SMT. SATYAWATI MARWAHA THROUGH LEGAL HEIR SH, CHANDER SHEIKHAR MARWAHA,JALANDHAR vs. ASSISTANT COMMISSIONER OF INCOME TAX, JALANDHAR

5. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs.15,40,998/-u/s 68 of the Act on account of credits in bank account considering as alleged unexplained money, without considering the facts of the case and without observing the principles of natural justice.

6. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making an addition of Rs.15,40,998/- u/s 68 of the Act without considering the facets of Section 68 of the Act and without considering the facts that no books of accounts have been maintained by the assessee.

7. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

The facts of the case as emerging from records are that the assessee filed her 3. return for the year 2014-15 on 31.03.2015 , declaring a total income of Rs.80,270/-, ( which included income from house property at Rs.75,600/-, short term capital loss at (Rs.30,618/-), income from bank interest at Rs.17,667/- and LTCG (long term capital gains) amounting to Rs.2,02, 30,196/- which has been claimed as exempt u/s 10(38) of the Act) .

After a search operation u/s 132 of the Act 1961 carried out on 29th Oct., 2020 4. at the residential premises of Marwaha family (IJM Group), proceedings in the instant Wing, Jalandhar , on insight portal), vide issue of notice u/s 148 dated 30/03/2021 , on the legal heir Mr C.S Marwaha ( son of the deceased assessee , because the assessee has unfortunately expired by then ) , and in response to which the return of income has been filed by the legal heir on 23.04.2021 (which however was treated as invalid in absence of proper verification ).

5. As per information supplied by the investigation wing it has been alleged that the stock sold by the assessee during the FY 2013-14 and FY 2014-15, relating to a script M/s. Dhanleela Investment & Trading Co. Ltd, was alleged to be a penny stock, being used for giving accommodation entries in the form of long-term capital gains. During the year under appeal, the assessee has sold 103400 shares of the said company for a total consideration of Rs.2,11,81,016/- (@ Rs.204.80 per share ), on which long term capital gains was disclosed in the original return filed on 31st March, 2015 amounting to Rs.2,02,30,196/- which was claimed exempted u/s 10(38) of the Act.

7. As recorded by the AO in the assessment order , it has been alleged that the LTCG claimed exempted u/s 10(38) of the Act 61, on the sale of shares of M/s Dhanleela Investment and trading company Ltd are bogus which has allegedly arisen out of a racket of accommodation entries in a controlled atmosphere and the assessee is one of the beneficiary who has traded in operator guided penny stock in order to accumulate her unaccounted money as exempt income and the assessment has been completed by making an addition of Rs.2.11 crores being the sale proceeds of the shares, received in bank during the year, as unexplained money u/s 69A of the Act 61, apart from other additions of Rs. 15.40 lakhs on account of unexplained credit entries in bank.

8. The matter carried in appeal has been dismissed by the ld. first appellate authority by observing as follows:

( relevant portion reproduced )

“5.3.3 I have considered the reasoning given by the AO in assessment order, submissions & documents submitted by the appellant, facts of the case and legal position.

Modus operandi of bogus LTCG

It shall be important to analyze the LTCG claimed by the assessee as exempt in his return of income. The LTCG has been claimed on sale of shares of M/s. Dhanleela Investment & Trading Co. Ltd. The Assessing Officer in the assessment order has given in detail the modus operandi used for generation of Long-term capital gains. The Assessing Officer has discussed in detail the operator of penny stock, the functioning of exit providers and the nature of penny stock companies. The AO has held that initially when the prices of the share are low, the beneficiaries of bogus -LTCG purchase the shares. Thereafter, circular trading is done and the prices of the shares are increased. Once the prices increase unrealistically, the shares held by the beneficiaries of bogus LTCG are sold to either paper entities or beneficiaries of bogus Short-Term Capital Loss. Thereafter, circular trading is done and the prices of the shares are decreased and afterwards, the shares bought by the beneficiaries of Short-Term Capital Loss are sold at low price. In the case of the assessee, it is further revealed from the assessment order that: a. The prices of the shares of M/s. Dhanleela Investment & Trading Co. Ltd. increased unrealistically without any corresponding movement in the normal share market. b. The shares were purchased by the assessee at very low price. c. The statement of entry operators confirms the use of the scrip M/s Dhanleela Investment & Trading Co. Ltd. for purposes of providing entries of LTCG d. The exit provider in the case of the assessee also had poor credentials. e. The financials of M/s. Dhanleela Investment & Trading Co. Ltd are poor to support the astronomical rise in the value of shares.

