ITAT deletes addition for Long Term Capital Gain from shares of Pine Animation Ltd.

ACIT Vs Priyanka Ankit Miglani (ITAT Mumbai)

Introduction: The ITAT Mumbai ruling in the case of ACIT Vs Priyanka Ankit Miglani delves into the intricate matters surrounding long-term capital gains (LTCG) derived from the sale of shares and the application of Section 10(38) of the Income Tax Act. The appeal arises from the assessment order passed by the Deputy Commissioner of Income Tax, Central Circle 5(4), Mumbai, against the decision of the Commissioner of Income Tax (Appeals)-53, Mumbai.

Detailed Analysis: The crux of the matter revolves around whether the long-term capital gains claimed as exempt under Section 10(38) were rightfully denied by the Commissioner of Income Tax (Appeals) and the subsequent justification of deleting the addition made by the assessing officer. The case presents a scenario where the Revenue challenges the authenticity of the long-term capital gains arising from the sale of shares of Pine Animation Ltd.

The assessing officer contended that the shares in question were categorized as penny stocks and the gains derived from their sale were therefore considered as bogus. This assertion was supported by references to third-party statements and an interim order by SEBI highlighting price manipulation in the shares of Pine Animation Ltd. However, the appellant provided substantial documentary evidence, including purchase and sale details, demat statements, and compliance with tax regulations, to support the genuineness of the transactions.

The ITAT Mumbai meticulously analyzed the evidence presented by both parties. It highlighted the lack of conclusive evidence linking the appellant to any fraudulent activities or price manipulation schemes. Moreover, the final order by SEBI, absolving the appellant of any wrongdoing, significantly influenced the tribunal’s decision.

Conclusion: In conclusion, the ITAT Mumbai ruled in favor of the appellant, Priyanka Ankit Miglani, emphasizing the importance of substantiating claims with concrete evidence. The case underscores the significance of thorough investigations and adherence to legal procedures in tax assessments. This ruling provides valuable insights into the interpretation and application of tax laws concerning capital gains from share transactions, ensuring fairness and transparency in tax administration.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

ITA No. 2531/Mum/2021(AY:2015-16),2530/Mum/2021  (AY:2014-15) & CO No.91/Mum/2022 (Arising out of ITA No.2530/Mum/2021 (AY: 2014-15)

These appeals in ITA No. 2531/Mum/2021 & 2530/Mum/2021 & CO No.91/Mum/2022 for A.Yrs.2015-16 & 2014-15 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in appeal Nos.CIT(A)-53, Mumbai/10005/2017-18 & CIT(A)-53, Mumbai/10002/2017-18 dated 04/09/2020 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) & 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2017 & 23/03/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 5(4), Mumbai (hereinafter referred to as ld. AO).

ITA No. 2533/Mum/2021(AY:2015-16),2532/Mum/2021  (AY:2014-15) & CO No.95/Mum/2022 (Arising out of ITA No.2532/Mum/2021 (AY: 2014-15)

These appeals in ITA No. 2533/Mum/2021 & 2532/Mum/2021 & CO No.95/Mum/2022 for A.Yrs.2015-16 & 2014-15 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in appeal Nos.CIT(A)-53, Mumbai/10003/2017-18 & CIT(A)-53, Mumbai/10001/2017-18 dated 07/09/2020 & 04/09/2020 respectively (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) & 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 5(4), Mumbai (hereinafter referred to as ld. AO).

ITA No.2528/Mum /2021(Assessment Year :2015-16)

This appeal in ITA No. 2528/Mum/2021 for A.Yr.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in appeal Nos.CIT(A)-53, Mumbai/10004/2017-18 dated 07/09/2020 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 5(4), Mumbai (hereinafter referred to as ld. AO).

ITA No.2529/Mum/2021(Assessment Year :2015-16)

This appeal in ITA No. 2529/Mum/2021 for A.Yr.2015-16 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-53, Mumbai in appeal Nos.CIT(A)-53, Mumbai/10006/2017-18 dated 07/09/2020 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2017 by the ld. Dy. Commissioner of Income Tax, Central Circle 5(4), Mumbai (hereinafter referred to as ld. AO).

2. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon’ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication.

3. Though the assessee has raised several grounds before us, we find that the effective issue to be issued in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition made by the ld. AO by denying the exemption claimed u/s 10(38) of the Act in respect of long term capital gain derived from sale of shares of Pine Animation Limited (earlier known as Four K Animation Ltd) , in the facts and circumstances of the case. The inter connected issue involved therein to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition made by the ld. AO on account of estimated commission expenditure as unexplained u/s 69C of the Act in the facts and circumstances of the case.

4. We have heard the rival submissions and perused the materials available on record. The brief facts of this issue are that the assessee is an individual deriving income from capital gains and income from other sources. The assessee is a regular investor in shares of various companies as is evident from the demat statements placed on record. The return of income was electronically filed for the A.Y. 2015-16 u/s.139(1) of the Act on 31/08/2015 showing total income of Rs 3,64,760/-. The ld. AO observed that during the A.Y. 2015-16, the assessee had sold the shares of Pine Animation Ltd (formerly known as Four K Animation Ltd) and claimed the long term capital gains thereon as exempt u/s 10(38) of the Act in the return of income. In the opinion of the ld. AO, the said scrip of Pine Animation Ltd is categorised as Penny Stock and hence the long term capital gains derived from sale of such scrip is to be treated as bogus. Accordingly, the ld. AO sought to examine the purchase and sale details of those shares from the assessee. The details of purchase and sale of shares together with the respective date, number of shares, mode of payment for purchase of shares, name and address of the broker through the shares were sold in recognised stock exchange and computation of long term capital gains were duly furnished by the assessee before the ld. AO. The entire details in this regard are captured in the following table hereinbelow:-

PRIYANKAMIGLANI
PAN No:ARIPS3477L
Assessment Year: 2015-16

PRIYANKA MIGLANI
Assessment Year: 2015-16
PAN No: ARIPS3477L
Computation of Long Term Capital Gain;

