugg
) herewith for your reference and records.

The sale of shares and capital gain thereon has duly been shown by the assessee in his return of income tax as per Income Tax law as annexed at P.No 26-28. 11
Further, the Company is “active” as per the Governing body “Ministry of Corporate Affairs” as on 08/10/024 and filing its ROC returns regularly evidencing from extracts of company details available at MCA
Site
(http://www.mca.gov.in/mcafoportal/companyLLPMasterData.do) , copy of which is annexed herewith P.No 84-85

While going through the statements of Mr Sanjay Vora director of the Company
M/s Channel Nine Entertainment Limited, on the sole basis of which, our case is being taken in scrutiny being recorded by the Investigation Wing of Income Tax
Department, it is noticed that except few points though general in nature, nothing pertains to the equity shares of the Company Channel Nine Entertainment
Limited. The points and our submissions in the matter are as given here-in-after the same had been put before Ld CIT (Appeal) annexed at P.No 18-22
The assessee in the instant case has made the transactions for the purchase and sale of the shares of a company available online to public at large and through a valid and reputed stock broker “HDFC Securities Limited”, whose reputation and goodwill can’t be doubted and in case have any doubt then can be called for statements independently. Therefore, the question about stock broking house or private broker or trading of shares indulging any broker in the case doesn’t arise. There are “n” number of cases, where-in, the additions were made due to suspicious share broker and reversed by the ITAT and high courts. For example in the case of CIT versus Carbo Industrial Holdings Limited reported in 116 taxman159 where the Hon’ble juri ictional High Court has held as under:

“If the share broker, even after issue of summons does not appear, for that reason, the claim of the assessee should not be denied, especially in the cases when the existence of broker is not in dispute, nor the payment is in dispute.
Merely because some broker failed to appear, assessee should not be punished for the default of a broker and on mere suspicion the claim of assessee should not be denied.”

Furthermore, the Company “Channel Nine Entertainment Limited” is listed company with Bombay Stock Exchange, which is still active and shares thereof are available for trade online seems to have sufficient proof of existence and duly authorized, permitted and valid script freely tradable in public at large. The merely information received from Investigation wing on the basis of statement of the director of the company does not prove the allegation as made against the assessee and the more important, it has no- where proved. Still any company make any manipulation in market prices of shares doesn’t mean that all shareholders / applicants have made part of it and then face harassment in income tax proceedings. The complete documents and information with valid real time proof of purchases and sale of shares and trade through renowned share broker namely “HDFC Securities Limited” is another reliable proof of genuine transaction and valid claim. The following case law also supports the assessee’s case as given here-in-after:- a.
The Fact that a small amount invested in "penny" stocks gave rise to huge capital gains in a short period does not mean that the transaction is "bogus", if the documentation and evidences cannot be faulted.
b. DCIT vs. SunitaKhemka (ITAT Kol) - [2016-ITRV-ITAT-KOL-057]
AO cannot treat a transaction as bogus only on the basis of suspicion or surmise.
He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by Contract Notes and demat statements and Account Payee Cheques cannot be treated as bogus.
Long-term capital gains arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiating an inquiry with regard to the Company and the broker, if the shares are purchased from the exchange, payment is by cheque and delivery of shares is taken and given.
A.
We may further point out that similar addition were made by treating the sale of shares of various other companies as bogus wherein the matter went up to the ITAT. The Hon’ble ITAT Jaipur Bench in the following cases held that transactions of sale of share is genuine and supported by various evidences and therefore deleted the addition. Few instance of such cases are as under:-
1. DCIT vs. Saurabh Mittal (2018) 53 CCH 530 (Jaipur) (Trib.)
Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee.
3. ITO vs. Shri Gaurav Bagaria in ITA No. 550/JP/2019 vide order dated
10.07.2019 after considering the facts and various decisions has dismissed the appeal filed by the Revenue by holding as under:

