NEETA RAJESH LODHA,MUMBAI vs. CIT (A), NFAC, DELHI

Brief facts are that the assessee is an individual and had filed her return of income on 29.02.2012 for Assessment Year 2011-12 declaring total income of Rs.1,85,403/-. Later on, the assessment was 2 A.Y. 2011-12 Neeta Rajesh Lodha reopened under section 147 of the Act; and the AO noted that the assessee had shown long term capital gains (LTCG) on sale of Shares of M/s Tuni Textile Mills Ltd (hereinafter M/s TTML) which assessee claimed to be exempt u/s 10(38) of the Act. According to AO, assessee has shown to have received Rs.2,61,43,231/- from sale of shares of M/s TTML on which Securities Transaction Tax (STT) was paid, therefore, assessee claimed the LTCG of Rs 2,51,62,370/- as exempt u/s 10(38) of the Act. In order to verify the genuiness of the claim, the AO called for the details of the transaction and pursuant to which, the assessee brought to his notice that she has been allotted 1,20,000 shares of M/s TTML on 27.01.2010 for a consideration of Rs.12,00,000/-; Later, in this relevant AY 2011-12, these 1,20,000 shares of M/s TTML were sold on the floor of Bombay Stock Exchange [BSE] through registered brokers M/s Sushil Financial Services Private Limited, which yielded LTCG which was claimed as exempt u/s 10(38) of the Act. The total sales consideration for sale of 1,20,000 Shares of M/s TTML was Rs.2,61,43,231/- and the LTCG claimed exempt was Rs.2,51,62,370/- [Rs.2,61,43,231/- minus Rs.12,00,000/- should be Rs 2,49,43,431/-], . The assessee produced relevant evidence before AO to substantiate the purchase of shares of M/s TTML by Share Certificate, Allotment letter, Demat Account Statement and for sale Contract Notes, Brokers Ledger Account, Demat Account Statement , Bank Statement to establish that purchase as well as the sale consideration has passed through the banking channel; and that the shares were duly dematerialized; and the shares

However, the AO didn’t agree. According to him, the gain shown by the assessee were from sale of penny scrips. According to AO, shares of M/s TTML was classified as penny scrips which were used for providing accommodation entries to beneficiaries like assessee in the form of bogus capital gain/losses. Thereafter, the AO discussed about the investigation report of the wing which spelled out the modus operandi of unscrupulous entry providers from para nos.7.1 to 7.8 and 14 of the assessment order; and made general assertions and observations, which according to him, is the manner and mode used by entry operators in active connivance with exit providers to accommodate bogus LTCG and losses in transactions of these penny scrips. The relevant facts concerning the assessee case, is noted by the AO from para no. 6 and 8 onwards. The AO is noted to have found from records that the assessee on 27.01.2010 had acquired 1,20,000 shares of M/s. TTML for a consideration of Rs.12,00,000/-. And the assessee sold these shares in this AY for a consideration of Rs. 2,61,43,231/- as noted in Para 6 of the assessment order. According to AO, there was circumstantial and other material to suggest that transaction of sale of shares of M/s TTML are not natural but are arranged one. Thereafter, AO discussed about the transaction in M/s

And thereafter, the AO discussed about investigations carried out against exit providers/entry operators at paras 13 and 14 .The AO

On appeal, the Ld. CIT(A) upheld the action of the AO. The Ld. CIT(A) is noted to have rejected the submissions put forth by the assessee. Aggrieved, the assessee is before us.

Assailing the action of the Lower Authorities, the Ld AR pointed out that AO as well as Ld. CIT(A) has not doubted the purchase of 1,20,000 shares of M/s. TTML on 27.01.2010 for Rs.12,00,000/- and the sales of the aforesaid shares through broker M/s. Sushil Financial Services Private Ltd during the financial year through BSE for Rs. Rs. 2,61,43,231/- on which assessee claimed LTCG of Rs. 2,51,62,370/-; and contended that the claim of LTCG and resultant exemption u/s 10(38) of the Act ought not to have been denied to assessee, since sale of share took place at the Bombay Stock Exchange wherein STT was paid; and the consideration of purchase and sales happened through banking channel. According to Ld. AR, when the purchases & sales, and holding period of shares have been accepted by both the authorities, merely on suspicion and surmises, the 7 A.Y. 2011-12 Neeta Rajesh Lodha impugned action of disallowing the LTCG/exemption is erroneous. Therefore, the action of AO/Ld. CIT(A) to disallow the LTCG claim is un-sustainable in law. According to him, findings rendered by them were factually misplaced and unjustified. The Ld AR submitted that the assessee is neither responsible nor has any role in the price of M/s TTML and it is governed by market forces. The Ld AR submitted that the AO has merely relied upon the investigation report of the Investigation wing of Kolkata and has not carried out independent enquiry to support his conclusion that the LTCG claim of the asssessee is bogus.