4.1. The assessee had applied for preferential allotment of 425000 equity shares of Pine Animation Ltd of the face value of Rs 10 each and the assessee had made payment of Rs 42,50,000/- vide Cheque No. 189312 dated 07.12.2012 of Punjab and Maharashtra Co-operative Bank (PMC Bank) Ltd and the shares were allotted and transferred in the name of the assessee. These shares were duly dematted by the assessee on 04.02.2013. Thereafter, on 20/05/2013, the face value of the shares were split from Rs 10 to Re 1 per share and thus the assessee holding of 425000 shares got increased to 4250000 shares. During the A.Y. 2014­15, the assessee sold 1200000 shares and in A.Y. 2015-16 , the assessee sold 961000 shares. The balance 2089000 shares are still lying with the assessee as is evident from the holding statement submitted by the ld. AR as on 27.02.2023. The assessee has sold 961000 shares between 10.04.2014 to 12.12.2014 on BSE through the broker namely Destimoney Securities Pvt Ltd for a consideration of Rs 7,86,28,300/-. During the year under consideration, the assessee earned Long Term Capital Gains (LTCG) of Rs 7,74,80,198/- on sale of shares of Pine Animation Ltd, which has been claimed as exempt u/s 10(38) of the Act. It is not in dispute that the shares of Pine Animation Ltd were purchased by the assessee as per the decision and guidance of Shri Rajinder Miglani, father in law of the assessee and he is the main person in the family who takes investment decisions on behalf of the entire family. Shri Rajinder Miglani in his statement recorded by the investigation wing had stated that he was advised by one of his friend Shri Rajkumar Surekha to invest in the preferential issue of shares of Pine Animation Ltd. The ld. AO had made reference to various third party statements such as Shri Anuj Agarwal, Shri Jagdish Prasad Purohit, Shri Rajkumar Kedia, Shri Soumen Sen and Shri Subrata Haldar, which are referred to by the investigation wing to come to conclusion that the company Pine Animation Ltd was penny stock and used for price manipulation so as to benefit certain people who were part of it to convert their undisclosed income into tax free money in their books. Shri Jagdish Prasad Purohit was called by the ld. AO for cross-examination by the assessee, however, he did not appear and sought adjournment wherein he has communicated to the ld. AO that he has no relation directly or indirectly with the assessee. The ld. AO has relied upon SEBI’s interim order dated 08.05.2015 in the case of Pine Animation Ltd whereby it is noted that price manipulation in scrip of Pine Animation Ltd was done so as to arrange entry of bogus LTCG to various beneficiaries. The name of the assessee figured in this interim order of SEBI as one of the beneficiaries. The ld. AO by referring to the decisions of Hon’ble Supreme Court in the case of Mcdowell & Co, Sumati Dayal vs CIT in 214 ITR 801 (SC) and Durgaprasad More vs CIT in 82 ITR 540 (SC). The detailed reasoning given by the ld. AO are reflected in pages 14 to 19 of the assessment order vide para 4.1 to 4.11, which are not reproduced herein for the sake of brevity. Thus, considering all the materials on record, the ld. AO had made addition u/s 68 of the Act as LTCG on sale of shares of Pine Animation Ltd was not found genuine and it was an arranged transaction to bring in unaccounted money in the books of accounts. The ld. AO has made addition u/s 69C of the Act in respect of unexplained commission expenditure allegedly paid to entry operators to arrange for alleged bogus LTCG.

4.2. It is not in dispute that the assessee furnished the following documents in support of his contentions before the lower authorities :-

a) Copy of offer letter by Pine Animation Ltd for issue of preferential allotment of shares.

b) Complete details of bank accounts held by the assessee together with the bank statements evidencing the payments made for purchase of shares and sale proceeds credited in the bank account for sale of shares.

c) Payments made by account payee cheques for purchase of shares and investment made in shares were duly reflected in the books of accounts of the assessee in the year of purchase.

d) Copy of letter dated 04.02.2013 by Pine Animation Ltd intimating that the shares have been allotted to the assessee on 13.12.2012.

e) Copy of Demat statement of the assessee of February 2013 showing inward entry of shares of Pine Animation Ltd.

f) Copy of details of investments as on 31.03.2015 of the assessee showing investment in the shares of Pine Animation Ltd among others.

g) Documentary evidences for Sale of shares of Pine Animation Ltd from 10.04.2014 onwards to Dec 2014 in the form of (a) Registered Share Broker’s Contract Notes ; (b) Copy of Demat account evidencing debit (outward entries) of sold shares ; (c ) Copy of Bank statement showing amounts received from the share broker in respect of shares sold and (d) Details of Securities Transaction Tax (STT) paid on sale of shares through recognized stock exchange in BSE Platform.

h) Details of long term capital gains earned by the assessee.

4.3. There was an Ad Interim Ex-parte order dated 08.05.2015 passed by SEBI in case of Pine Animation Ltd wherein it was alleged that the LTCG earned by various allottees on preferential basis were not genuine. The assessee’s name being preferential allottee, was also included in the said order. Accordingly, the said company i.e Pine Animation Ltd and the assessee together with various other parties were restrained from accessing the securities market and buying, selling or dealing in securities, either directly or indirectly, in any manner by SEBI, till their final investigation was completed. However, on completion of final investigation, the SEBI has passed a final order dated 19/09/2017 where it has been held that investigations did not find any adverse evidence/findings in respect of violation of provisions of SEBI (Prohibition of Fraudulent and unfair Practices relating to Securities Market) Regulations, 2003 in respect of 114 persons including the assessee herein, eventhough the scrip of Pine Animation Ltd was manipulated by some operators whose names have been duly listed in the said order. This final order of SEBI dated 19/09/2017 was also placed on record by the assessee before the ld. CIT(A).