Order of SEBI

It is also pertinent to mention here that pursuant to the irregularities detected in the share of M/s Dhanleela Investment & Trading Co. Ltd, Securities and Exchange Board of India (SEBI) had suspended the sale/purchase of shares from the stock exchange due to violation of SEBI & Exchange Regulations and non-payment of annual listing fee. Therefore, even as per SEBI action, the scrip M/s Dhanleela Investment & Trading Co. Ltd is a penny stock and non- genuine stock in nature

Analysis

The submissions of the appellant have to be seen critically in the light of the test of human probability. It is duly brought on record by above discussion that M/s Dhanleela Investment & Trading Co. Ltd. is also a penny stock and has weak financial position, suspicious pattern of rigging of share prices and stands debarred/suspended from share market as per the order of the SEBI. Further, there is no evidential change in performance of the company which would substantiate the price rise of the scrip. The persons selling the scrip when the price of scrip is high at its peak are all beneficiaries of bogus Long-Term Capital Gains. The purchasers of these scrips do not have creditworthiness. No prudent investor and particularly trader or investor in stock will invest in such company.

The gains made by the appellant are altogether beyond human probabilities. The meticulous paper work of routing the transactions through banking channel is futile because the profits shown are beyond human probabilities. It is just a sham transaction to convert undisclosed income into disclosed income by evading tax under garb of LTCG in connivance with Entry providers. Reliance is placed on the judgment of Ld. ITAT Delhi in Sanat Kumar vs. ITO dated 14.08.2019 for AY 2014-15 in ITA No. 1881/Del/2018.

The jump in the share price of the companies of unknown credentials cannot be an accident or wind fall but is possible because of manipulations in pre-planned manner by interested broker and entry operators. As per section 101 of the Evidence Act 1872, the onus is on the appellant to prove that the LTCG is genuine. However, the appellant has not been able to discharge the onus cast on it. The findings of the AO are based on strong surrounding circumstances, preponderance of probability and human conduct in light of analysis of modus operandi of broker and operators beneficiaries which has come to surface as a providing LTCG entries to interested result of investigations done by Investigation Wing of Department. A genuine transaction must be proved as genuine in all respects which the appellant failed to prove.

The appellant has submitted that she is regularly doing share transaction and have invested/traded in other scrips as well. This submission is not acceptable as a person can enter into certain genuine as well as certain non-genuine transactions. Considering the facts and circumstances of the case, I find that the appellant has indulged in dubious share transactions meant to account for the undisclosed income in the garb of Long-Term Capital Gain. The action of AO in making additions u/s 69A of the Act and disallowing the claim of LTCG being exempt u/s 10(38) is fully justified. In view thereof, addition of Rs. 2,11,81,016/- made by the AO is upheld

Accordingly, these grounds of appeal are dismissed.”

9. Now the assessee is in appeal before the tribunal and in course of hearing the Ld. AR of the assessee has argued on the legal aspect of the matter on the grounds contained in the memorandum of appeal and also on the merits of the case and has filed a written submission on both counts (relevant part of which is reproduced):

Written submission on the legal aspect by Ld. AR of assessee:

“It is submitted that the reasons recorded by the Ld. AO are prima facie only on the basis of investigation wing for purpose to enquiry regarding a transaction. So, the reasons recorded are 'reasons to suspect which only required further enquiry and cannot be regarded as 'reasons to believe' and also based on borrowed satisfaction from investigation wing that assessee has escaped assessment.

