Smt. Neelam Devi vs ITO Ward-1

“1.

That order passed u/s 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Learned Assessing Officer in resorting the provisions of Section 147.

2.

That Learned CIT(A) was not justified to hold that the assessment framed was a valid assessment by violating the mandatory statutory requirements of issue a notice u/s 143(2) OR granting an reasonable opportunity of hearing to the appellant.

3.

That Learned CIT(A) further gravely erred in upholding the addition of Rs. 1,07,79,380/- made by the Learned Assessing 3 Officer by treating sale proceeds of equity shares as non-genuine long-term-capital gain which were claimed as exempt u/s 10(38) of the Act.”

(B) Facts in brief

(1)

The brief facts of the case are that search proceedings u/s 132 of the Act were conducted on "PMC Fincorp Group" on 11.10.2018. As per the department, the said scrip/share is merely a "penny stock" whereby the transactions executed by the Appellant of trading in the same are merely bogus/sham transaction. Based on the said information. re-assessment proceedings were initiated against the Appellant. The basis of formation of belief against the Appellant is only the information received from Investigation Wing which again is general in nature and does not implicate the Appellant in any manner.

(2)

Before issuing the notice initiating re-assessment proceedings, no independent provided by the Investigation Wing simpliciter without any application of mind thereto or enquiry was conducted by the Ld. Assessing Officer. He only relied on the information even attempting to analyse the same.

(3)

The Ld. Assessing Officer in the Dissemination Note in the case of PMC Fincorp Limited (date of search 11.10.2018) provided the list of allottees to whom equity shares of the company had been allotted during the period from 2004 to 2015. The list contains the name of 96 persons, which does not have the name of the Appellant.

(4)

All findings of the Ld. AO are based on the search carried out in the case of M/s PMC Fincorp Limited and the statements given by Rajkumar Modi, Manish Gupta, Pramod Gupta and Vishnu Bhagwan Aggarwal during the course of the said proceedings. However the name of Appellant does not appear in any of the statements of the above stated persons. There is no evidence of any form to implicate the Appellant by even suggesting that the long-term capital gains earned by her was bogus

(C) Appellants submission before Hon'ble Bench

(1)

In the instant case Appellant purchased 30000 equity shares of M/s PMC Fincorp Limited @ Rs 10.50 each for a consideration of Rs 3,15,000/- and made the payment for the same on 05.03.2010 vide Ch No 584250 dated 05.03.2010 drawn on bank account maintained with Bank of Baroda (Refer page no 98 of Paper Book. Subsequently 30000 bonus shares of the said company were also allotted to the Appellant.

(2)

The Appellant purchased the shares of M/s PMC Fincorp Limited through a registered broker

(3)

These shares were subsequently sold in two instalments viz. during the Financial Year 2013-14 for Rs 1,34,48,002/- and in the financial year 2014-15 for Rs 1,07,79,380/-through a registered broker. Copy of ledger account of the registered broker is enclosed. The shares were traded through a recognised stock exchange and Securities Transaction Tax was duly paid on the same. The sale consideration for sale of shares was received in bank account maintained with State Bank of India.

(4)

The counsel of the Appellant, during the assessment proceedings, specifically asked for the cross examination of the concerned persons the statements of whom were relied upon by the Ld. Assessing officer. However, at no point of time the opportunity for same was provided to the Appellant. The said Act of the Ld. Assessing Officer is gross violation of principles of natural justice thereby rendering the proceedings to be void ab-initio. For this Ld. AR of the Appellant heavily relied on the judgement of Hon'ble Supreme Court in the case of M/s Andaman Timber Industries vs Commissioner of Central Excise, Kolkatta -II [2015] 62 taxmann.com 3 (SC) and in the case of PCIT vs. Hadoti Punj Vikas Ltd. [2023] 157 taxmann.com 193 (SC).

(5)

The counsel of the Appellant duly relies on the judgement dated 25.03.2026 passed by the Coordinate Bench in the case of Sh. Harish Chourasia in ITA No 3033/Del/2025 for A/Y 2013-14 wherein the issue of sale of shares of M/s PMC Fincorp Ltd was duly discussed and an addition made on similar grounds was deleted. The Ld. AR also submitted that the facts of the matter in the present appeal are pari materia to the case of Sh. Harish Chourasia in ITA No 3033/Del/2025. Para 16 and 17 of the said order clearly concluded that capital gains declared from the sale of shares of PMC Fincorp Ltd. is genuine and not a sham transaction.

(6)

Further the order of Securities and Exchange Board of India against M/s PMC Fincorp Limited and the order of Securities Appellate Tribunal was also relied upon wherein the impugned order of SEBI was quashed.”

“9.

We observed that the assessee during the course of assessment proceedings has filed all the plausible evidences and details to establish the genuineness of the purchases and sales of shares of PMC which includes the copies of hills for purchases of shares, copies of the bank statements showing relevant entries of payment of purchase consideration through banking channel were also filed before the AO. Besides this, copies of the Demat account statements and copies of all the contract notes and sale invoices regarding sale of shares on various on dates were also filed along with copies of the statements of account of the assessee in the books of broker. Further the assessee filed the copies of the bank statement showing the receipts of sale proceeds. The AO failed to controvert all these evidences filed by the assessee nor any contrary material except the so called statements, was brought on record to hold these details as invalid. It is further observed that nowhere in the statements recorded of Raj Kumar Modi and Manish Gupta, they stated the name of the assessee nor admitted providing any accommodation entry alleged bogus long term capital to the assessee. We further observed that the Security Appellate Tribunal had quashed the order passed by the SEBI in case of PMC Fincorp Ltd wherein the company was charged guilty of price rigging of its share price to benefit to its shareholders for bogus LTCG and, therefore, the allegations and conclusions drawn of bogus LTCG by the AO based on the said order of SEBI has no legs to stand.”

“17.

In view of the above discussion, and by respectfully following the decisions of hon'ble Apex court and of jurisdictional high court stated herein above, we are of the considered opinion that long term capital gain declared by the assessee from sale of shares of PMC Fincorp Ltd. of Rs. 13,47,01,513/- is genuine and, accordingly, addition made and uphold by Id. CIT(A) is hereby deleted. Once we hold the transaction of sale of shares of PMC as genuine transactions, there is no occasion to allege that assesse has paid commission to obtain such long term capital gain and, accordingly, the addition made of Rs.26,94,030/- u/s 69C of the Act is also deleted Accordingly, all the Grounds of appeal taken by the assessee are allowed.”