PRADIPKUMAR HARAKCHAND DOSHI,MUMBAI vs. THE ITO , WARD-19(2)(5), MUMBAI
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI ABY T VARKEY, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Neelkanth Khandelwal Shri H.M. Bhatt
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI ABY T VARKEY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO.2229/MUM/2023 (ASSESSMENT YEAR: 2015-16) Pradipkumar Harakchand Doshi v. Income Tax Officer – 19(2)(5) 94/100, 2nd Floor Matru Mandir, Grant Road 2nd Pathan Street Mumbai - 400007 Mumbai - 400004 PAN: AAHPD4722B (Appellant) (Respondent) Shri Neelkanth Khandelwal Assessee Represented by : Department Represented by : Shri H.M. Bhatt
Date of conclusion of Hearing : 05.03.2024 Date of Pronouncement : 15.03.2024
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld. CIT(A)”] dated 28.10.2022 for the A.Y.2015-16.
ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi 2. At the outset, we observe that the present appeal is filed by the assessee with a delay of 174 days and assessee also filed an affidavit in this regard and prayed for condonation of delay. Assessee filed an affidavit dated 19.06.2023 and submitted as under: -
“1. That I am a proprietor of a concern in the name of M/s. Navjyoti Steel Suppliers and engaged in the business of trading in ferrous and non- ferrous metals. I am regularly assessed to income tax by the ITO, Ward 19(2)(5), Mumbai under PA No. AAHPD4722B. 2. The appellate order u/s.250 for the A.Y.2015-16 in my case was passed by the NFAC, Delhi on 28-10-2022 and the same was downloaded on the portal of Income Tax by the NFAC, Delhi, presumed to be, on the same day. However, no such information or intimation was either received on the e-mail or SMS by me and as such I was not aware of such appellate order u/s.250 passed by the NFAC, Delhi on 28-10-2022 and therefore I could not file an appeal before the ITAT, Mumbai within the prescribed time. Recently while log-in on Portal of Income Tax I came to know about the appellate order u/s.250 dated 28-10-2022 dismissing my appeal. Thereafter I have downloaded the appellate order. I was advised by tax consultant to file an appeal before the second appellate authority with request to condone the delay. Since the order u/s.250 came to my knowledge recently. I could not present the appeal within 60 days from the date of service of the order u/s.250. 3. That I have not been served with copy of the order u/s.250 physically. 4. That the delay in presenting the appeal was on account of sufficient and reasonable cause. 5. That I make this affidavit for presenting before the ITAT, Mumbai with pray to condone the delay in presenting the appeal in the fairness of the law. 6. That, whatever is stated hereinabove and in the application is true to my knowledge and information.”
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi 3. On the other hand, Ld. DR objected for the condonation of delay and however, he has not filed any submissions against the affidavit as well as the facts described in the above affidavit.
Considered the submissions of both parties, on a perusal of the affidavit and the reasons explained therein for the delay in filing the appeal, we find the assessee is prevented with reasonable cause in filing the appeal in time. The assessee could properly explain the delay in filing the appeal, therefore following the ratio in the decision of the Hon’ble Supreme Court in the case of Collector, Land Acquisition v. MST. Katiju and others, [1987] 167 ITR 471, we condone the delay of 174 days and admit the appeal for disposing off the same on merits.
Brief facts of the case are, assessee filed his return of income on 12.09.2015 declaring total income at ₹.13,72,670/-. Subsequently, the case was selected for complete scrutiny under CASS and the notice under section 143(2) and 142(1) of the Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for.
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi 6. Assessee is an individual derives incomes from house property, from speculative business i.e. profit, Capital gain income and income from other sources. During the course of the assessment proceedings, Assessing Officer observed that as per working of long term capital gain attached with return of income, the assessee has earned gain of ₹.1,08,85,225/- on sale of shares during the year which has been claimed exempt under section 10(38) of the Act. The details are as follow:-
Buy Sell Date of Purchase / Quantity Amount Quantity Amount Sale -- 20000 200000 Various 20000 110,85,225
This case was selected for complete scrutiny with main reason for selection being to examine the "Suspicious sale transactions in shares and exempt long term capital gains shown in return (Penny Stock Tab in ITS)". Assessing Officer observed from the details filed by the assessee that assessee has earned Capital Gain of ₹.1,08,85,225/- from sale of shares of M/s Parag Shilpa Investment Ltd (now known as M/s. PS IT Infrastructure & Services Ltd). The details of purchase and sale of this particular scrip i.e. Parag Shilpa Investment Ltd were examined. The assesse has submitted the details regarding the purchases of the shares of this company.