4.4. The ld. CIT(A) deleted the additions made by the ld. AO by appreciating the contentions of the assessee together with the documentary evidences thereon, especially the final SEBI order dated 19.09.2017, wherein the assessee was duly discharged by SEBI as not to be involved in the price manipulation of scrip of Pine Animation Ltd. The ld. CIT(A) also placed reliance on various decisions of Hon’ble High Courts including the decisions of Hon’ble Jurisdictional High Courts to support its view. The ld. CIT(A) also relied on the co-ordinate bench decision of this tribunal in the case of Vijayrattan Balkrishan Mittal in ITA No. 3248/Mum/2019 dated 01.10.2019 which was rendered in the context of sale of shares of Pine Animation Ltd and stated that the facts in the present assessee’s case are exactly identical with facts prevailing in the case of Vijayrattan Balkrishan Mittal. Accordingly, the ld. CIT(A) deleted the addition made u/s 68 of the Act in respect of sale proceeds of shares of Pine Animation Ltd by treating the same as genuine. Consequently the addition made u/s 69C of the Act towards unexplained commission expenditure was also deleted by the ld. CIT(A).

5. We find that the ld. AO had relied on the findings of the investigation wing of Kolkata and an interim order dated 08.05.2015 passed by SEBI wherein assessee and the company Pine Animation Ltd were prevented from accessing the securities market either directly or indirectly in any manner whatsoever, till the completion of final investigation by SEBI. The main grievance of the ld. AO is that rise in share price of Pine Animation Ltd is devoid of commercial principle or market factors ; that transactions are based on mutual connivance on part of assessee and operators ; that assessee resorted to preconceived scheme to procure bogus long term capital gains and hence the transactions are not bonafide ; that SEBI also passed an interim order in the case of Pine Animation Ltd holding that share prices were determined artificially by manipulations ; that these are close circuit transactions and are pre-structured; that assessee had failed to discharge her onus cast on her ; that net worth of Pine Animation Ltd is negligible and that its share prices were artificially rigged ; that investigations prove that cash is routed through various accounts to provide these bogus long term capital gain entries. The ld. AO by making these observations proceeded to treat the sale proceeds of the shares as unexplained cash credit u/s 68 of the Act. Since the receipt of sale proceeds was treated as bogus, the ld. AO also proceeded to add estimated commission @ 6% on LTCG amount for arranging the said bogus transaction as unexplained expenditure u/s 69C of the Act.

5.1. At the outset, we find that the documentary evidences submitted by the assessee were found to be genuine and no adverse inferences were drawn by the ld.AO on the same. Infact the ld. AO had an occasion to examine the sme thrice – once during original assessment proceedings ; second during the first remand proceedings and third during second remand proceedings. Even in the remand reports, the ld. AO had not given any adverse comments or drawn adverse inferences on the documentary evidences submitted before him. The transactions were carried out by the assessee in the secondary market through a registered share broker at the prevailing market prices. Payments were received by the assessee by account payee cheques from the stock exchange through the registered broker. Amounts received on sale of shares were duly subjected to levy of Securities Transaction Tax (STT) at the applicable rates.

5.2. We find that no enquiries were carried out by the ld. AO either on the broker or with the stock exchange with regard to transactions carried out by the assessee. The ld. AO had merely relied on the Kolkata investigation report without linking the assessee with the various allegations leveled in the said investigation report.

5.3. We find that the ld. AO had not proved with any cogent evidence on record that assessee was involved in converting his unaccounted income into exempt long term capital gains by conniving with the so called entry operators and brokers who were involved in artificial price rigging of shares. No evidence is brought on record to prove that assessee was directly involved in price manipulation of the shares dealt by him in connivance with the brokers and entry operators.

5.4. It is not in dispute that the assessee had made purchase of shares in off-market through preferential allotment of shares by the concerned company. Now the next issue that arises for our consideration is as to whether an off market purchase of shares could be taken as a ground to declare the entire transaction as sham. In our considered opinion, the transactions could not be treated as sham merely because they are done in off-market, if the assessee had discharged his onus of proving the fact that shares purchased by him were dematerialized in the Demat account and held by the assessee till the same were sold from the Demat account of the assessee. The transaction of holding the shares are reflected in Demat account and sale of shares are through Demat account. More so , when there is no dispute regarding the purchase price and sale price of  shares. Our view is further fortified by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom) wherein it was held that –

“From the documents produced before the Court it was seen that the shares in question were, in fact, purchased by the assessees on the respective dates and the company had confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares of the respective buyer was also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates, as was seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions could not be a ground to treat the transactions as sham transactions.

On a perusal of those documentary evidences, the Tribunal had arrived at a finding of fact that the transactions were genuine. Nothing was brought to notice of the Court that the findings recorded by the Tribunal were contrary to the documentary evidences on record. Therefore, no substantial question of law arose from the order of the Tribunal.”

5.5. We find that independent enquiries were conducted by SEBI and SEBI had passed an interim order dated 08.05.2015 in the case of Pine Animation Ltd, wherein the assessee and Pine Animation Ltd together with some others, were restrained from accessing the securities market, either directly or indirectly in any manner whatsoever, till the final investigation by SEBI is completed. After completion of the final investigation, SEBI had passed a final order dated 19.09.2017 in the case of Pine Animation Ltd clearly acquitting 114 persons which admittedly included the assessee on the plea that they were not involved in artificial price rigging of shares. In the said order, SEBI had listed out the names and PAN of various persons who were involved in artificial price rigging of shares and the list of beneficiaries together with exit providers. Hence even SEBI does not allege any involvement of the assessee herein with the manipulation of share prices. The relevant operative portion of the SEBI order dated 19/09/2017 is reproduced hereunder:-

10. Considering the fact that there are no adverse findings against the aforementioned 114 entities with respect to their role in the manipulation of the scrip of PAL, I am of the considered view that the directions issued against them vide interim order dated May 08, 2015 which were confirmed vide Orders dated June 02,2016, July 05, 2016, August 22, 2016, and June 02,2017 need not be continued.

11. In view of the foregoing, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4) and 11B of the SEBI Act, hereby revoke the Confirmatory Orders dated June 02,2016, July 05, 2016, August 22, 2016, and June 02,2017 qua aforesaid 114 entities (paragraph 9 above) with immediate effect.

12. The revocation of the directions issued vide the abovementioned orders (at paragraph 11) is only in respect of the entities mentioned at paragraph 9 of this order in the matter of Pine Animation Limited. As regards remaining entities in the scrip of PAL, violations under SEBI Act, SCRA, PFUTP Regulations, etc., were observed and SEBI shall continue its proceedings against them. Hence, the directions issued vide Orders dated July 05, 2016, August 22, 2016, and June 02,2017 against the remaining 62 entities shall continue.