Sir, it is further submitted that on perusal of these reasons would reveal that there is no nexus between the material in the possession and the belief of escapement of income formed about escapement of income. In other words no cause and effect relationship has been established with regard to material in his possession and belief based upon such material. In fact, there was no material on record that could lead your good self to a belief that income has escaped assessment. This alleged fact as stated in reasons, cannot, in any case, lead to a belief that income has escaped assessment. Sir, it is stated that Ld. AO in reasons recorded states that there are credits of Rs.2,83,67,948/-. Further merely the fact that there were credits in bank accounts of assessee could not be the reasons to initiate proceedings u/s 148 of the Act. Sir, credits in bank accounts, was out of declared bank accounts, which is stated in the return of income and considering all the credits and other income assessee filed return of income. Further reasons recorded are wrong as last para of reasons recorded states that no return was filed, but assessee duly filed return. Thus, proceedings cannot be initiated on the basis of wrong reasons, as the entire basis is vitiated and this is supported with the decision of Hon'ble High Court of Punjab & Haryana in the case of CIT v/s Atlas Cycle Industries, 180 ITR 319, P & H High Court in which it was held as under: "Reassessment Validity Grounds alleged in notice under s. 148 incorrect or non- existent-ITO's jurisdictions is ousted the moment this situation comes to his knowledge." Sir, it is stated that reasons recorded nowhere reflected as what information and corroborative materials/records regarding this have been independently examined and verified by the AO. There is nothing to suggest that the AO has applied his own mind to the said material before reopening the assessment and satisfied himself before issuing notice under s.

inducing the belief. Such a belief has not to be based on mere suspicion but it must be based on information as was held by Hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. Vs. ITO 41 ITR 191. Thus, initiation of proceedings u/s 147 cannot be done for the purpose of making any enquiry or to verify any information available with the department. Further AO has merely relied on the information passed on to him by the Investigation Department. There is nothing to reveal application of mind by the AO to the information in his possession, as to whether he had verified that any such amount was actually received/earned during the year and if so in what mode or manner. Reliance is placed on the following decisions: a. Universal Power Systems Pvt. Ltd. v/s ACIT, (2016) 48 ITR 0191 where it was held as under:

Reassessment-Escapement of Income-Validity of Reassessment Assessee engaged in business of trading in electrical, electronic and mechanical items-Assessee filed its e-return- AO noticed that there was escapement of income as Assessee had billed royalty under head other income-AO completed assessment u/s. 143(3) restricting TDS-Assessment was reopened to consider relevant TDS relating to income offered by assessee and income included in TDS certificate, which included share of other assessee also -CIT(A) confirmed action of AO-Held, only for purpose of requirement of verification to find out any excess TDS benefit had been given to Assessee, assessment was reopened There was nothing in reasons to indicate that there was escapement of income-To consider variation in TDS benefit to be given to Assessee, assessment was reopened Variation in TDS benefit to be given did not lead to escapement of income Mere fact that matters need to be verified and examined further could never be reason good enough to believe that income had escaped assessment and re- open assessment proceedings was bad in law-Assessee's Appeals allowed. b. Commissioner of Income Tax v/s Batra Bhatta Company, High Court of Delhi, 220 CTR 531 it was held as under:

"Reassessment-Reason to believe-Fishing enquiry-Reasons recorded for reopening the assessment does not disclose that the AO, in fact, had reason to believe that any income had escaped assessment-There is no indication as to on what information or on what material the AO harbored the belief that the claim of the assessee required deeper scrutiny-There must be some basis upon which the belief can be built-It does not matter whether the belief is ultimately proved right or wrong-CIT(A) as well as the Tribunal found as a fact that there was no material upon which the AO could have based his belief that income had escaped assessment-Expression 'requires much deeper scrutiny indicates that the AO was embarking on mere exploration without any belief, much less a belief based on reason and materials- Therefore, there is no error in the order of the Tribunal holding that the issuance of notice under s. 148 and initiation of proceedings under s. 147 were illegal-No substantial question of law arises for consideration"

Further reliance is placed on the decision of ITO v/s Lakhmani Mewal Das, Supreme Court, 103 ITR 0437 in which it was held s under:

"Reassessment under sec 147(a)-Reason to believe-Must have a material bearing on the question of escapement of income of assessee. Whether the grounds are adequate or not is not a matter for the Court to investigate-Only the existence of belief can be challenged by assessee-Expression "reason to believe" does not mean a purely subjective satisfaction on the part of ITO-I must be held in good faith-Powers of ITO to reopen assessment, though wide, are not plenary-Interest allowed as deduction in original assessment subsequently ITO found that creditors were name-lenders-Confession from creditors There was nothing to show that the confession related to a loan advanced to assessee-The live link or close nexus between material before ITO and belief he was to form regarding escapement of income was missing- Said material could not have led to formation of the belief that income escaped assessment because of assessee's failure or omission to disclose fully and truly all material facts-Pre- conditions for exercise of jurisdiction under s. 147 were not fulfilled.”

