Loading judgment…
Facts
The revenue filed appeals against two assessees challenging the deletion of additions made on account of bogus long-term capital gains. The Assessing Officer had made additions based on information regarding accommodation entries in the scrip of Bakra Pratisthan Ltd. However, the CIT(A) deleted these additions, holding that the AO's action was based on suspicion and presumption, and that the denial of exemption was not substantiated.
Held
The Tribunal found that the share of Bakra Pratisthan Ltd. was not in the list of identified penny stocks. The reopening of assessment was based on the investigation wing's report without substantive material or independent inquiry. The Tribunal relied on previous decisions of coordinate benches and High Courts which held that additions cannot be made solely on the basis of price manipulation or alleged entry operators.
Key Issues
Whether the deletion of additions made on account of bogus long-term capital gains, based on alleged accommodation entries, by the CIT(A) was justified, considering the lack of substantive evidence and the fact that the scrip was not listed as a penny stock.
Sections Cited
68, 10(38), 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY
CO No.65&63/KOL/2025 आदेश / O R D E R
Per Rajesh Kumar, AM:
The revenue has filed two appeals against two different assessees arising out of the orders both dated 26.07.2024 passed by the ld. CIT(A), Kolkata-20, for the assessment year 2013-2014.
Both the assessees have also filed cross objections arising out of the both the appeals of revenue. CO No.65/KOL/2025 is delayed by 324 days and CO No.63/KOL/2025 is delayed by 243 days. In this regard, the both the assessees have field condonation petition supported with affidavit in their respective appeals. The reasons stated in the condonation petition filed in both the appeals by both the assessees are found sufficient for delay in filing the cross objection before the Tribunal. Accordingly, we condon the delay and the cross objections of both the assessee are admitted to be heard along with appeals of the revenue.
Since the issues involved in both the appeals are identical except difference in figures, therefore, both the appeals of the revenue are taken together and disposed off by this consolidated order. We shall consider the facts and grounds raised
in appeal of the Revenue in to decide the appeal and outcome of the same shall be applicable, mutatis mutandis, to the other appeal of the revenue also.
4. The revenue has challenged the deletion of addition of Rs.1,67,78,383/- by the ld.CIT(A) as made by the Assessing Officer on account of bogus long term capital gain u/s.68 of the Act by denying genuine claim of exemption u/s.10(38) of the Act.
CO No.65&63/KOL/2025 5. Facts in brief are that in the case of assessee-Chandu Somani return of income was filed on 22.07.2013 declaring total income at Rs.5,86,460/-. The case of the assessee was reopened u/s.147 of the Act by issuing notice u/s.148 of the Act on 07.01.2021 by the Assessing Officer after receiving information of DDIT(Inv.), Unit1(2), Kolkata that the assessee has taken bogus capital gain accommodation entries in the scrip of Bakra Pratisthan Ltd. The Assessing Officer after referring to the modus operandi of entry operators , made the addition to the income of the assessee of Rs.1,67,78,383/- u/s.68 of the Act as unexplained cash credit.
6. In the appellate proceedings ld. CIT(A) allowed the appeal of the assessee by holding that the Assessing Officer has made the addition only on suspicion and presumption basis that scam has happened in the penny stocks. The ld.CIT(A) noted that the denial of exemption to the assessee by the Assessing Officer is only based upon suspicion and, thus, deleted the addition of Rs.1,67,78,383/- by directing the Assessing Officer accordingly. The ld.CIT(A) noted that the denial of claim of long term capital gain u/s.10(38) of the Act based on the report of the investigation wing of the department has came to be examined by various Hon’ble High Courts and it was held that the addition cannot be made only on the basis of the fact that price manipulation of the trading of shares of those companies that too on the basis of alleged entry operators. The ld. CIT(A) relied on the series of decisions while deleting the additions .
CO No.65&63/KOL/2025 6. After hearing the rival contentions of the parties and perusing the material available on record, we find that the undisputed facts are that the assessee earned long term capital gain on sale of shares of Bakra Pratisthan Ltd. to the tune of Rs.1,67,78,383/-. The Assessing Officer upon receiving of the information from the DDIT(Inv.), Unit-1(2), Kolkata reopened the case of the assessee and called for the necessary details and evidences which were duly filed by the assessee before the Assessing Officer. The Assessing Officer noted that the trading in the said shares were suspended by the SEBI. We note that the share of Bakra Pratisthan Ltd. is not contained in the list of 84 penny stocks as brought out by the investigation wing and, therefore, this cannot be held to be penny stock on the basis of investigation report alone. The case of the assessee squarely covered by the decision of the coordinate bench in the case of Subhra Dugar Vs ITO, passed in dated 20.11.2024, wherein the coordinate bench of the Tribunal has decided the similar issue which involved the sale of shares in the case of Bakra Pratisthan Ltd. in favour of the assessee. The operating part of the Tribunal reads as under :- 5. After hearing the rival contentions and perusing the material on record, we find that the case was reopened for the reason that the assessee had sold shares of M/s Bakra pratisthan Ltd. a penny stock company and capital gain of Rs. 1,32,40,990/- was declared from the sale of 37500 equity shares which was claimed as exempt u/s 10(38) of the Act. The Ld. Counsel of the assessee referred to the reasons recorded u/s 148(2) of the Act a copy of which is filed at page 7 of PB which states that the assessee has traded in scrip which is a penny stock as per the report of the Investigation Wing. However, we find that the said company did not appear in the list of 84 stocks the details wherein is furnished in the PB from page 60 to 62. We find that in this case no adverse view drawn was drawn by CO No.65&63/KOL/2025 the SEBI even nonetheless the stock remained suspended for some time through SEBI order but ultimately no adverse view was taken by SEBI and the trading on the stock exchange was restored. The ld. Counsel for the assessee relied on the decisions of Hon’ble Calcutta High Court in the case of PCIT vs. Deepa Agarwal in ITAT/47/2022, IA NO. GA/2/2022 dated 07.11.2022 and PCIT vs. Shri Abhay Kr. Jain in ITAT/63/2022 IA No. GA/2/2022 dated 10.11.2022 which have been perused and we find that the assessee case is squarely covered by these decisions. We also note that these decisions of the Hon’ble High Court after the PCIT Vs Swati Bajaj in ITAT/6/2022 & others dated 14.6.2022.
Further we find merit in the contentions of Ld. A.R that the list of penny stocks did not contain this share, therefore, we are not in a position to sustain the orders of authorities below which has not done anything to find out whether the assessee has routed his own money by trading in the said stock. In our opinion, the AO is not free to generalize any inference from the report of Investigation Wing that the stock is a penny stock by ignoring the fact that stock does not even figure in the list of 84 penny stock which has been discussed by the Hon’ble Calcutta High Court (supra). We observe that the ld AO has only relied on the investigation wing report and has not done any enquiry to bring any substantive material on record. In view of the facts, we are inclined to hold that the reopening of assessment by the AO is not as per the provisions of Act and is in fact based on the borrowed satisfaction and also done without any application of mind 7. Since the issue involved is squarely covered in the case of the assessee by the above decision of the coordinate bench , we are inclined to uphold the order of the ld. CIT(A) by dismissing the appeal of the revenue in the case of assessee Chandu Somani. Thus, is dismissed.
The issue in the appeal of revenue in in the case of the assessee Shanti Devi Somani is identical to the appeal of the revenue decided by us in . Therefore, our decision/observation made therein shall be applied, mutatis mutandis, to