5.5.1. We find that the name of the assessee is reflected in Serial Number 38 which is part of 114 entities acquitted by SEBI, on whom clean chit has been given.

5.6. We find that the assessee had held the shares in the instant case for 16 months in the case of Pine Animation Ltd and then sold the shares in the open market at prevailing market prices. From the above order of SEBI , it is very clear that SEBI, based on its investigations and replies given by various parties, had ordered either to take action against certain parties or had acquitted certain parties on the ground that they are not involved in the price manipulation. In any case, the assessee has been duly discharged by SEBI on the ground that she is not involved in price manipulation of scrip of Pine Animation Ltd. Hence it could be safely concluded that the assessee herein is merely a gullible investor, who had resorted to make investment in the shares of Pine Animation Ltd based on market information through the guidance of her father in law Shri Rajinder Miglani and had sold the shares in the secondary market in prevailing market prices. It is not the case of the ld. AO that assessee herein had directly sold the shares in the secondary market with clear knowledge of the name of the person to whom the said shares were sold. In secondary market transactions, the buyer and seller are not supposed to know each other unless it is a case of ‘block deals’. Same is the case of the assessee herein. Admittedly, the assessee’s case does not fall under the category of ‘block deals’.

5.7. We find that one of the findings of the ld. AO in page 3 of his order is that assessee does not have elaborate experience in share trading and that the isolated investment made by the assessee is in Pine Animation Ltd. This is factually incorrect as assessee has been regular in making investments in various scrips which is evident from the demat statement furnished on record by the assessee. Hence the observation made by the ld. AO in this regard is dismissed as factually incorrect. Moreover, the father in law of the assessee Shri Rajinder Miglani had in his statement recorded by the investigation wing had stated that all the investments in shares on behalf of the family members were carried out by him and that those investments were made based on inputs received from known friends and market information.

5.8. Hence the entire addition has been made merely by placing reliance on the Kolkata Investigation Wing report which are more general in nature and does not implicate the assessee herein in any manner whatsoever. We are unable to persuade ourselves to accept to the
contentions of the ld. DR that Kolkata Investigation Wing had conducted a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss. Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits. In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee has been finally discharged in the list of 114 entities in final order of SEBI dated 19.09.2017 after its detailed investigations, the transaction carried out by the assessee cannot be termed as bogus. We find that the revenue had primarily relied SEBI interim order dated 08.05.2015 passed in the case of Pine Animation Ltd. This SEBI Interim order is subsequently revoked on 19.09.2017 duly acquitting the assessee as stated supra. Before the first appellate proceedings, the assessee had furnished the SEBI final order dated 19.09.2017 duly acquitting the assessee, which was duly appreciated by the ld. CIT(A) while granting relief to the assessee. We find that the main basis for denying the exemption u/s 10(38) of the Act was the reliance placed on the Interim order of SEBI dated 08.05.2015, wherein the assessee’s name was included as one of the beneficiaries and to have indulged in mal practices. Later pursuant to detailed investigations carried out by SEBI, a final order was passed on 19.09.2017, wherein specifically the assessee along with remaining 113 entities had been discharged by SEBI stating that those 114 entitites were not involved in price manipulation of scrip of Pine Animation Ltd. When the final SEBI order dated 19.09.2017 was placed before the ld. AO in the remand proceedings, the ld. AO shifts his stand that findings of SEBI are not binding on the Income Tax Department. We are unable to persuade ourselves to accept to this argument of the ld. DR and the ld. AO. This aspect was subject matter of adjudication by the Co-ordinate Bench o f this Tribunal in the case of Sunita Chaudhry vs ITO in ITA No. 143/Mum/2022 for A.Y. 2013-14 dated 13.10.2022 wherein it held as under:-

12. We find that despite the aforesaid interim order dated 06/09/2017 passed by SEBI being specifically mentioned by the assessee in her objections before the AO as well as in her submission before the learned CIT(A), the impugned addition was sustained. Since, the very transaction of the assessee in the scrips of First Financial Services Ltd, which resulted in long term capital gains to the assessee, has been found to be not violative of provisions of relevant Act and Rules by the SEBI upon necessary investigation and even the initial restraint order was revoked vide interim order dated 06/09/2017 , therefore, we find no basis in sustaining the impugned addition made by the AO by treating the said transaction to be a penny stock transaction resulting in bogus long term capital gains. Accordingly, we direct the AO to delete the impugned addition of Rs 84,45,050. Further, since the other addition of Rs 22,712 by AO is also consequent to the aforesaid impugned addition, therefore, the said addition is also directed to be deleted.

5.9. We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the ld. AO merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus. In our considered opinion, the ld. AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus. This view of ours is further fortified by the decision of Hon’ble Delhi High Court in the case of PCIT vs Laxman Industrial Resources Ltd in ITA No. 169/2017 dated 14.03.2017. It is well settled that the suspicion however strong could not partake the character of legal evidence. Hence the greater onus is casted on the revenue to corroborate the impugned addition by controverting the documentary evidences furnished by the assessee and by bringing on record cogent material to sustain the addition. No evidence has been brought on record to establish any link between the assessee herein with the entry operators who were allegedly involved in price rigging of shares artificially or any other person named in the assessment order being involved in any price rigging and also the exit provider. This onus is admittedly not discharged by the revenue in the instant case.

5.10. We find that the Co-ordinate Bench of this Tribunal in the case o f Mukesh Ratilal Marolia vs Additional CIT reported in 6 SOT 247 (Mum ITAT) dated 15.12.2005 had held that personal knowledge and excitement on events should not lead the ld. AO to a state of affairs where salient evidences are overlooked. It was held that when every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares and ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench chose to delete the impugned additions. We find that this tribunal decision was approved by the Hon’ble Jurisdictional High Court in ITA No. 456 of 2007 dated 07.09.2011. It is pertinent to note that the Specia l Leave Petition preferred by the Revenue against this decision before the Hon’ble Supreme Court has been dismissed vide SLP No. 20146 of 2012 dated 27.01.2014.