Further, according to the Ld. AR, the assessee was not a first time investor but rather she was a regular investor and drew our attention to the investment made by the assessee in other companies like Igarashi Motors, Indraprashtha Gas, MRPL, Reliance Power, UCO Bank over the years as evidenced by the Demat Statement filed in the paper book. And therefore, according to him, assessee’s action of investing in share of M/s. TTML could not be doubted when both the authorities [AO/Ld. CIT(A)] could not dispute the genuineness of the purchase/dematerialization of the shares, bank transaction of purchase as well as sale, and sale happening through Bombay Stock Exchange on which STT was paid; and relevant evidences consisting of Shares Certificates, Demat Statement, Sales Contract Notes, and Bank statements had been filed. With regard to the assertion by the AO that the notices u/s 133(6) issued to exit providers where some replied and some did not comply, the Ld AR pointed out that the AO

Further according to the Ld AR, the findings rendered by the AO/CIT(A) were factually misplaced and unjustified and took us through the contemporaneous evidences placed on record to show that the transaction in shares of M/s TTML were properly documented. He argued that neither the AO nor the Ld. CIT(A) had pointed out any specific defect or infirmity therein and rather both of them had cited extraneous considerations to make the impugned addition. The Assessee has provided several documents in support of the transaction of LTCG consisting of Contract notes for sale of shares, Demat Account Statement, Bank Statements reflecting payments / receipts for purchase and sales of shares. The Ld. AR drew our attention that the AO had acknowledged that he summoned under section 131 of the Act, the assessee before him and recorded his statement on 27.11.2018 where she was questioned in detail about the investments in M/s TTML, and she satisfactorily explained the transaction of purchase and sale of shares giving complete information and evidences about the transaction and withstood the cross examination and the AO could not elicit any wrong doing / illegal action on the part of the assessee. The Ld. AR thus submitted that when the transactions were supported by corroborative evidences which remained undisputed, these irrelevant surrounding circumstances cited by the lower authorities to make the impugned addition was unsustainable both on facts and in law. He thus urged that the orders of the lower authorities be reversed and the 10 A.Y. 2011-12 Neeta Rajesh Lodha impugned additions be deleted. The Ld AR also referred to various decisions and case laws to substantiate his case.

Per contra, the Ld. DR appearing for the revenue supported the orders of the lower authorities. The Ld. DR submitted that shares of both were purchased by assessee for meagre cost and later sold when the prices have been artificially rigged/increased by synchronous trading and as pre-planned, the shares were sold to exit entry operators at an exorbitant price. According to the Ld. DR, by this modus operandi undue benefit in the form of exempted gains was claimed by assessee. According to Ld. DR, assessee couldn’t explain why she invested in M/s. TTML and pointed out to the financials of the company and wondered as to how such a company can fetch such high price unless it was pre-fixed by unscrupulous entry providers as revealed by the investigation report of the Investigation Wing of Department. Therefore, he does not want us to interfere with the action of the Ld. CIT(A) and prayed for dismissing the appeal of the assessee.

In his rejoinder, the Ld. AR rebutted the submission of Ld. DR and contended that there was no incriminating statement or/documentary material against assessee to show that the assessee had indulged in any wrongdoing and that the assessee had discharged the burden to prove the purchase/sale of shares in question and the AO, without any evidence / material to link the assessee or her broker with any of the entry providers could not have drawn adverse view against the assessee’s claim of LTCG.

