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Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
Before: SHRIS.RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
(Assessment Year: 2016-17) Udita Gupta, vs. ACIT, Central Circle 29, 43/1, Rajpur Road, Civil Lines, Delhi. Delhi – 110 054. (PAN : ADVPA9481B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Saubhagya Agarwal, Advocate REVENUE BY : Shri Ajay Kumar Arora, Sr. DR Date of Hearing : 27.10.2025 Date of Order : 12.11.2025 O R D E R
PER S.RIFAUR RAHMAN, AM:
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax Appeals-30, New Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 21.09.2024 for Assessment Year 2016-17.
2. Brief facts of the case are, the case of the assessee was picked up for limited scrutiny and during the assessment proceedings, the assessee’s claim of earning capital gain amounting to Rs.57,11,085/- & Rs.46,95,755/- from sale of shares of M/s Yamini Investment Pvt. Ltd. and M/s. Goenka Business & Finance Ltd. totaling Rs.1,04,06,840/- were examined. The Assessing Officer has found the claims to be not genuine and considered these scrip to be penny stock and disallowed the claim making addition u/s 68 of the Income-tax Act, 1961 which was sustained by Ld. CIT(A).
3. Aggrieved by the order of ld. CIT (A), assessee is in appeal before us raising following grounds of appeal :-
1. That on the facts and circumstances of the case and provisions of law, the order passed by the Ld. CIT (A) under section 250 of the Act is bad both in the eyes of law and on facts.
2. That on the facts and circumstances of the case and the provisions of the law, the Ld. CIT(A) has failed to appreciate that the assessment order passed u/s 147 is illegal, bad in law and without jurisdiction. 3 That on the facts and circumstances of the case and the provisions of the law, the La. CIT(A) has failed to appreciate that the approval u/s 151 is illegal, bad in law and without application of mind and consequently the assessment order passed requires to be quashed. 4 That On the facts and circumstances of the case, the Ld. CIT(A) has failed to appreciate that the assessment order being passed in violation of the principle of natural justice by not providing opportunity for cross examination of persons, whose statements have been relied upon by the AO, in spite of specific request made by the appellant in assessment proceedings as well as before CIT(A) and without giving adequate time and opportunity to the assessee to represent its case. 5 On the facts and circumstances of the case, the learned Ld. CIT (A) 30, New Delhi has erred, both on facts and in law, in sustaining the assessment of the appellant at income of Rs.1,37,65,870/- as against the income of (Rs.33,59,030/-) declared by the appellant. 6 That the Ld. CIT(A) has erred, both on facts and in law, in sustaining the addition of Rs.l,04,06,840/- 147 on account of L TCG on sale of shares without appreciating the facts of the case. 7 That the Ld. CIT(A) has erred, both on facts and in law, enhancing the income by of Rs.5,20,342/- on account of alleged notional commission @ 5% paid for arranging the accommodation entries. 8 That the provisions of sections 234A, 234B and 234C of the Act are not at all applicable.
9. That the impugned appeal order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.
4. With regard to two scrip involved i.e. M/s Yamini Investment Pvt. Ltd. and M/s. Goenka Business & Finance Ltd., the Ld. AR has relied on the decision of the Co-ordinate Bench in the case of Rachna Gupta vs. ACIT in & 2531/Del/2022 for Assessment Years 2015-16 & 2016-17 respectively whereby vide order dated 20.12.2024, the Co-ordinate Bench, in which present Bench is also in quorum, has also taken in consideration scrip, M/s Yamini Investment Pvt. Ltd. and M/s. Goenka Business & Finance Ltd. in AY 2016-17 and benefited the assessee holding that transactions of the assessee are not tainted. The Ld. AR has pointed out that Rachna Gupta is in fact related to the assessee Udita Gupta and heavily relied on the decision of the coordinate Bench.
5. On the other hand, ld. DR of the Revenue relied on the orders of the authorities below.
6. Considered the rival submissions and material placed on record. Taking into consideration the contention of ld. AR, we are of the considered view that in the case of Rachna Gupta (supra), the Co-ordinate Bench vide order dated 20.12.2024 has taken into consideration two scrips i.e. M/s Yamini Investment Pvt. Ltd. and M/s. Goenka Business & Finance Ltd. in AY 2016- 17. In paras 9 to 13, all the aspects have been examined to benefit the said assessee and the findings certainly apply mutatis mutandis to the case of assessee also. For the sake of brevity, findings in para 9 to 13 in the case of Rachna Gupta (supra) are reproduced as under:- 9. 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 and through share transfer from other party, subsequently, sold the same in the stock exchange. However, there is no 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 beneficiaries in these 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?"
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.
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. 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.
The appeal is devoid of merits and it is dismissed with no order as to costs.”
10. 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 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.
11. 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. 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 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.
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.”
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 scrips 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 grounds raised by the assessee are allowed.
12. In the result, appeal filed by the assessee is allowed.
13. With regard to appeal for AY 2016-17, since the facts are exactly similar except change in scrips bought and sold by the assessee i.e. Yamini Investment Pvt. Ltd. and Goenka Business & Finance Ltd. to AY 2015-16 our above findings in AY 2015-16 are applicable mutatis mutandis in AY 2016-17. Accordingly, the appeal being for AY 2016-17 filed by the assessee is allowed.”
In the light of the aforesaid discussion, we are inclined to allow the grounds raised
by the assessee.
8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 12TH day of November, 2025.