5.11. Further we find that the Hon’ble Jurisdictional High Court in the case of CIT vs Shyam S Pawar reported in 54 taxmann.com 108 (Bom), it was held that where Demat account and contract note showed details of share transaction and the ld.AO had not proved the said transaction as bogus, the long term capital gain earned on said transaction could not be treated as unaccounted income u/s 68 of the Act. The relevant operative portion of the said judgement is reproduced below:-

5. We have perused the concurrent findings and on which heavy reliance is placed by Mr.Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee’s DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee’s role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme.

6. It is in that regard that we find that Mr.Gopal’s contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs.25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal’s order are not vitiated by any error of law apparent on the face of the record either.

7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.

8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs.25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law.

5.12. We are conscious of the decision of Hon’ble Delhi High Court in the case of Suman Poddar vs ITO reported in 112 taxmann.com 329 dated 17.09.2019 where the decision was rendered in favour of the revenue. The Special Leave Petition filed by the assessee before the Hon’ble Supreme Court in this case was dismissed by the Hon’ble Apex Court vide its order dated 22/11/2019. But we find that there is yet another decision of Hon’ble Delhi High Court in the case of PCIT vs Krishna Devi and others in ITA 125/2020 ; 130 & 131/2020 dated 15.01.2021 reported in 126 taxmann.com 80 (Delhi HC) wherein similar issue of penny stock vis a vis long term capital gain exemption u/s 10(38) of the Act was subject matter of adjudication, in favour of the assessee. This decision rendered in the case of Smt Krishna Devi considers all the propositions laid out hereinabove and are squarely applicable to the facts before us. Infact the Hon’ble High Court duly endorses the elaborate findings given by the Delhi Tribunal on various facets of the issue. Moreover, in this decision, the Hon’ble Delhi High Court duly considered the decision of Suman Poddar (earlier Hon’ble Delhi High Court decision referred to supra) and also the decision of Hon’ble Supreme Court in the case of Sumati Dayal which was heavily relied upon by the ld. DR before us also herein. The relevant operative portion of the decision of Hon’ble Delhi High Court in the case of Smt Krishna Devi is reproduced hereunder:-

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 preplanned 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 case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (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 (supra) too turns 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.

(emphasis supplied by us)

5.13. The transactions of sale of shares were done in online platform of BSE through the registered share broker from whom the received the sale consideration. The broker also receives payments for all his transactions from Stock Exchange. The seller and the buyer cannot know the names of each other as well as their respective brokers, who were involved in the trading transactions in the secondary platform. In such a situation, it cannot be presumed that there could be any transfer of cash between the buyers and sellers to convert the unaccounted money of the beneficiaries as alleged by the ld AO. There is absolutely no evidence brought on record whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit provider whatsoever to convert unaccounted money for getting benefit of LTCG as alleged. Hence we hold that in the absence of any material to show that huge cash was transferred from one side to another , addition cannot be sustained.

5.14. We find that all the observations, conclusions and findings of the ld. AO are based on suspicion, surmises and hearsay. It is trite law that the suspicion howsoever strong cannot partake the character of legal evidence. We find that the entire case of the revenue hinges upon the presumption that the assessee has ploughed back her own unaccounted money in the form of bogus LTCG. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that the assessee had brought back her unaccounted income in the form of LTCG. Reliance in this regard is placed on the decision of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs. ACIT reported in 80 taxmann.com 284 (Mumbai-Trib.)(SB) The Tribunal observed as under:

46…….Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of ^„preponderance of probability‟ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee.

5.15. We find that the ld. CIT(A) had called for a remand report twice from the ld. AO before passing the appellate order. The remand report of the ld.AO is reproduced in pages 35 and 36 of the order of ld. CIT(A). In the remand report, while defending the assessment, the ld. AO relied on various case laws in favour of the revenue. We find that the assessee in her rejoinder had distinguished each and every case law on facts. This rejoinder is enclosed in pages 43 and 44 of the order of ld. CITA. After this, one more remand report was called for by the ld. CITA from the ld. AO. The second remand report dated 24.01.2019 was submitted by the AO reiterating the findings of the assessment order. Assessee filed rejoinder to the second remand report on 20.02.2020. The ld. CIT(A) after considering all these submissions had passed a reasoned order granting relief to the assessee.

5.16. We find that the ld. CIT(A) relied on the decision of Nagpur Bench of Hon’ble Jurisdictional High Court in the case of Sanjay Bimalchand Jain vide order dated 10/04/2017 reported in 89 taxmann.com 196 which is against assessee. We find that the distinguishing facts in the case of Sanjay Bimalchand Jain vis a vis the facts of the case are as under:-

(a) The assessee therein had purchased shares of two companies whose address was same and even the authorized signatory was same for both the companies and eventually both the companies merged with another company, which is not the case of the assessee herein before us.

(b) The address of the broker from whom the assessee therein had purchased the shares of these companies was also the same as that of those companies which is not the case of the assessee herein before us.

(c) The shares were purchased by the assessee in cash which gave rise to the suspicion that the transaction of purchase of shares was back dated whereas in the present case of the assessee herein before us, the shares were purchased by issuing account payee cheque which rules out the possibility of back dating.

(d) The assessee had not provided strong and enough documentary evidences in support of purchase and sale of shares whereas in the case of the assessee herein before us, enough documentary evidences were duly submitted before the ld. AO which stood uncontroverted by the ld. AO.

(e) Furthermore, the Hon’ble Bombay High Court in Sanjay Bimalchand Jain has categorically observed that its facts are not similar to the one prevailing in the Hon’ble Bombay High Court decision in CIT vs Jamnadevi Agarwal reported in 328 ITR 656, whereas the facts of the assessee herein before us are similar to the one prevailing in the case of Jamnadevi Agarwal.

5.16.1. Hence we hold that the decision relied upon by the ld. DR vehemently before us on Sanjay Bimalchand Jain, is factually distinguishable and does not advance the case of the revenue.