We have heard both the parties and perused the records; and we find that AO/Ld. CIT(A) has not found any infirmity in the primary documents produced by the assessee in support of claim of exemption of LTCG u/s 10(38) of the Act. We find that AO during assessment proceedings had asked the assessee to prove the claim of LTCG of Rs 2,51,62,370/- [AO to verify whether it is Rs 2,51,62,370/-or Rs.2,49,43,431/- as noted at page 2 supra] from sale of shares of M/s TTML pursuant to which, the assessee filed documents (refer page no.7 to59 of PB along with documents) to prove the claim, which documents have not been found by AO to suffer from any infirmity. The assessee placed evidence to prove the allottment of 1,20,000 shares of M/s. TTML, which is seen from perusal of Share Allotment Letter (refer Page 7 of PB) , Share Certificate is found placed at Page 11 of PB, Contract notes and Ledger Account of assessee with Broker M/s Sushil Financial Services Private Limited a copy of which are seen from perusal of Pages 38 to 56 of paper book; and copy of demat statement of Standard Chartered Wealth Manager DP of N L at Page 14 to 20 of Paper Book. And further, we note that assessee has paid for the allotment of shares through Banking channel, which fact is discernable from bank statement wherein Rs 12 Lakhs has been seen debited in her bank account of Union Bank of India A/c No 315302010045433 with Abdul Rehman Street Branch, Mumbai on 15.01.2010 [refer Page 8 & 9 of the Paper book]. Thus, the purchase of the shares of M/s TTML by assessee cannot be disputed. It is further noted that, assessee sold 1,20,000 Shares of M/s TTML

The main plea of the assessee is that such an action of the AO/Ld. CIT(A) cannot be legally sustained in the light of the fact that assessee has discharged the burden of proving the genuineness of claim regarding LTCG by submitting primary documents to substantiate the claim (LTCG) by proving the events of purchase of shares, dematerialization of the shares, and transfer of shares to demat account, and the sale happening through Bombay Stock Exchange Electronic platform. Therefore, according to Ld. AR, AO could not have drawn adverse view against the claim made by assessee without first finding any infirmity in the primary documents filed by the assessee, which in this case AO/Ld. CIT(A) have not made any allegation about it. In such a scenario, according to Ld. AR, the AO was duty bound to show from the incriminating evidences, he relies upon in the assessment order (like report of investigation wing, statement of entry providers, non-compliance by exit providers etc) that assessee was participant in the modus operandi to convert black money of assessee in active connivance with these statement- makers/exit-providers (anonymous). Unless AO is able to point out from the report/statement of entry operators/name of exit-providers and any material to indicate the role of assessee as a wrong doer or 14 A.Y. 2011-12 Neeta Rajesh Lodha participant in the modus-operandi (as stated in the investigation wing report), the impugned action of AO/Ld CIT(A), in the light of primary documents has to fall.

As noted (supra), AO/Ld. CIT(A) has been influenced by the investigation report submitted by the Investigation Wing of the Department functioning at Kolkata. It is true that some unscrupulous entry operators had devised methods/modus-operandi to beneficiaries to facilitate laundering their black money to white through pre-planned receipt in the form of bogus LTCG, loans etc. But the discussion of lower authorities, we find to be general in nature and there is nothing in the discussion to link/connect the assessee somehow with the modus-operandi of the Investigation Wing or Report. Since there is no evidence incriminating assessee in the investigation report of being part of the nefarious conspiracy or abetment, such a report of investigation wing cannot be of any aid to the revenue and both the authorities erred in placing reliance on such report to draw adverse inference against assessee.

As noted (supra), the lower authorities have not doubted the documents which were furnished in support of the purchases. Rather the lower authorities doubted the investment rational of the assessee purchasing the shares of M/s.TTML. The AO wondered as to how the assessee could have invested in such an entity which did not have any future outlook at the time of purchase, which according to him was unusual and suspicious. Moreover, the AO have not brought on record

As noted (supra), during the year, in several lots, shares of M/s TTML were sold. The assessee has placed before us the contract notes issued by registered stockbroker M/s Sushil Financial Services Private Limited which fact is evident from page 42 to 56 of PB. The consideration for allotment/sale of shares in question, has happened through the banking channel which has not been disputed. It is noted that none of these documents to have been found to be defective or forged by any of the lower authorities. It is also noted that the broker through whom assessee had conducted then transaction M/s Sushil Financial Services Private Limited has also not been alleged to be guilty of any wrongdoing or manipulation. It is also not the case of the 16 A.Y. 2011-12 Neeta Rajesh Lodha revenue that the shares were not sold at the prices at the prevailing price on the floor of Bombay Stock Exchange on the given date of sale. Further, we agree with the submission of Ld AR that no adverse view can be drawn from observation by AO at para 13 of his order that notices sent under section 133(6) to the exit-providers where some replied and some didn’t comply, because it is common knowledge that there is no scope for sellers of shares in stock market to know who has purchased the shares in the market. Secondly, it is noted that the AO has neither spelled out the name of the so called exit providers nor confronted the assessee while she was examined and therefore in such a scenario, without bringing any evidence/material about the identity of exit providers, and the nexus of such entities with the assessee/broker, no adverse view could have been taken against the assessee in the given facts and circumstances of the case. Thus, we find that the assessee had discharged her burden of substantiating the sale of the listed shares which were subjected to STT, on the floor of stock exchange in order to avail the benefit of the exemption set-out in section 10(38) of the Act.