Further reliance is placed on the decision of CIT v/s Smt. Paramjit Kaur, (2009) 311 ITR 38, where it was held as under:

"Sec. 147 empowers the AO to assess or reassess income chargeable to tax if he has reasons to believe that the income for any assessment year has escaped assessment. The power conferred under this section is very wide, but at the same time it cannot be stated to be a plenary power. The AO can assume jurisdiction under the said provision provided there is sufficient material before him. He cannot act on the basis of his whim and fancy, and the existence of material must be real. Further, there must be nexus between the material and escapement of income. The AO must record reasons showing due application of mind before taking recourse to reassessment proceedings. Still further the AO can assume jurisdiction for reassessment proceedings provided he has reasons to believe but the same cannot be taken recourse to on the basis of reasons to suspect-ITO & Ors, vs. Lakhmani Mewal Das 1976 CTR (SC) 220 (1976) 103 ITR 437 (SC) relied on".

Therefore, the very assumption of jurisdiction u/s 147 on the basis of the "reason" recorded is vitiated. Thus, the reasons recorded are incorrect and vague and not based on any tangible material and merely based on borrowed satisfaction from investigation wing, it does not have live nexus with the formation of belief. It was at best a suspicion and therefore, the assumption of jurisdiction u/s 147 is bad in law. Further no incriminating material/documents used against the assessee was confronted or provided to assessee and no opportunity to cross examination was given to assessee. Thus, assessment framed against the assessee may kindly be quashed on this ground only.

Written Submission of the assessee on merits:

Sir, as regard addition of Rs. 2,02,30,196/-, it is stated that the Ld. Assessing Officer framed assessment by treating the Long-Term Capital Gain as bogus LTCG. While framing assessment the Ld. Assessing Officer made addition of Rs. 2,02,30,196/- in para 7 of the impugned order but at time of calculating the assessed income in para 9 of the impugned order it has calculated an amount of Rs. 2,11,81,016/-instead of Rs. 2,02,30,196/-, which is wrong and it may kindly be treated as Rs. 2,02,30,196/-. Sir, further it is submitted that during the course of assessment proceeding assessee furnished his submission but the Id. Assessing Officer ignoring the same framed assessment by making addition in the hand of assessee by treating the LTCG as bogus LTCG on account of information received from Investigation Wing, Calcutta that M/s Dhanleela Investment & Trading Co. is operator scrip and it is used by assessee to make his unaccounted money as exempt by declaring the same as LTCG. Sir, it is submitted that reply filed by the assessee during the course of assessment proceeding is reproduced herein below:

Income From Short Term Capital Gain Particulars: - shares Sale Proceeds 619737626 Less: Cost of Acquisition u/s 48 (-) 619768244) Short Term Capital Loss (-) 30618 Apart from these assessee had long term capital gain of Rs. 2,02,30,196/-and the same was disclosed in return of income.

4. That all the transactions were carried through proper banking channel and no cash transaction was involved.

6. That all the transactions have been conducted through recognised stock exchange and STT has been paid by the assessee.

Thus, on the basis of above facts it is stated that assessee was engaged in genuine share trading transactions, all the transactions were carried through recognized stock exchange and STT was duly paid, no cash transaction was involved, and assessee has regularly carried share transactions during the last three years of more than Rs.90 Crores and it is not an isolated Single transaction.

Sir, assessee is from Punjab and Jurisdictional High Court has decided the similar issue in favour of assessee in the case of PCIT w/s Prem Pal Gandhi dated 18.01.2018, 401 ITR 253(P&H) in which it was held as under: Income-Addition-Abnormal appreciation in value of shares-Assessee having purchased shares in asst. yr. 2006-07 @ Rs. 11 per share and sold than in asst. yr. 2008-09 @ Rs. 400 per share AO was not justified in making addition on account of appreciation in value of shares treating the transaction as sham when the shares were traded on the National Stock Exchange and transition were carried through banking channels-Principal CIT vs. Hitesh Gandhi (IT Appeal No. 18 of 2017, dt. 16th Feb., 2017) followed.