5.17. We find that the Hon’ble Jurisdictional High Court in the recent case of PCIT vs Ziauddin A Siddique in Income Tax Appeal No. 2012 of 2017 dated 04.03.2022 had held as under:-

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 Ramakrishna 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. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income Tax (Central)- 1 vs. NRA Iron & Steel (P) Ltd (2019) 103 taxmann.com 48 (SC) 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.

5.18.We find that the Hon’ble Calcutta High Court in the case of M/s Classic Growers Ltd. vs. CIT in ITA No. 129 of 2012 had observed that in that case, the ld. AO found that the formal evidences produced by the assessee to support huge losses claimed in the transactions of purchase and sale of shares were stage managed. The Hon’ble High Court held that the opinion of the ld. AO that the assessee generated a sizeable amount of loss out of prearranged transactions so as to reduce the quantum of income liable for tax might have been the view expressed by the ld. AO but he miserably failed to substantiate that. The Hon’ble High Court held that the transactions were at the prevailing price and therefore the suspicion of the ld. AO was misplaced and not substantiated.

5.19. We find that the Hon’ble Calcutta High Court in the case of CIT vs Shreyashi Ganguli in ITA No. 196 of 2012 had observed that in that case, the Hon’ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI’s action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. We find that the assessee’s case before us is in a much stronger footing as no action has been initiated on the Broker by SEBI and even the action initiated on the assessee by SEBI vide Interim order dated 08.05.2015 were finally revoked by SEBI in its final order dated 19.09.2017.

5.20. We find that the Hon’ble Calcutta High Court in the case of CIT vs Bhagwati Prasad Agarwal reported in 2009- TMI-34738 (Cal HC) in ITA No. 22 of 2009 dated 29.4.2009, had observed that the Assessee claimed exemption of income from Long Term Capital Gains. However, the ld. AO, based on the information received by him from Calcutta Stock Exchange found that the transactions were not recorded there. He therefore held that the transactions were bogus. The Hon’ble High Court, affirmed the decision of the Tribunal wherein it was found that the chain of transactions entered into by the assessee have been proved, accounted for, documented and supported by evidence. It was also found that the assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. On these facts, the appeal of the revenue was summarily dismissed by Hon’ble High Court. In the instant case of the assessee before us, no such enquiries were even sought to be made by the ld. AO with the stock exchange to understand whether the transactions carried out in online platform of BSE were genuine or not. Hence the assessee’s case before us stands on a better pedestal.

5.21. We find that the Hon’ble Punjab & Haryana High Court in the case o f PCIT (Central), Ludhiana vs Prem Pal Gandhi reported in 401 ITR 253 (P&H) in Para 4 & 5 of its order and the PCIT (Central), Ludhiana vs Hitesh Gandhi in ITA NO. 18 of 2017 dated 16.02.2017 (P&H) in Para 5 & 6 of its order had rendered the similar decisions in favour of the assessee on identical facts and circumstances.

5.22. We find that the Hon’ble Jharkhand High Court in the case of CIT vs Arun Kumar Agarwal HUF reported in 210 taxman 405 (Jharkhand) had rendered the similar decision on identical facts and circumstances as under:-

10. We have considered the submissions of the learned counsel for the parties and we are of the considered opinion that the learned Assessing Officer was much influenced by the enqiury report which may has been brought on record by the efforts of the Assessing Officer and that enquiry report was prepared by the SEBI and from the observations made by the Assessing Officer himself, it is clear that after getting that enquiry report, the SEBI prima facie found involvement of some of the share brokers in unfair trade practices. Even in a case where the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he show his bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in the share of a particular company in collusion with others or in the manner of unfair trade practices against the norms of S.E.B.I and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such transactions cannot be held to be a shame transaction. Fact of tinted broker may be relevant for suspicion but it alone necessarily does lead to conclusion of all transaction of that broker as tinted. In such circumstances, further enquiry is needed and that is for individual case. Such further enquiry was not conducted in that case.

11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees were already shown in the earlier Balance Sheet submitted by the assessees, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the shares. If within a period of one year, the share price has risen from Rs.5 to 55 and from 9 to 160 and one person was holding the shares much prior to that start of rise of the share, then how it can be inferred that such person entered into sham transaction few years ago and prepared for getting the benefit after few years when the share will start rising steeply. In present case even there was no reason for such suspicion when the shares were purchased years before the unusual fluctuation in the share price. Here in this case, we have given example of one of the Tax Appeal wherein the shares were purchased in the year 2004 and were sold in the year 2006, which is said to be one of the case wherein the gap in the purchase and sale of the shares was narrowest. In other cases as we have noticed from the various orders of the C.I.T(Appeals) that, the shares of some of the companies were purchased by the assessees even five years ago from the time of sale and those purchasers were already disclosed in the Balance Sheet of the assessee, then from any angle, it is proved that the assessees had held the shares much prior to 12 months of the sale of the shares.

12. Hence, these Appeals are dismissed.

5.23. We find that the ld. DR before us vehemently relied on the recent decision of Hon’ble Calcutta High Court in the case of PCIT vs Swati Bajaj reported in 139 taxmann.com 352 (Cal) which is an elaborate decision rendered after considering various decisions of various High Courts on the subject. In the said decision, it was held that assessee had to establish the genuineness of rise of price of shares within a short period of time that too when general market trend was recessive. But we find that when there are several decisions of Hon’ble Jurisdictional High Court as stated supra are already in favour of the assessee, the same would prevail over this tribunal and this tribunal need not take cognizance of the Hon’ble Non-Jurisdictional High Court. The law is very well settled by the Hon’ble Supreme Court in the case of Union of India vs Kamalakshi finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon’ble Jurisdictional High Court would have higher precedence value than the decision of Hon’ble Non-Jurisdictional High Court on the Tribunal. The Hon’ble Supreme Court emphasised therein that the orders of the Tribunal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher appellate authorities. The Hon’ble Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline. Hence we deem it fit and appropriate to follow the decisions of Hon’ble Jurisdictional High Court referred supra wherein the impugned issue is decided in favour of the assessee. Moreover, when there are two conflicting decisions of various High Courts, the Hon’ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC) had held that Construction that is favourable to the assessee should be adopted. Hence by following this principle, the decision of Hon’ble Calcutta High Court and other decisions that are rendered against the assessee, need not be followed by this Court in the peculiar facts and circumstances of the instant case.