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“The same facts were considered in above cited cases regarding purchase of shares of M/s Careful Projects Advisory Ltd. which was subsequently merged with M/s Kailash Auto Finance Ltd. and after analyzing the relevant documentary evidence which includes purchase bill, payment consideration through bank, dematerialization of shares, allotment of the shares amalgamated new entity in lieu of earlier company, the Tribunal has held that in the absence of any contrary evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus Long Term Capital Gain. The Tribunal also followed the decision of Hon’ble Juri ictional High Court in case of CIT vs.
Pooja Agarwal (supra) wherein the Hon’ble High Court has also upheld the finding of the Ld. CIT(A) and this Tribunal when the assessee produced all the relevant details and evidences in support of the transaction of purchase and sale of shares. Accordingly, in view of the facts and circumstances as discussed above, when the assessee has produced all the relevant documentary evidences to establish the genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee then treating the transaction of purchase and sale as sham by the AO is not justified.
The assessee has also produced the financial statements of M/s Kailash Auto
Finance Ltd. to show that the company has earned a handsome profit. Further, the alleged SEBI order was also subsequently revoked. Therefore, all these facts established the genuineness of the transaction. Hence, we do not find any error or illegality in the order of the Ld. CIT(A) in deleting the addition made by the AO under section 68 of the IT act by treating the Long Term Capital Gain on sale of shares as unexplained cash credit. The addition of Rs.1,51,869/- being the deemed commission for taking the accommodation entry, is consequential to the main issue. Hence, the same is also not sustainable”.
4. Shri Vivek Agarwal vs. ITO (2017) 292/JP/2017 (ITAT Jaipur) Order dt.
6/4/18
5. The brief facts of the case are that the assessee is an Individual & has claimed exempt income of Rs. 4,78,38,157/- under the head Long Term Capital
Gains on account of shares. The AO while passing the assessment order under section 143(3) has held that the long term capital gains claimed by the assessee is bogus as the assessee has arranged the accommodation entries from the persons who are engaged in providing bogus accommodation entries of capital gains. The Hon’ble ITAT held that the facts of the present case acquiring of shares of M/s. Paridhi Properties Ltd. under private placement directly from the company and subsequently on merger of the said company with M/s. Luminaire
Technologies Ltd. the shares of the new entity were allotted to the assessee which were duly dematerialized and then sold from the Demat account are identical to the case of ShriPramod Jain & Others vs. DCIT & others. In view of the finding of the Coordinate Bench on the identical issue, it was found that when the payment of purchase consideration paid through cheque directly to the company and the subsequent merger of the company as per the scheme of merger approved by the High Court, then the transaction and sale of shares in question cannot be held as bogus. The AO has passed the impugned order on the basis of the statement of Shri Deepak Patwari which is identical as in the 14
SHRI BIRENDRA SINGH NIRBHAY VS ITO, WARD 3(1), JAIPUR case of ShriPramod Jain & others vs. DCIT. Accordingly, following the order of the Coordinate Bench of this Tribunal, we hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support the claim. Further, the AO has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by the AO on this account.Shri Purushotam Soni vs. ITO(2017)
288/JP/2017 (ITAT Jaipur)Order dt.6/4/18
The facts of this case are that assessee claimed long term capital gain on sale of shares of Luminare Technology Limited. The AO on the basis of the information received from investigation wing treated the same as bogus & made the addition.
The CIT(A) confirmed the same. On further appeal, the Hon’ble ITAT by following the decision of Pramod Kumar Jain & others vs. DCIT ITA No. 368/JP/2017 as well as in the case of Meghraj Singh Shekhawat vs. DCIT 443 & 444/JP/2017
allowed the appeal of the assessee.
(6) Shri Meghraj Singh Shekhawat vs. DCIT (2017) 443 & 444/JP/2017 (JP) order dated 7-03-2018Brief facts are that the assessee is an individual and engaged in the business of retail sale of IMFL/Beer. During the assessment proceeding the AO noted that the assessee has shown long term capital gain of Rs. 1,32,56,113/- which is claimed as exempt u/s 10(38) of the Act on sale of shares of M/s Rutron International Ltd. The AO received information from Investigation Wing, Kolkata that during the search conducted u/s 132 of the Act on 12.04.2015 at the business premises of one Shri Anil Agarwal Group it was found that Shri Anil Agarwal is one of the promoters of M/s Rutron International
Ltd. The shares were sold by the assessee from his D-mat account through the broker M/s AnandRathi Share and Stock Brokers Ltd. and therefore, the assessee denied any involvement of availing the bogus of long term capital gain.
Consequently the AO made an addition of Rs. 1,32,56,113/- to the total income of the assessee u/s 68 of the Act. The ld. AR has submitted that the assessee was allotted 3,50,000/- equity shares by M/s Rutron International Ltd. on 01.03.2012 vide allotment letter dated 08.03.2012. The shares were allotted by the company at face value of Rs. 10/- each without charging any premium under preferential issue. The assessee paid the purchase consideration/ share application money vide cheque on 29.02.2012 the payment made by the assessee is duly reflected in the bank statement of the assessee. The shares were dematerialized on 18.06.2012 and thereafter the shares were sold from 13.03.2013 onwards on various dates through M/s AnandRathi Shares & Stock
Brokers Ltd. The assessee has produced all the relevant evidence to show the allotment of shares, payment of consideration through cheque at the time of allotment of shares dematerialization of the shares and thereafter, sale of shares from the D-mat account. The Assessing Officer has not produced any material or record to controvert the evidence produce by the assessee. Considering all these facts the Hon’ble ITAT held that the order of the Assessing Officer treating the long term capital gain as bogus and consequential addition made to the total income of the assessee is not sustainable & deleted the same.

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B. . In the following cases matter of penny stock went up to Rajasthan High court wherein the High court has dismissed the appeal of the department by confirming the deletion of the addition made by the Hon’ble ITAT:-
1. Principal CIT-1 Vs Ritu Agarwal Shree Ram BhawanITA No 54/2021 order dated 10/05/2022 (Jaipur)

It has been held that before rendereing the judgement the learned ITAT has considered entire facts of the case in hand the assessee produced all the documentary evidence to establish the genuineness of the transaction, The learned assessing officer as per the learned ITAT has failed to produce the contrary material evidence to rebut the claim of assessee and documents produced by him. Learned ITAT has considered the bank statement, Demat account, books of accounts which were external documents and were not in the control of assessee and therefore the claim of manipulation and for treating the transaction in question is as sham and bogus were not proven and hence untenable.

Section 10(38)/69 r.w.s 143(3)- Long term capital gain claimed exempt u/s 10(38)- AO denied exemption and assessed it as unexplained income u/s 68/69
by treating the transaction of purchase and sale of shares as not genuine by relying on the information received from DIT, Kolkata that in survey/search carried out in office of broking house certain entry operators including Shri
Deepak Patwari, they have stated in the statement recorded u/s 131 that they were merely an operator and buying shares by using the money provided by other operators for creating bogus entry of long term capital gains– Held that assessee produced all relevant records and evidences right from the purchase bills, certificates issued by the