BIJOY KUMAR AGARWAL,RANCHI vs. ACIT/DCIT CENTRAL CIRCLE-1, RANCHI

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH-RANCHI VIRTUAL HEARING AT KOLKATA Before Shri Sonjoy Sarma, Judicial Member andShri Ratnesh Nandan Sahay, AccountantMember I.T.A. No.310/Ran/2025 Assessment Year: 2011-12 Bijoy Kumar Agarwal….…………….…….…............................……….……Appellant Flat 1402, 4th Floor, Shree Block Shree Ram Garden, Kanke Road, Ranchi, Jharkhand – 834008. [PAN: ADBPA6754D] vs. ACIT/DCIT, CC-1, Ranchi......……….…..….........……........……...…..…..Respondent Appearances by: Shri Devesh Poddar, Adv.,appeared on behalf of the appellant. ShriSunit Dasgupta, Sr. DR,appeared on behalf of the Respondent. Date of concluding the hearing :December 18, 2025 Date of pronouncing the order : 06/01/2026 ORDER PerSonjoy Sarma, Judicial Member: This appeal filed by the assessee is directed against the order of the CIT(A)-3, Patna (hereinafter referred to as “CIT(A)”) dated 30.07.2025 passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). 2. Brief facts of the case are that the assessee filed his return of income for the Assessment Year 2011–12 declaring a total income of ₹5,56,050, showing income from salary and house property. The assessee also declared Long-Term Capital Gain of ₹30,55,833, claimed as exempt, arising from sale of equity shares on which Securities Transaction Tax (STT) was paid. The case was reopened under section 147 of the Income-tax Act, 1961 on the basis of information received through a list forwarded from the PMO/Investigation Wing, alleging that certain beneficiaries had earned bogus LTCG through penny stock

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transactions, including transactions in the scrip of Global Capital Market Ltd. Notice under section 148 was issued, in response to which the assessee filed a return declaring the same income as originally returned. During the reassessment proceedings notice under section 143(2) was issued. The assessee filed detailed replies along with computation of income, contract notes, demat statements, bank statements,details of investments, broker bills and notes. notices under section 133(6) were issued to Bombay Stock Exchange, National Stock Exchange, Concerned brokers. Despite the above, the AO treated the LTCG of ₹30,55,833 as bogus, holding that the transaction was part of a pre-arranged penny stock scheme, and added the same to the total income. 2. Aggrieved by the order of the Assessing Officer, assessee preferred an appeal before the Ld CIT(A). Where the ld. CIT(A) sustained the addition made by the AO. While doing so, the ld. CIT(A) relied upon certain decisions of non-jurisdictional High Courts and Tribunal orders passed against the assessee in penny stock matters. However, the ld. CIT(A) did not follow the binding decision of the jurisdictional High Court, despite the assessee specifically relying upon the same. 3. Dissatisfied with the order of the Ld. CIT(A) assessee is in appeal before this tribunal. At the time of hearing, the learned Authorised Representative (AR) of the assessee submitted that the assessee had fully discharged the onus cast upon him under the Act by submitting the purchase and sale of shares which were purchase through recognised stock exchanges, supported by contract notes, reflected in demat account, routed through banking channels and are subject to STT. It was submitted that no material was brought on record to show that the assessee paid any unaccounted money and the transaction was sham or

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accommodation entry.The learned AR placed strong reliance on the jurisdictional Jharkhand High Court decision in CIT vs. Arun Kumar Agarwala (HUF) ITA No. 04 of 2011, judgment dated 13.07.2012 wherein it was held that LTCG arising from sale of shares cannot be treated as bogus merely on suspicion, once documentary evidences are produced and are not disproved by the Revenue.It was argued that the ld. CIT(A) was bound to follow the jurisdictional High Court decision, ignoring the same renders the appellate order bad in law. 4. On the other hand the Ld. DR relied upon the orders of the lower authorities. It was submitted that penny stock transactions have been held to be bogus in several cases. The surrounding circumstances justified the addition. 5. We after hearing the rival submission of the parties and perusing the material available on record, we find that it is a settled principle of law that decisions of the jurisdictional High Court are binding on all authorities subordinate to it. In the present case, the assessee specifically relied upon the decision of the Hon’ble Jharkhand High Court in CIT vs. Arun Kumar Agarwala (HUF), which deals with identical facts and issues. While passing the impugned order the ld. CIT(A) has neither distinguished the said judgment nor demonstrated how it is inapplicable to the facts of the present case. Ignoring a binding jurisdictional High Court judgment and relying upon contrary non- jurisdictional decisions is impermissible in law. Accordingly, we find that the assessee has produced purchase bills, sale contract notes, demat account statements, bank statements evidencing receipt of sale consideration, proof of payment of STT. The AO has not disputed the documents, nor has he established that the documents are false, the transactions are manipulated, any cash was exchanged. The addition

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has been made merely on the basis of general investigation reports, third-party information, suspicion surrounding penny stocks. Suspicion, however strong, cannot take the place of evidence.In view of the binding judgment of the Hon’ble jurisdictional High Court, and in absence of any adverse material disproving the assessee’s evidences, we hold that the LTCG declared by the assessee is genuine, the addition of ₹30,55,833 is unsustainable in law.Accordingly, the addition made by the AO and sustained by the ld. CIT(A) is deleted.

Sd/- Sd/- [Ratnesh Nandan Sahay] [Sonjoy Sarma] Accountant Member Judicial Member

Dated:.06/01/2026. RS Copy of the order forwarded to: 1. Appellant 2. Respondent 3. CIT(A)- 4. CIT- , 5. CIT(DR),

//True copy// By order Assistant Registrar, Kolkata Benches