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi 8. Assessing Officer issued summons under section 131 of the IT Act to the assessee and the statement of the assessee was recorded under oath on 20.11.2017. Assessing Officer in his order from Page No. 3 to 11 has elaborately analysed various parameters with regard to claim of Bogus long term capital gain such as modus operandi to generate bogus LTCG, Misuse of exemption on Long Term Capital Gains tax for money laundering and findings and investigation of the Wing (for the sake of brevity the same is not reproduced below). Subsequently, Assessing Officer issued notice under section 142(1) of the Act requiring assessee to explain with evidences why the Long Term Capital Gain should not be treated as non-genuine and sale consideration received on the penny stock should not be taxed as an unexplained cash credit under section 68 of the Act. In response, assessee filed his submission on 31.08.2017 and submitted that the transaction of Long Term Capital Gain is genuine with supporting documents.
After considering the submissions of the assessee, Assessing Officer observed that the transaction of LTCG is a manipulated transaction done by assessee in connivance with the operators to evade taxes on his unaccounted income and treated the LTCG as non-genuine, according to him LTCG declared by the assessee of ₹.1,10,85,225/- as
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi unexplained income u/s.68 of the Act, he came to conclusion by observing as under: - "Findings and conclusion The AR of the assessee has submitted details on 31.08.2017. Submissions made by the assessee is considered. The facts of the case, investigations made by various directorates, statements recorded during the assessment proceedings are considered. From the discussion in the preceding paras it is concluded that long term capital gains booked by assessee in his books were pre-arranged method to evade taxes and launder money. Following are the findings and the reasons which substantiates the findings. a. Mode of acquisition of the shares: The assessee has purchased the shares of Shree Shaleen Textiles Ltd on 12.10.2011. It is also seen from ITS data available with the department that most of the purchases of share from, the assessee are done by the companies/individuals based in Kolkatta. b. Sale of shares and unusual rise in the price: Further the assessee has sold these shares for a sale consideration of Rs.5,71,37,014/- in F.Y. 2013-14. Which is 2755 times the increase of the cost price. It is pertinent to mention here that the normal returns on savings were 7.80% for F.Y. 2012-13 and 18.70% for F.Y. 2013-14 for BSE/Sensex. Whereas, the assessee has earned 2400% (approx.) of returns on investments in this scrip, that too when sensex, gold returns are far behind the strong performance of M/s Parag Shilpa Investment Ltd. without having any supporting financial results itself is a circumstantial evidence to show that the LTCG on sale of shares of Shree Shaline Textiles Ltd is not genuine one. c. Findings of Investigation wing: The findings of the Directorate of Investigatin of Mumbai and Kolkata as discussed above have proved that the assessee had worked out an arrangement in which the shares were acquired by the assessee, the share prices were rigged and then with the help of entry operators by routing the cash, shares were sold at high price to arrive at tax free capital gains. d. Analysis of transactions: Facts revealed that such trading transactions of purchase and sale of shares are not been effected, for commercial purpose but to create artificial gains, with a view to evade taxes-
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi i. Transactions of shares were not governed by market factors prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators. ii. The assessee resorted to a preconceived scheme to procure long-term capital gains by way of price difference in share transactions not supported by market factors. iii. Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bona fide and, hence, impugned long term capital gain is not allowable, ….. Thus considering the findings of the search/ survey, inquiries conducted in the case of assessee, brokers, operators and the entry and the nature of entered into by the assessee the LTCG of Rs 1,08,85,225/- claimed u/s 10(38) of the act by the assessee cannot be allowed and the amount of Rs.1,10,85,225/ received back as sales proceeds on sale of shares is being added to the total income of the assessee u/s 68 of the Act"
Aggrieved, assessee preferred an appeal before the Ld. CIT(A) and filed detailed submissions. After considering the detailed submissions of the assessee and findings of the Assessing Officer, Ld. CIT(A) sustained the addition made by the AO by re-enforcing the findings of AO by relying on the decisions of various courts.