AO have doubted the genuineness of the sale of the share of M/s. TTML on the basis of unusual rise in the share prices, which according to him was not supported neither by any market factors nor the fundamentals of the scrip itself. According to him, the assessee could not properly explain the unusual price rise over two years, and therefore, the sale of shares were held to be not genuine. According to us, merely because the price of shares have gone up cannot be the 17 A.Y. 2011-12 Neeta Rajesh Lodha basis of branding the shares of M/s. TTML and LTCG claim as bogus. Because it is common knowledge that the prices of shares listed in a stock exchange are subject to upper and lower circuits placed by stock exchanges/SEBI and these are monitored very closely by Stock exchanges and SEBI. The fact that during the tenure of holding of shares by the assessee (from January 2010 to Mar 2011) no action was taken by SEBI against the assessee or her broker for price rigging or to be part of any illegal activity in respect of price rigging proves the fact that the assessee has nothing to do with the change in prices of M/s TTML.

We note that the AO has relied on the purported statement of Mr. Subrata Haldar who has explained the modus operandi of booking bogus LTCG on transaction involving shares of M/s TTML which he carried out through his broking company (M/s BSAS Securities Pvt Ltd) and therefore according to AO, his statement confirm that the asssessee’s claim of LTCG is bogus. However, the Ld. AR pointed out that statement of Mr. Subrata Haldar cannot be relied upon by AO/Ld. CIT(A) because it was neither recorded in assessee’s presence nor confronted to the assessee nor the AO allowed assessee to cross- examine him in spite of specific request made to AO vide letter dated 12.12.2017. Therefore, according to him, those statements even if incriminating cannot be used against the assessee unless cross- examined as held by Hon’ble supreme Court in Andaman Timber A.Y. 2011-12 Neeta Rajesh Lodha or exit provider has alleged any allegation against the assessee or her broker of any misconduct or wrong doing or being part of any illegal acts/modus-operandi to convert unaccounted money. This assertion of Ld. AR could not be controverted by revenue before us. Therefore, nothing turns on the purported statement of Mr. Subrata Haldar to discredit the primary documents filed by assessee to prove the claim of LTCG. Therefore, the same need to be allowed. Therefore, we do not countenance the action of the lower authorities and direct the deletion of the addition u/s 68 of the Act.

The Ld. AR has also brought to our notice that similar case came up before the Tribunal (LTCG claim on sale of shares of M/s.TTML) wherein the Tribunal in the case of Rohit Jalan Vs ITO ITA No 2205/Kol/2018 where the Tribunal deleted the addition made on account of rejecting the claim of LTCG on sale of Shares of M/s TTML by following the orders of the Tribunal in the cases of ITA Nos 112 & 113/Kol/2018 Ramesh Chandra K. Shah Vs. ACIT and Kiran Kothari HUF ITA No 443/Kol/2017 , the Tribunal observed that 14. Coming to the merits of the case we note that the assessee has applied for allotment of 2,00,000 equity shares at face value @ Rs. 10 each on 4.01.2010 in M/s. TTML. The company issued and allotted 2,00,000 equity shares on preferential basis on 25.01.2010 and informed assessee on 27.01.2010 with a condition that the shares shall be held in for a lock in period for one year. Copies of application for allotment, allotment letter & photocopy of share certificate are available in paper book pages 70 -72. The assessee had paid the purchase consideration of Rs.20,00,000/- vide account payee cheque issued upon Bank of India on 14/01/2010, which was cleared on 15/01/2010. Copy of Bank Statement

