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Facts
The revenue appealed against the order of the CIT(A) who deleted the addition of Rs. 3,73,18,458/- made by the AO on account of disallowance of bogus long-term capital gain claimed as exempt u/s 10(38) of the Income-tax Act, 1961, on sale of shares of M/s Capital Tradelink Pvt. Ltd. and M/s Alankit Ltd. The AO had treated the transaction as not genuine and a case of bogus capital gain.
Held
The Tribunal noted that in similar cases involving the same scrips, the Coordinate Bench had found the transactions to be genuine. The AO himself had acknowledged Alankit Limited as a leading e-Governance Service Provider, and no findings indicated the assessee booked the capital gain in connivance with promoters. The sale of shares through banking channels with STT payment and demat transfer, coupled with the company's dividend history, supported the genuineness of the transaction.
Key Issues
Whether the long-term capital gains from the sale of shares were genuine or bogus, and if the CIT(A) erred in deleting the addition made by the AO.
Sections Cited
147, 148, 143(3), 10(38), 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, DELHI
Before: SHRI S RIFUAR RAHMAN & SHRI ANUBHAV SHARMA
This appeal is preferred by the revenue against the order dated 26.03.2024 of the Ld. Commissioner of Income Tax(A)-26, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) assessment order dated 22.03.2022 u/s 147 r.w.s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the ACIT, Central Circle-15 for AY: 2017-18.
The assessee is an individual and during the year under consideration had filed return declaring income of Rs.2,72,93,110/- and the case was reopened by assumption of jurisdiction u/s 147/148 of the Act and the AO examined the Long Term Capital Gain (in short ‘LTCG’) of Rs.1,57,77,877/- claimed to have been earned by assessee on sale of shares of Capital Trade Link and a gain of Rs.1,71,47,430/- on sale of shares of Alankit Limited. The claim of the assessee u/s 10(38) of the Act was found to be not genuine and considering it to be a case of bogus capital gain, the entire sale consideration of Rs.3,73,18,458/- was added to the income of the assessee which was challenged by the assessee before the Ld. CIT(A) and where assessee had succeeded against which department is in appeal raising following grounds:
“1. Whether on the facts & circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 3,73,18,458/- made by AO on account of disallowance of bogus long term capital gain claimed as exempt u/s 10(38) of the Income-tax Act, 1961 on sale of shares of M/s Capital Tradelink Pvt. Ltd. & M/s Alankit Ltd. and Rs. 7,46,370/- as unexplained expenditure u/s 69C of the Income-tax Act, 1961 on account of cost of arranging accommodation entry by the assessee.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in ignoring the fact that the status of company namely "M/s Capital Tradelink Pvt. Ltd." was under the category of "Additional Surveillance Measure (ASM) Grade 1" at the time of such transaction and shares in which assessee invested has shown an abnormal price hike in a short span of time? 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in ignoring the report of SEBI, reports of Special Investigation Team (SIT) of the Hon'ble Supreme Court of India on Black Money and Investigation done by Investigation Wing of Income Tax Department on such issue?
4. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in ignoring the Circular No. SMDRP/Policy/CIT-21/99, dated 14th September, 1999 issued by SEBI which banned all negotiated deals including cross deals according to which off market purchases of shares done by the assessee at a meager price of Rs. 1 per share was clearly not a genuine transaction and was used as colorable device by the assessee to gain from the future exponential rise in price of the scrip of M/s Capital Tradelinks Ltd. through manipulated trading.
5.(a) The order of the Ld. CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”
On hearing both the sides we find that Ld. DR has heavily relied the contentions of AO alleging that SEBI had flag the scrips to be suspicious.
Thus, relying of assessment order it was contended that Ld. CIT(A) has fallen and SEBI.
3.1 Ld. AR however, submitted that there is no error in the findings of Ld. First Appellate Authority as in the case of husband of assessee Sanjeev Agrawal the same scrips have been considered by the Coordinate Bench and the transactions have found to be genuine.
It comes up from the impugned order that ld. CIT(A) has taken into consideration all the submissions of the assessee including the decision in the case of Sanjeev Agrawal for AY: 2016-17 & 2017-18 by the Coordinate & 1519/Del/2021 order dated 20.09.2023 wherein the Coordinate Bench has deleted the addition made towards LTCG on sale of shares of M/s Capital Trade Link Ltd. Then in assessee’s own case for AY: along with C.O. No. 48/Del/2024 the Coordinate Bench by order dated 29.08.2024 has dismissed the appeal of the revenue holding the claim of LTCG on sale of shares of Capital Trade Link Ltd. to be genuine.
As with regard to the claim of shares of Alankit Limited ld. CIT(A) observed as follows:
“7.2.6 Further, with respect to the sale of shares of Alankit Limited, the AO has noted that it is a leading e-Governance Service Provider listed on India's premier exchanges, the NSE and the BSE. The AO further analysed the trading pattern of this scrip and just by seeing the trading pattern, he has concluded that the assessee has taken bogus capital gain. From the chart of share trading pattern of this scrip it is evident that the scrip was traded at its highest value in Nov.2017 and Dec.2017, however, the appellant has sold her shares in May 2016. Had there been a case of taking bogus capital, the appellant would have sold her scrips at the highest price band. Hence, just from seeing the trading pattern it cannot be concluded that the appellant has taken bogus capital gain. The AO has also failed to bring any contrary findings on the basis of which it can be concluded that the profit earned was non-genuine. The AO himself has mentioned that Alankit Limited is a leading e-Governance Service Provider of India and further, there is no findings that the assessee has booked the capital gain in connivance with the promoters of the company. Thus, the suspicion cannot become the basis of addition [CIT vs. Indian Oil Corporation 159 ITR 956 (SC)].
7.2.7 Considering the above facts and submissions and the decision of the Hon’ble ITAT Delhi on the identical issue of LTCG on the sale of same script wherein it was held that since the assessee has fulfilled the twin conditions laid down under Section 10(38) of the Income Tax Act and the AO had made no reference of non-fulfilment of such conditions, the addition was deleted, I am of the considerate view that a transaction evidenced by payment / receipt of share transaction value through banking channel and transfer of shares through demat account through online trading platform after payment of STT cannot be treated as bogus transaction. Further the Assessing Officer has not carried out any investigation of the facts of the case which are specific to the appellant. There is nothing on record from the market regulator SEBI which establishes the dubious status of the scrip of Capital Trade Link Ltd. and Alankit Limited, so as to hold the shares' sale transaction as bogus/accommodation entry by the Assessing Officer. At present also the scripts are active and being traded online in the share market. Capital Trade Link Ltd. has also declared dividend during the Financial Years 2017-18 and 2018-19 and Alankit Ltd. has also regularly dividend from the FY 2014-15 to 2021-22. Therefore, it has been held Deepti Agrawal (AY: 2017-18) that the assessing officer is not justified in making addition of Rs. 3,73,18,458/- on account of bogus LTCG u/s 10(38) of the IT Act, 1961 and thus the same is deleted. Accordingly, the grounds taken by the appellant are allowed.”
We find no reasons to interfere in the findings of ld. CIT(A) which are based on a undisputed fact that the AO himself has mentioned that Alankit Limited is a leading e-Governance Service Provider of India and further, there is no findings that the assessee has booked the capital gain in connivance with the promoters of the company.
In the light of the aforesaid we find no substance in the grounds as raised and the appeal of the revenue is dismissed.
Order pronounced in the open court on 12.12.2025