Aggrieved with the above appellate order, Assessee is in appeal before us raising following grounds in his appeal: -
“1. a) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of 1,10,85,225/- made by the AO to the income of the Appellant u/s.68 representing sale proceeds of shares of M/s. PS IT Infrastructure & Services Ltd.
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi after rejecting the claim of the Appellant in respect of Long term capital gains being exempt u/s.10(38) treating the same as not genuine on the basis of information in possession of the Investigation Wing, Kolkata that certain operators and intermediaries had provided accommodation entries of bogus Long term capital gains using certain penny stock companies and thereby further erred in upholding the view of the AO that such income be taxed at special rate u/s.115BBE. b) The ld. CIT(A) failed to appreciate that:- (i) the Appellant has earned Long term capital gains of ₹.1,08,85,225/- on sale of shares of M/s. PS IT Infrastructure & Services Ltd. and the same is supported by independent and admissible evidences; (ii) the shares were sold in the open free market of Bombay Stock Exchange on BOLT; (iii) the payments for purchase of shares and receipts for sale of shares are through banking channels; (iv) the delivery of shares are taken and given from the Demat account of the Appellant; and v) the ld. AO did not provide copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been suspected to provided accommodation entries to the Appellant. c) In reaching to the conclusion and confirming such addition the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was , influenced and prejudiced by and factors. 2. The ld. CIT(A) erred in holding that levy of interest u/s. 234B and 234C of the Income Tax Act, 1961 is consequential. The denies his liability for such interest. 3. The ld. CIT(A) erred in holding that the ground raised disputing initiation of penalty is premature. The Appellant denies his liability for such penalty. 4. The appellant was prevented by sufficient and reasonable cause from presenting the present appeal within the time and therefore prays your Honour to condone the delay in presenting the appeal and admit the appeal in the fairness of law.
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi The craves leave to add, alter, amend or delete any or all of the above grounds of appeal.”
At the time of hearing, Ld.AR of the assessee brought to our notice relevant facts relating to the case and reiterated the submissions made before the Ld. CIT(A) and contended the action of the Ld. CIT(A) in sustaining the action of the Assessing Officer. Ld.AR of the assessee submitted various documentary evidences in support of the Long Term Capital Gain transaction and he brought to our notice contract notes of sales of shares, details of cheque issued by stock broker of the assessee towards sales, bank statements in support of the realisation of the sale proceeds and he submitted that the Long Term Capital Gain earned by the assessee is genuine and not an arranged one as alleged by the tax authorities.
Further, he submitted that Assessing Officer and Ld. CIT(A) have not pointed out any discrepancies in the documentary evidences submitted by the assessee. Ld.AR of the assessee submitted that without pointing out any discrepancies in the documentary evidences submitted by the assessee the Assessing Officer has heavily relied on the investigations carried out by the Directorate of Investigation. The predetermined action with specific intention is one of the circumstances
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi evidences leading to the conclusion that the Long Term Capital Gain earned is not genuine. Further, assessee has not declared any Short Term Capital Gain or business income or exempt income of share transactions in the previous assessment years.
On the other hand, Ld. DR objected to the submissions of the Ld.AR of the assessee and relied on the orders of the lower authorities by submitting that there are substance in the findings of the lower authorities.
Considered the rival submissions and material placed on record, The Assessing Officer observed that assessee had made huge profit out of this investment because of this, it makes the script as suspicious and penny stock. We cannot agree to the above observation, merely because of huge profit, it does not make the script a penny stock. Further, it is fact on record that the financials of the company are not commensurate with the purchase and sale price in the market. The assessee has purchased the shares directly from the company on preferential allotment, subsequently, D-mated the scrips and sold the same in the stock exchange. It clearly raises several doubt on the purchase and sales transactions recorded in this case. However, there is no
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee. We can only presume that the assessee is one of the beneficiary in this transactions merely as an investor who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. We observe that the Hon’ble Bombay High Court in the case of Pr. CIT v. Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04.03.2022 held as under: -
“1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs.1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs.1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?"
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. 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. but that does not help the revenue in as much as the facts in that case were entirely different. 5. 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. 6. The appeal is devoid of merits and it is dismissed with no order as to costs.”