Thus, considering the jurisdictional prudence no adverse inference may kindly be drawn against the assessee.

Sir, it is submitted that since assessee was engaged in the trading of share since long in the preceding year also assessee was indulged in the share trading and during the previous year assessee also suffered short term loss of Rs. 21,557/- and carried transaction of Rs. 26,45,47,189/- and in the year under consideration assessee suffered STCG loss of Rs. 30,618/- and carried transaction of Rs. 61,97,37,626/-, which also proves beyond any doubt that assessee had not traded only in one script as alleged by the Ld. Assessing Officer. During the period under consideration assessee invested /traded in multiple scripts, which was entirely ignored by the Ld. Assessing Officer. Sir, assesee invested in Large Cap, Small Cap and Mid Cap companies which also includes MRF, VOLTAS, AXIS Bank and other big companies. Assessee made his portfolio diversified and made investment/trading of more than Rs. 90 Crores in the three-year span, which also ignored by the Ld. Assessing Officer and made huge addition without any basis. Sir, the Ld. Assessing Officer in para 2 of the impugned order it is stated that assessee made investment in M/s Dhanleela Investment & Trading Co. @ Rs. 7.30/- in F.Y 2012-13 and sold @ Rs. 204.80/- per share and stated that it was operator script and assessee induce his unaccounted money in the script and thereafter claim exemption. Assessee made investment in multiple script and out of them one scrip becomes multi bagger, so, it is not fault of assessee. Assessee made investment through proper channel and through the recognized exchange of the country, so, it cannot be said that assessee induce unaccounted money make it exempted. Sir, this script made high of Rs. 1075/- and this script was last traded on BSE on April -2019, assessee made investment in the scrip in the F.Y 2012-13 and sold it in the F.Y 2013-14, if assessee made investment on the basis of tips of operator then it will not come out or sold at lower levels as compare to the highest made by the share in the same year. That assessee purchased in 2012-13 and partly sold in FY 2013-14 and partly in 2014-15, so when the share reached the level of Rs1,075/- assessee was holding those shares, thus if assessee made investment on the basis of tips of operator, then it will not come out for sale at lower levels as compare to the highest made by the share in the same year.”

Submission by Ld DR ( relevant portion reproduced )

The unexplained amount on account of Bogus sale/purchases of shares from Shell companies (in the case of Assessee from M/s Dhanjeela investment and trading company as per investigation report), purchased @ 7.30 per share and sold @ 204.8 per share (abnormal increase during the short period of 18 months) the purchasers did not have creditworthiness and no prudent investor will invest in such companies and bar on sale /purchase by SEBI (due to violation of Sebi and exchange regulations etc.) and finacials of Dhanleela investment and trading co were very poor and statement of entry providers confirming the Company providing entries, and other facts as per orders of CIT(A) and A.O, are supported with following case laws.

1. Various case laws as per CIT (A) page 31 to 39 of his orders supporting the above facts including case law of ITAT Pune Raj Kumar B Agarwal vs DCIT 2-2-2019 (page 32 of the order) the paper trial producing contracts notes and mere furnishing of contract notes does not Inspire any confidence in light of facts (also discarded in PCIT vs Sumati Bajaj Kolkata high court as below.

i) Investigation report relied upon by the AO was a general report; ii) Adverse report was not confronted to the assessee; iii) No opportunity of cross-examination provided to the assessee, and iv) Assessee's onus of proving genuineness of the transaction stood discharged. The Hon'ble High Court dealt with each and every contention raised by the Id. counsel for the assessee before it.

Regarding the contention of the assessee that investigation report was a general report and could not form the basis for holding the impugned transaction as bogus, it was discarded by the Hon'ble court holding that the report was prepared by an authority of the Department, le DDIT on the basis of Investigation conducted when matter of large scale scam of providing accommodation entries in the guise of long term capital gains came to their notice (Para 8 to 10).