We note that for claiming exemption u/ s 10(38) of Act three requirement needs to be fulfilled. Firstly, the share purchased should be held for more than 1 year. Secondly the shares should be listed & sold on recognized stock exchange. Thirdly on the said sale, necessary security transaction tax (STT) has been paid. In the present case, the shares of M/s. TTML was acquired by assessee on 25/01/2010 from the Company on preferential basis. After the lock-in period of one year, the shares were placed in the De-mat Account. Some shares were sold in BSE on various dates starting from 02/02/2011 onwards after payment of all statutory levies including STT & brokerage. Thus, after the shares were held for more than 1 year, the same was sold on recognized stock exchange and necessary STT paid. Hence the assessee is legally eligible to avail the exemption u/s. 10(38) of the Act and the AO only can deny the claim on cogent grounds with material to substantiate his conclusion that assessee indulged along with persons’ statement

Coming to the judgements cited before us, it is clarified that we have carefully perused the cited judgements relied upon by both the parties and but only those judgements which are found to be relevant to the case in hand, have been discussed in the ensuing paragraphs.

It is noted that the Ld. AR had rightly relied upon the judgment of the Hon’ble juri ictional Bombay High Court in the case of Shyam R. Pawar (229 Taxman 256). In the decided case also, the assessee was purchasing and selling the shares through a broker in Mumbai, for purchase of shares of (i) M/s. Bolton Properties Ltd., (ii) M/s Prime Capital and (iii) M/s. Mantra; and he has transacted through the broker at Calcutta and two operators namely Mr. Sushil Purohit and Shri Jagdish Purohit, and one of them was the Director of M/s. Bolton Properties Ltd. who had purportedly admitted to have manipulated the share price of M/s. Bolton Properties Ltd. Mr. Jagdish also reportedly floated several investment companies which were aggressively used in the entire deal with the broker M/s. Prakash Nahata & Co. According to AO, the shares offloaded by the beneficiaries through M/s. Prakash Nahata & Co., were ultimately purchased by the investment companies controlled by Shri Purohit. The name of the assessee figured during the course of the investigation. The AO noted that these entities/ companies, whose shares were traded by the assessee, were not having sufficient business activities justifying the increase in their shares prices. Therefore, the AO concluded that certain operators and brokers

It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs.25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that 23 A.Y. 2011-12 Neeta Rajesh Lodha this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either.

As a result of the above discussion, we do not find any substance in the contention of Mr.Suresh kumar that the Tribunal mi irected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.”

We may also gainfully refer to the decision rendered by this Tribunal in the case of DCIT Vs Mukesh R Marolia (6 SOT 247) (affirmed by the Hon’ble Bombay High Court in their order in ITA No. 456 of 2007 dated 07-09-2011 ) wherein on similar facts and circumstances the addition made by the AO on account of purported bogus LTCG derived on purchase/sale of shares (off-market) was deleted by observing as under:

At this juncture, we may gainfully refer to the decision of the Hon’ble Gujarat High Court in the case of Pr.CIT Vs Parasben K. Kochar (130 taxmann.com 176). In the decided case also, the assessee had furnished all relevant documents such as contract notes, demat statements, bank statements, ledgers, bills etc. to substantiate the LTCG derived on sale of listed shares. The AO, however, disputed the genuineness of the same by placing reliance on statements of certain persons obtained by the Investigation Wing. On appeal the Hon’ble Gujarat High Court is noted to have upheld the order of this Tribunal holding that since the assessee was not given opportunity to cross-examine these persons, the addition was unsustainable. The relevant findings of the Hon’ble High Court were as follows :-

In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his

Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee.

In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No. 62/Ahd/2018 in the matter of Mohan Polyfab (P.) Ltd. v. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee."

Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income-tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant.

We take notice of the fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under section 260-A of the Act, 1961.”

The Ld. AR of the appellant has rightly relied on another judgment of the Hon’ble Bombay High Court in the case of CIT Vs Jamna Devi Agarwal (328 ITR 656). In the decided case, also the Revenue had disputed the genuineness of the long-term capital gains derived by the assessee on sale of shares of listed companies for 29 A.Y. 2011-12 Neeta Rajesh Lodha similar reasons as cited in the present case. On appeal, the Hon’ble High Court upheld the decision of this Tribunal deleting the additions by observing as under:

