Shri Ajay Gupta vs DCIT, Circle 6 (2)

“1.

That the order passed by the Hon'ble CIT(A) upholding the order of the Ld. AO is bad in law and on the facts in assessing income at Rs.2,84,35,150/- as against Rs.l,02,10,430/- income declared by the Appellant.

2.

That the Hon'ble CIT(A) has erred in law and on the facts while upholding the addition of Rs.1,03,37,458/- by the Ld. A.O under section 68 of the Income Tax Act, 1961 on the purchase and sale of shares of M/s CCL International Ltd. as non-genuine Long Term Capital Gain and unexplained cash credit without properly considering and appreciating the supporting documents placed on record and just on the basis of surmises, conjectures and presumptions and without independent application of mind.

3.

That the Hon'ble CIT(A) has erred in law and on facts in confirming the disallowance of exemption claimed under section 10(38) of Rs.95,57,458/- in respect of Long Term Capital Gain earned on the sale of shares of M/s CCL International Ltd. which are listed equity shares and sold through recognized stock exchange and which has been duly subjected to security transaction tax (S.T.T.).

4.

That the Hon'ble CIT(A) has erred in law and on the facts while upholding the addition of Rs.2,87,269/- by the Ld. A.O under section 69C of the Income Tax Act, 1961 being 3% of the total LTCG i.e. of Rs.95,57,458/- on the basis that the transaction were carried out on commission basis without having any direct material on record and just on the basis of surmises, conjectures and presumptions which amounts to borrowed satisfaction. .

5.

That the Hon'ble CIT(A) and the Ld. A.O have erred in law and on facts by not providing the Appellant or confronting the Appellant with the substantive part or portions of the report by Directorate of Investigation, Kolkata and with an opportunity to cross examine the source of evidence or any statement recorded of any person or evidence collected behind his back even after request and inclusion in written submissions before the Ld. A.O and Hon'ble CIT(A), which renders the Assessment void and also-violates the cardinal principles of natural justice. The statement recorded of any person or evidence collected behind Assessee's back has no evidentiary value as:

•

These statements cannot bind Assessee, who was not subject matter of any parallel survey operation,

•

These statements are pre-existing as were recorded by investigation wing and no where independently re-examined by the Ld. Assessing Officer,

•

The Assessee had never made the transaction through person whose statements were recorded and relied.

6.

That the Hon'ble CIT(A) has erred in law and on facts in sustaining the action of Ld A.O in making addition of Rs.1,03,37,458/- without appreciating that basis of findings of the lower authorities is "suspicion" and "human probabilities" only which was never converted to reliable and trustworthy material and the entire Assessment order is passed on sole basis of "borrowed satisfaction" and without independent application of mind and also the burden to prove that transaction is bogus/sham has remained un-discharged from revenue's side.

7.

That the Hon'ble CIT(A) has erred in law and on the facts in confirming the disallowance of deduction of Rs.1,00,000 claimed u/s 80C of the Income Tax Act, 1961 irrespective of documents submitted in support of the above amount i.e. Rs.1,00,000 .

8.

That the Hon'ble CIT(A) has erred in law and on the facts in upholding the subject additions without appreciating that the modus operandi relied extensively in impugned order is never co-related even remotely to the facts of the present case as there is no iota of evidence brought on record which can display that the Appellant herein has inducted certain cash at the time of sale to certain identified brokers/ middlemen/ syndicate members who has in turn introduced certain identified artificial paper company for alleged parking of said cash to buy the shares sold by the Assessee, which theoretical trail has remained inchoate completely nullifying the entire basis of addition.

9.

Thai the Hon'ble CIT(A) has erred in law and on facts by upholding the addition of Rs.75,00,000/- made by the Ld. AO under section 68 of the Income Tax Act, 1961, on account of genuine unsecured loans taken, without properly appreciating the supporting or additional documents placed on record on earlier occasion and also with submission dated 15.01.2018 just on the basis of surmise, conjecture and presumptions without independent application of mind.

10.

It is axiomatic that the order passed by the Hon'ble CTT(A) and the Ld. Assessing Officer is against the Principle of Natural Justice and cause undue hardship to the Appellant.”

1.

It is submitted that the appellant filed his return of Income for the year under consideration on 01.09.2015 by declaring income of Rs.1,02,10,430/-.

2.

It is submitted that appellant purchased 20,000 shares of M/s CCL International Ltd. on 26.03.2013 from M/s Drishti Textile P. Ltd. for a consideration of Rs.7,80,000/- and the same has been paid through the banking channel.

3.

It is submitted that the appellant has sold the shares of M/s CCL International from 07.10.2014 to 15.12.2014 by holding them more than one year, a tabulated chart of the sale is at page 2 of the assessment order.

4.

It is further submitted that the appellant has duly enclosed the long term capital gain in his return of the income and claimed exemption u/s 10(38) of the Act (pages 8-9 of paper book).

5.

It is submitted that the appellant's case was selected for scrutiny and on 21.09.2016 notice u/s 143(2) of the Act was issued to the appellant for the main reason of "Suspicious sale transaction in shares and exempt long term capital gains in return" (page 1 of the assessment order).

6.

It is submitted that the learned Assessing officer solely relied upon the "Findings of the SEBI and investigation wing report" and failed to comment any adverse observation of any involvement of the appellant with the operator or with the exit providers.

7.

It is evident and apparent that observations of learned Assessing Officer are in the shape of allegations in the nature of suspicion with predetermined approach to willingly deny the claim made by appellant.

8.

It is submitted that the issue involved herein is no longer res integra in view of the decisions of the Tribunals and High courts, reliance is placed on the following:

(i)

ITA No. 5418/D/2018 dated 20.12.2024 Rachna Gupta vs. ACIT

ii) ITA No. Jyoti Gupta dated 06.11.2024 Jyoti Gupta vs. ACIT (pages 32-42 of CLC)

iii) ITA No. 944/D/2025 dated 02.04.2025 Kavya Satija vs. DCIT (pages 58-67 of CLC)

iv) ITA No. 2116/D/2024 dated 16.05.2025 ITO vs. Nupur Garg (pages 68-73 of CLC)

v)

ITA No. 971/Chd.l2024 dated 23.06.2025 Avi Aggarwal vs. ITO (pages 74-84 of CLC)

vi) ITA No. 3670/D/2023 dated 22.08.2025 Late Sh. Om Parkash Sethi vs. ACIT (pages 85-92 of CLC)

vii) ITA o. 16911D12019 dated 07.10.2019 Reeshu Goel vs. ITO (pages 1-11 of CLC), which was upheld by the Hon'ble Delhi High Court in ITA No.173/2021 dated 14.12.2021 (pages 12-14 of CLC)

“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?"

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.”

“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.

9.

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.

10.

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.

12.

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.

13.

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.

14.

In this view of the matter, no question of law, much less a substantial question of law arises for our consideration.

15.

Accordingly, the present appeals are dismissed.”