The aspect of discharge of onus of the assessee by filing documentary evidences, is dealt with at pars 25 to 88 of the order, holding that the burden in the said eases where the facts fanciful rise in shares in a short span of time and thereafter steep fall, all unsupported by the facts showed phenomenal and financials of the companies, was heavy and could not be said to be discharged by filing mere documentary evidences of sale and purchase of shares. The relevant portion of the order in as under:

While it may be true that M/s. Swati Bajaj, Mr. Girish Tigwani or other assessees who are before us could have boon regular investors, Investors could or could not have been privy to the information or modus adopted. In our considered view, what is important is that it is the assessee who has to prove the claim to be genuine in terms of section 68 of the Act. Therefore, the assessee cannot escape from the burden cast upon him and unfortunately in these cases the burden is heavy as the facts establish that the shares which were traded by the assessees had phenomenal and fanciful rise in price in a short span of time and more Importantly after a period of 17 to 22 months, thereafter has been a steep fall which has led to huge claims of STCL. Therefore, unless and until the assessee discharges such burden of proof, the addition made by the assessing officer cannot be faulted

It was argued that unless there are foundational facts, circumstantial evidence cannot be relied on. This argument does not merit acceptance as wealth of information and facts were on record which is the outcome of the investigation on the companies, stock brokers, entry operators etc. Based on those foundational facts the department has adopted the concept of "working backward" leading to the assessees. While at that relevant stage the sounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over, were all taken into consideration to negative the claim for exception made by the assessee. Therefore, the department was fully justified in taking note of the prevailing circumstances to decide against the assessees (para 12).

13. He further submitted that the report has been prepared by the DDIT and the same is forwarded to the DGIT(Inv) in all states in the country and is prepared on behalf of the Director of investigation , Kolkata, and the assessment cannot be held to be illegal simply because the copy of such report was not furnished to the assessee, as agitated by the assessee in this case. He further stated that investigation commenced not from the assessee end , but those persons who delt with penny stocks were targeted , which includes the stock brokers, the entry operators , directors of penny stock companies and amongst all these enquiries , the only allegation against the assessee is that the claim for LTCG are bogus, and the burden of proof lies upon the assessee to establish the genuineness of the claim of LTCG . He prayed for upholding the order of the Ld CIT(A) on merits as well as on law. the written arguments and submissions filed by both the counsels, which are all taken on record.

15. It is seen that the assessee has delt with various scripts through her registered broker Max Growth Capital Private Limited, during the financial years 2012-13 to 2015-16 ( after which she unfortunately expired ) , and some of the scripts she invested in as emerging from records, are that of Asian Paints, Bank Bees, Gold Bees, Infosys Technologies , MRF , etc, and also in “ Dhanleela Investment and trading co ltd ” ( in short dhanleela ) which just happens to be one of the scripts , and the subject matter of dispute in this case. The investment made for purchase of the said stock was paid directly to the company through bank channel on 26th October, 2012, through “Capital Small Finance Bank Ltd ” by cheque no 659071 amounting to Rs. 18,00,000/- (as reflected in bank statement a/c xxxxx3904 ), and the break up as given by the assessee are as follows (total 246516 shares @ Rs. 7.30 each ) . Subsequently, 1,03,400 shares were sold through the said broker @ 204.85 during the FY 2013-14 ( after a holding period of 14 months ) and the sale proceeds has been received by the assessee in the same bank account ( by cheques and RTGS) starting 13th December, 2013 till 27th March, 2014, totaling Rs. 2.11 crores, and the transactions in DEMAT are STT paid.

& 347/Asr/2024 Assessment Years: 2014-15 & 2015-16 shares are held for more than 12 months ( purchase date being October, 2012 and date of sale being 13th December, 2013) (iii) shares were sold through recognized stock exchange after payment of securities transaction tax ( as evident from brokers ledger statement ) are available on record and the claim of exemption u/s 10(38) was duly reflected in her return of income originally filed on 31st March, 2015 u/s 139 of the ‘Act , ( in schedule – EI ) as well as in her computation of income .

, and the copy of the investigation report relied upon has never been forwarded to the assessee ( and we have been informed that the said report is not in public domain ) and there is no evidence to show that the assessee has been named in the report, and the AO has proceeded on basis of presumption and assumption and on preponderance of probabilities .