5.24. The ld. DR relied on the decision of this tribunal in the case of DCIT vs Leena Power Tech Engineers (P) Ltd reported in 130 taxmann.com 341 (Mumbai Trib) dated 21.09.2021 in support of his contentions. We have gone through the said decision and we find that the said decision was rendered in the context of receipt of share capital and share premium by that assessee wherein the genuineness of transactions and creditworthiness were not proved by that assessee. This is factually distinguishable with the facts of the assessee before us. Hence reliance placed on this decision by the ld. DR does not advance the case of the revenue.

5.25. The ld. DR relied on the decision of Hon’ble Delhi High Court in the case of CIT vs Jansampark Advertising & Marketing (P) Ltd reported in 375 ITR 373 (Del) in support of his contentions. On perusal of the said judgement, it only postulates that the appellate authority should conduct enquiry on its own or by calling a remand report from the ld. AO and cannot merely brush aside his co-terminus powers by stating that the ld. AO had not carried out any enquiry. This decision was rendered in the context of lack of proper enquiries by the ld. AO, which is not the facts of the case in the instant appeal before us. It is settled law that the ld. CIT(A) has got enhancement powers and he could do what ld. AO had not done with regard to the issue in dispute before him. We hold that the ld. DR before this tribunal would be entitled only to defend the case of the ld. AO and cannot improve the case of the revenue. No power is vested in the statute for the same. The tribunal, being a second appellate authority, could only adjudicate the disputed order before it i.e. the order of ld. CIT(A). That order of ld. CIT(A) had already been passed after considering the assessment order. In this regard, the wordings used in section 254(1) of the Act would also be relevant which reads as under :­

Section 254(1). The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard , pass such orders thereon as it thinks fit.

The crucial words are –

a) such orders and

b) thereon

The expressions ‘such orders’ and ‘thereon’ used in section 254(1) of the Act restricts the scope of powers of the tribunal to confine only to the orders before it and not to travel beyond it. That is precisely the reason the power of enhancement of income has not been granted by the statute to the tribunal, when the same was given to ld. CIT(A). Hence the legislature in its wisdom had consciously curtailed the powers of the tribunal to adjudicate only those issues that are reflected in the orders of the lower authorities and materials available on record with respect to the facts. Accordingly, the tribunal is bound to pass orders only based on facts and materials available on record. In our considered opinion, this is how the expression ‘pass such orders thereon’ used in section 254(1) of the Act need to be understood. In any case, we find that in the instant appeal before us, the ld. CIT(A) had sought for a remand report twice from the ld. AO. In both the remand reports, the ld. AO had merely reiterated his findings given in the assessment order. Hence sufficient opportunities were indeed given to the ld. AO to justify his case by the ld. CIT(A). Hence we hold that the reliance placed on this decision of Hon’ble Delhi High Court supra does not advance the case of the revenue.

5.26. In any case, we find that the assessee had duly proved the nature and source of credit representing sale proceeds of shares of Pine Animation Ltd within the meaning of section 68 of the Act. The sale proceeds have been received by the assessee from the stock exchange through the SEBI registered share broker by account payee cheques through regular banking channels. We find that the three ingredients of section 68 of the Act are duly fulfilled by the assessee in the instant case. Hence there is no question of making any addition as unexplained cash credit u/s 68 of the Act in the instant case.

5.27. Considering the totality of the facts and circumstances of the instant case and respectfully following the judicial precedents relied upon hereinabove, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee by deleting the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 6% against the same. Accordingly, the grounds raised by the revenue are dismissed.

6. We find that the ld. AR before us, without preferring any cross objections or cross appeal, raised a preliminary argument that the appeal of the revenue is to be dismissed in limine, as the ld. PCIT had not objected to the order of the ld. CIT(A) by bringing in any illegality in the said order, which is the mandate of provisions of section 253(2) of the Act. According to ld. AR, the ld. PCIT while giving the authorization to the ld. AO to prefer appeal had merely expressed his grievance on the order of the ld. CIT(A) and had not given his objections to the order of ld. CIT(A). Accordingly, he argued that the appeal of the revenue is to be dismissed inlimine. This argument of the ld. AR , in our considered opinion, is very far fetched, and cannot be accepted. Once the ld. PCIT authorizes the ld. AO to prefer further appeal before this tribunal against the order of ld. CIT(A), it could be logically and legally presumed that the ld. PCIT has got lot of grievances and objections in the order of ld. CIT(A). This is the manner in which appeals are preferred by the revenue before this tribunal for the last 8 decades. Hence this argument advanced by the ld. AR on preliminary grounds is dismissed.

7. In the result, the appeal of the revenue in the case of Priyanka Ankit Miglani in ITA No. 2531/Mum/2021 for A.Y. 2015-16 is dismissed.

Priyanka Ankit Miglani – ITA No. 2530/Mum/2021 – Asst Year 2014-15 – Revenue Appeal

8. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon’ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication.

9. The facts of this assessee in appeal of the revenue for A.Y. 2015-16 are identical with facts prevailing in A.Y. 2014-15. Hence the decision rendered by us in A.Y. 2015-16 in ITA No. 2531/Mum/2021 shall apply mutatis mutandis to A.Y. 2014-15 also, except with variance in figures and dates. Accordingly, the grounds raised by the revenue are dismissed for the A.Y.2014-15.

Priyanka Ankit Miglani – CO No. 91/Mum/2022 – Asst Year 2014-15 – Assessee CO

10. With regard to Cross Objections preferred by the assessee for the A.Y. 2014-15 in CO No. 91/Mum/2022, we find that at the outset, there is a delay of 57 days in preferring cross objections by the assessee before us. The assessee had filed an affidavit explaining the reasons for the delay and the same is placed on record. On going through the same, we are inclined to condone the delay as the assessee was having sufficient cause in not preferring cross objections in time.