Further, the Hon’ble Delhi High Court in the case of Pr. CIT v. Smt Krishna Devi in ITA 125/2020 dated 15.01.2021 held as under: -
“8. Mr. Hossain argues that in cases relating to LTCG in penny stocks, there may not be any direct evidence in the hands of the Revenue to establish that the investment made in such companies was an accommodation entry. Thus the Court should take the aspect of human probabilities into consideration that no prudent investor would invest in penny scrips. Considering the fact that the financials of these companies do not support the gains made by these companies in the stock exchange, as well as the fact that despite the notices issued by the AO, there was no evidence forthcoming to sustain the credibility of these companies, he argues that it can be safely concluded that the
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi investments made by the present Respondents were not genuine. He submits that the AO made sufficient independent enquiry and analysis to test the veracity of the claims of the Respondent and after objective examination of the facts and documents, the conclusion arrived at by the AO in respect of the transaction in question, ought not to have been interfered with. In support of his submission, Mr. Hossain relies upon the judgment of this Court in Suman Poddar v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453.
Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips.
We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter.
On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes.
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent’s unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that “There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels.” The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained.
Mr. Hossain’s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance. Upon examining the judgment of Suman Poddar (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turns ITA 125/2020 and connected matters Page 10 of 10 on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue.
The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order.
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration.
Accordingly, the present appeals are dismissed.”
Even otherwise, the Coordinate Bench of the Tribunal in the case of Yogesh Thakkar v. DCIT in ITA No. 1612/MUM/2021 dated 03.02.2023 dealt with identical scrip wherein the assessees have also earned Long Term Capital Gain at the high volume and the Tribunal ultimately decided the issue in favour of assessee. For ready reference, the conclusion drawn by the ITAT is reproduced below: -
“Shri Yogesh Thakkar – ITA No. 1612/Mum/2021 – Asst Year 2015-16 - Assessee Appeal 9. Though the assessee has raised several grounds before us, we find that the effective issue to be issued in this appeal is as to whether the ld. CIT(A) was justified in confirming the action of the ld.AO in denying the exemption claimed u/s 10(38) of the Act in respect of long term capital gain derived from sale of shares of Greencrest Financial Services Ltd and PS IT Infrastructure & Services Ltd, in the facts and circumstances of the case. The inter connected issue involved therein to be decided in this appeal is as to whether the ld. CIT(A) was justified in upholding the addition made on account of estimated commission expenditure as unexplained u/s 69C of the Act in the facts and circumstances of the case. 10. The brief facts of this issue are that the assessee is an individual and working as director/partner in certain company/partnership firms and also engaged in trading of shares. The return of income for the A.Y. 2015-16 was e-filed u/s.139(1) of the Act on 30/09/2015 showing total income of Rs 5,18,60,550/-. Subsequently, search u/s.132 of the Act was carried out by the Department on 09/04/2015 at the residential premises of the assessee on the plea that he was indulged in evasion of income tax by introducing unaccounted money into the books of account in the grab of bogus Long term capital gains claimed to be exempt
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi u/s.10(38) of the Act. In response to notice u/s.153A of the Act dated 08/08/2016, the assessee filed his return of income on 22/08/2016 showing total income of Rs 5,18,60,550/- which was the same as shown in the return of income furnished u/s.139(1) of the Act. In the said return of income, the assessee has shown Long term capital gains (LTCG) of Rs 5,21,88,356/- on sale of shares of Greencrest Financial Services Ltd. (“Greencrest‟) and Crescent Digital Technologies Pvt. Ltd. (now known as PS IT Infrastructure & Services Ltd.)(“PS IT”) which have been claimed to be exempt u/s.10(38) of the Act. Details of such LTCG are as under:- No. of Name of the Date of Purchase Sr.no. Shares Company Purchase Amount (1) purchased (2) (4) (In. Rs) (5) (3) 1 “Greencrest” 765000 06.02.2013 9,18,000/- 2 “PS IT” 10000 28.06.2012 1,00,000/- X x x Total :- 10,18,000/-
No of Sr. Name of the Shares Date of Sale Amount LTCG (In Rs) No. Company (2) sold Sale (7) (In Rs) (8) (8)-(5) (1) (6) 1 “Greencrest ” 765000 Sep-14 to 4,79,70,600/- 4,70,52,600/- Oct-14 2 “PS IT” 10000 07.05.2014 52,35,756/- 51,35,756/- Total :- 5,32,06,356/- 5,21,88,356/-