In other words the initial burden of proof has been discharged by the assessee with conditions of section 10(38) of the Act 61, and now the onus of proof has shifted on the revenue.

2013-14, where in an almost identical situation the Hon’ble Tribunal, referred to various Apex Court and High Court judgments to arrive at a logical conclusion. The relevant portion is reproduced for ready reference:

“12.The Hon’ble SUPREME COURT OF INDIA in the case of Principal Commissioner of Income-tax vs. Renu Aggarwal [2023] 153 Taxmann.com 579 (SC) dismissed the SLP filed by revenue filed against the Hon’ble high 9 Rama Mittal v. ITO court where adjudicating the matter on Section 69A, read with section 10(38), of the Income-tax Act, 1961 - Unexplained moneys (Share dealings) - High Court by impugned order held that where Assessing Officer disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in penny stock which were being misused for providing bogus accommodation of LTCG, however, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in investigation wing report, additions made by Assessing Officer had rightly been deleted - Whether SLP filed by revenue against said impugned order was to be dismissed - Held, yes [Para 2] [In favour of assessee].

"We have heard the rival parties and have gone through the material placed on record. We find that the assessee had purchased shares in the month of April/May, 2006 as noted by the learned CIT(A) in his order at page-4. The shares were purchased in Assessment year 2006- 07. Further the shaes were got dematerialized and the same were created in the account of assessee maintained with HDFC bank. The assessee also received dividend on such shares on 23.10.2007 and such dividend was claimed as exempt and Assessing Officer did not raise any objection against the claim of such dividend. The learned CIT(A) has noted in his order that in the remand report Assessing Officer was not able to contradict any of the facts regarding purchase of shares and regarding sale of shares. It is further observed that assessee had paid STT on the sale of such shares and this fact has been noted by learned CIT(A) in his order. Further, we find that while making out the addition on account of capital gain the Assessing Officer himself gave credit to assessee for indexed cost of acquisition to the extent of ` 11,67,821/- taking the purchase price at ` 11,00,000/-. Further, we find that assessee had sold shares through MTL shaes and Stock Brokers Limited as is noted by Assessing Officer in reply to question No.24 which is a SEBI registered Stock Broker. Furthermore the payment for sale of shares was received through Banking channels. All these documentary evidences in favour of the assessee were rejected by Assessing Offiver merely on the basis of some casual replies given by assessee to the Assessing Officer. However, the fact remains that all the documentary evidences are in favour of assessee and learned CIT(A) has passed a very reasoned and speaking order and we do not find any infirmity in the same."

& 347/Asr/2024 Assessment Years: 2014-15 & 2015-16 The findings recorded by the CIT (A) and the Tribunal are pure findings of fact which have not been shown to be illegal, erroneous or perverse by the learned counsel for the appellant. He has also not been able to produce any material on record to controvert the said findings. Thus, no substantial question of law arises. Consequently, finding no merit in the appeal, the same is hereby dismissed. (Ajay Kumar Mittal) J.”

30. Grounds no 5 and 6 relates to the addition of Rs. 15.40 lakhs on account of unexplained credits in bank account. No submission or explanation has been made by the assessee on these additions in course of hearing and as such these grounds are dismissed and ground no 7 is general in nature and needs no adjudication.

Grounds of Appeal:

“1. That the order passed by the Hon'ble CIT(A) dated 31.05.2024 is against the law and facts of the case.

2. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned assessment order u/s 144 r.w.s 147 by recording incorrect facts/reasons and without complying with the mandatory conditions u/s 147 as envisaged under the Income Tax Act, 1961.

3. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of L.d. AO in framing the impugned assessment order u/s 144r.w.s 147of the Income tax Act and without complying with the mandatory conditions u/s 151 as envisaged under the Income Tax Act, 1961 and also the approval granted is without DIN.

4. (a) That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of ld. A.O., in making an addition of Rs.2,74,76,433/-, on account of long term capital gain treated as income from undisclosed sources, without considering the facts of the case and without observing the principles of natural justice and without following the decision of jurisdictional high court.

& 347/Asr/2024 Assessment Years: 2014-15 & 2015-16 (b) That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO, in making an addition on account of alleged bogus long term capital gain without considering the fact that assessee was a regular investor and has not invested in only one share.

5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 30.10.2025