The Ld AR also bought to our notice the recent judgment rendered by the Hon’ble juri ictional Bombay High Court in the case of PCIT v. Ziauddin A Siddique (ITA No. 2012 of 2017) dated 04.03.2022 which is found to be relevant in the facts involved in the present case. In the decided case, the issue before the Hon’ble High Court was whether this Tribunal was right in law in deleting the addition made u/s 68 of the ACT in relation to LTCG derived on sale of shares, ignoring the fact that the shares were purchased from off- market sources and that the sharp rise in prices were not supported by financials. Answering the question raised by the Revenue in the negative, the Hon’ble High Court held that there was a finding of fact that the purchase & sale of shares occured on the platform of stock exchang, upon payment of STT and were supported by documentary ecidences and therefore there was no perversity in the order of this Tribunal. The Court further noted that there was no allegation against the assessee that he had participated in price rigging in the market and therefore dismissed the appeal of the Revenue. The relevant findings of the Hon’ble High Court which is binding upon us, are as follows :-

Therefore we find nothing perverse in the order of the Tribunal.

Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd.1 but that does not help the revenue in as much as the facts in that case were entirely different.

In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.”

It is noted that similar questions were also put up for consideration before the Hon’ble Rajasthan High Court in the case of Pr.CIT Vs Gaurav Bagaria (453 ITR 513) which read as follows :-

We also gainfully refer to the decisions cited by the Ld. AR, rendered by the coordinate Benches of this Tribunal wherein also, on similar facts and circumstances, following the above referred judgments of the juri ictional High Court, this Tribunal deleted the addition/s made by the AO u/s 68 of the Act in relation to the long-

On the above facts and circumstances, we find that the transaction of the assessee of deriving long term capital gains of Rs. 1, 93, 56, 813/- by selling shares of M/s Trinity Tradelink Ltd. was treated as bogus by the Revenue only on the basis of suspicion and probability and without finding any defect in the various documentary evidences filed by the assessee and further, the finding recorded by ld CIT (A) on page 26 of his order that the addition has been made on independent analysis of the documents, is contrary to material available on record. As on perusal of the order of assessment, we find that no independent inquiry was made with regards to alleged entry operator Sh. Vikrant Kayan. Whereas, the sole basis of making the impugned addition was statement of Sh. Vikrant Kayan, which too was recorded behind the back of assessee by DIT (Inv) Kolkata and the statement alone cannot be the conclusive evidence to nail the assessee and hence needs to be excluded for consideration as the said person has not been allowed cross examination by assessee, even though various requests were made by assessee. As such, the transaction of the assessee was duly supported by relevant documentary evidences without there being any rebuttal by lower authorities; the addition made by the Assessing Officer of Rs. 1,93,56,813/- by treating the LTCG as bogus is unsustainable. In view of our above finding, we, therefore, delete the addition of Rs.1,93, 56,813/-.

As we find the transaction of long term capital gains of Rs.1,93,56,813/- derived by the assessee as genuine and as such, further addition of Rs. 3,87,136/- made by the Assessing Officer on account of alleged commission is consequential and is also liable to be deleted and accordingly, the same is also hereby deleted.”

The Ld. AR of the appellant has relied on another judgment of the Hon’ble Rajashthan High Court in the case of PCIT Vs Ritu

We are also guided by the decision of Juri iction Bombay High Court referred by the Ld AR, in the case of PCIT V Indravadan Jain ITA 458 of 2018 where the Hon’ble Court has held that 3. Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gain and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs.3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs.155.04/- per share. It was A.O.’s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross

The A.O. did not accept respondent’s claim of long term capital gain and added the same in respondent’s income under Section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under Section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent’s bank account has been debited. The shares were also transferred into respondent’s Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent’s bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under Section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.

We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises.

Apart from the above, the Revenue has also relied upon several judgments rendered in the context of unexplained cash credit u/s 68 of the Act by the judicial forums. Having perused those judgments, it is noted that, the question as to whether the assessee had satisfied the three ingredients set out in Section 68 of the Act is essentially a fact finding exercise. We note that the facts involved in each of them were distinguishable to the issue involved in present case i.e. genuineness of capital gains derived on sale of shares. Since these judgments were noted to be not relevant to the present case, we do not deem it fit to discuss each of them separately. However, we discuss and distinguish some of the cases as under: -

For the various reasons discussed in the foregoing and following the judgments cited above, more particularly of the binding juri ictional High Court in the cases of Shyam Pawar (supra),

In the result, the appeal of the assessee is allowed.