10.1. The assessee was allotted 200000 shares of Greencrest Financial Services Ltd (formerly known as Marigold Glass Inds. Ltd.) on 12/02/2013 having a face value of Rs.10/- and premium of Rs.2/- per share and consideration paid thereon was Rs 24,00,000/-. Subsequently, the shares having face value of Rs.10/- were split into 10 share having face value of Re.1/-. Post split, the total shares credited into demat account were 2000000 shares. During the year under consideration, the assessee has sold 765000 shares after holding for a period of 18 months and balance share holding still remains unsold as on 31/03/2022. Similarly, the
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi assessee purchased 10000 shares of Crescent Digital Technologies Pvt Ltd. of face value of Rs. 10 for a consideration of Rs.1,00,000/- on 28/06/2012 in off-market. Crescent Digital Technologies Pvt Ltd. subsequently amalgamated with Parag Shilpa Investment Ltd in accordance with a scheme of amalgamation and Parag Shilpa was subsequently renamed “PS IT Infrastructure & Services Ltd.” or PS IT in short. These shares were sold during the F.Y.2014-15 after holding for a period of 2 years. For both the shares, the payments for purchase of shares were made by the assessee by account payee cheques out of sources duly disclosed in the books of accounts. 10.2. The ld. AO in the assessment framed u/s 143(3) r.w.s 153A of the Act in the same manner by making the same observations as was done in A.Y. 2014-15 in the case of the assessee herein by treating the sale proceeds of shares of Rs 5,32,06,356/- as unexplained cash credit u/s 68 of the Act and an estimated commission expenditure of Rs 31,92,381/- (53206356 *6%) as unexplained u/s 69C of the Act at the rate of 6% of sale proceeds of shares. 10.3. When the appeal was pending before the ld. CIT(A) , SEBI had passed an order u/s 11(1), 11(4) and 11B(1) of SEBI Act, 1992 dated 05/06/2020 in the case of Greencrest Financial Services Ltd and PS IT Infrastructure Services Ltd, wherein certain parties were debarred for a period of 3 years from accessing the securities market and were further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner. In the said list of persons who were debarred, the name of the assessee or its registered share broker was not reflected. Accordingly, it was pleaded before the ld. CIT(A) that even as per SEBI investigation and its order dated 05/06/2020, the assessee cannot be stated to be involved in artificial price rigging of shares. 10.4. The ld. CIT(A) however did not heed to the contentions of the assessee and proceeded to confirm the order of the ld. AO in the same manner as was done by him in A.Y. 2014-15 in the case of the assessee herein. 11. We have heard the rival submissions and perused the materials available on record. The findings given by us hereinabove for the A.Y. 2014-15 in the case of the assessee shall apply mutatis mutandis to A.Y. 2015-16 also , save that during the A.Y. 2015-16, there was no interim order passed by SEBI on both the scrips ; that there was only final order passed by SEBI dated 05/06/2020 wherein the name of the assessee or his registered share broker was not reflected as defaulters or persons involved in artificial price rigging of shares. Hence the observations and findings recorded by us for A.Y. 2014-15 together with reliance placed on various case
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi laws thereon shall apply for A.Y.2015-16 also. Accordingly, the Ground Nos. 1 & 2 raised by the assessee are allowed.”
Therefore, we respectfully follow the ratio of the above decisions. In this case also, the Assessing Officer and Ld.CIT(A) has applied the concept of Human probabilities and held the above said scrip to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed by the Hon’ble Bombay High Court in the case of Ziauddin A Siddique (supra). Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. Therefore, we are inclined to allow the ground raised by the assessee. Accordingly the Ground No.1 raised by the assessee is allowed.
With regard to Ground No. 2 which is in respect of levy of interest under section 234B and 234C of the act, as we have adjudicated ground No. 1 in favour of assessee, this ground being consequential in nature this ground is not adjudicated at this stage. Accordingly, Ground No. 2 raised by the assessee is allowed for statistical purpose.
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ITA NO.2229/MUM/2023 Pradipkumar Harakchand Doshi 20. Ground No. 3 which is in respect of initiation of penalty proceedings under section 271(1)(c) of the Act, this ground being premature, accordingly, the ground is not adjudicated at this stage.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 15th March, 2024.
Sd/- Sd/- (ABY T VARKEY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 15.03.2024 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
//True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mum
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