11. We find that the assessee has challenged the validity of reassessment u/s 147 of the Act in the cross objections for the A.Y. 2014-15. The grounds raised by the assessee in this regard are as under:-

“1) In the facts and circumstances of the case and in law, the learned Assessing Officer erred in re-opening the assessment u’s 147 of the Act by solely placing reliance on the information received from investigation wing and without conducting independent examination to form a belief that income has escaped assessment

2) In the facts and circumstances of the case and in law, the learned Assessing Officer erred in re-opening the assessment u/s 147 of the Act by relying on the statements of various unrelated parties recorded by Investigation Wing without placing on record any corroborative evidence

That the order of CIT(A) is correct in law and in facts of the case and must be upheld. That the respondent craves leave to delete, modify or amend any of the above cross objections or add a new cross objection at any time before or during the course of the hearing

11.1. We have heard the rival submissions and perused the materials available on record. We find that the original return of income for the A.Y. 2014-15 was electronically filed by the assessee on 29.07.2014 declaring total income of Rs 46,076/-. Later the assessment was sought to be reopened u/s 148 of the Act on 29.09.2016 after duly recording the reasons for reopening.The reasons recorded for reopening are reproduced in pages 1 and 2 of the assessment order framed u/s 143(3) r.w.s. 147 of the Act dated 23.03.2017 for the A.Y. 2014-15. From perusal of the same, we find that admittedly the ld. AO had indeed received information from the investigation wing unit of Mumbai that assessee had earned huge LTCG claimed as exempt on sale of shares of Pine Animation Ltd, which has been categorized as a Penny Stock by the Income Tax Department, based on the various enquiries conducted by them. These facts are also supported by searches conducted on various persons and statements recorded from various entry operators and promotes that the prices of certain scrips had been artificially rigged by certain manipulators. This information, definitely , in our considered opinion, constitutes primafacie information, which enables the ld. AO to constitute a primafacie belief that income of the assessee had escaped assessment as admittedly, the assessee had also dealt in the said scrip. Moreover, SEBI had also passed an interim order dated 08.05.2015 wherein the assessee’s name is included as one of the beneficiary and was suspended from entering the capital market in any manner whatsoever, till the completion of investigation by SEBI. In view of this, we are not inclined to accept the arguments advanced by the ld. AR challenging the validity of reopening of assessment. Hence we hold that the assessment had been validly reopened as the ld. AO had indeed primafacie material before him to form a belief that income of the assessee had escaped assessment within the meaning of section 147 of the Act. Sufficiency of material need not be gone into at the time of recording the reasons for reopening. Hence the grounds raised by the assessee in her cross objections are hereby dismissed.

12. In the result, the appeal of the revenue in the case of Priyanka Ankit Miglani in ITA No. 2530/Mum/2021 for A.Y. 2014-15 is dismissed and cross objection of the assessee in CO No. 91/Mum/2022 is dismissed.

Archana Anuj Miglani – ITA No. 2533/Mum/2021 – Asst Year 2015-16 – Revenue Appeal

13. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon’ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication.

14. The facts of this assessee and issues involved in the appeal of the revenue for A.Y. 2015-16 are identical with facts and issues prevailing in the case of Priyanka Ankit Miglani in A.Y. 2015-16. Hence the decision rendered by us in A.Y. 2015-16 in ITA No. 2531/Mum/2021 for Priyanka Ankit Miglani shall apply mutatis mutandis to this assessee also for A.Y. 2015-16 also, except with variance in figures and dates. Accordingly, the grounds raised by the revenue are dismissed for the A.Y.2015-16.

15. In the result, the appeal of the revenue in the case of Archana Anuj Miglani in ITA No. 2533/Mum/2021 for A.Y. 2015­16 is dismissed.

Archana Anuj Miglani – ITA No. 2532/Mum/2021 – Asst Year 2014-15 – Revenue Appeal

16. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon’ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication.

17. The facts of this assessee and issues involved in the appeal of the revenue for A.Y. 2015-16 are identical with facts and issues prevailing in A.Y. 2014-15. Hence the decision rendered by us in A.Y. 2015-16 in ITA No. 2533/Mum/2021 shall apply mutatis mutandis to this assessee also for A.Y. 2014-15 also, except with variance in figures and dates. Accordingly, the grounds raised by the revenue are dismissed for the A.Y.2014-15.

Archana Anuj Miglani – CO No. 95/Mum/2022 – Asst Year 2014­15 – Assessee CO

18. With regard to Cross Objections preferred by the assessee for the A.Y. 2014-15 in CO No. 95/Mum/2022, we find that at the outset, there is a delay of 65 days in preferring cross objections by the assessee before us. The assessee had filed an affidavit explaining the reasons for the delay and the same is placed on record. On going through the same, we are inclined to condone the delay as the assessee was having sufficient cause in not preferring cross objections in time.

19. The facts prevailing in Cross objections filed for A.Y. 2014-15 by Priyanka Ankit Miglani in CO No. 91/Mum/2022 are identical with facts prevailing in Cross objections preferred by Archana Anuj Miglani for A.Y. 2014-15. Hence the decision rendered by us hereinabove on the CO No. 91/Mum/2022 shall apply mutatis mutandis for CO No. 95/Mum/2022 also, except with variance in figures and dates. Accordingly, the grounds raised by the assessee in Cross Objections are dismissed.

20. In the result, the appeal of the revenue in the case of Archana Anuj Miglani in ITA No. 2532/Mum/2021 for A.Y. 2014­15 is dismissed and cross objection of the assessee in CO No. 95/Mum/2022 is dismissed.

Anuj Rajinder Miglani – ITA No. 2528/Mum/2021 – Asst Year 2015-16 – Revenue Appeal

21. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon’ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication.

22. The facts of this assessee and issues involved in the appeal of the revenue for A.Y. 2015-16 are identical with facts and issues prevailing in A.Y. 2015-16 in the case of Priyanka Ankit Miglani in ITA No. 2531/Mum/2021. Hence the decision rendered by us in A.Y. 2015-16 in ITA No. 2531/Mum/2021 shall apply mutatis mutandis to this assessee also for A.Y. 2015-16 also, except with variance in figures and dates. Accordingly, the grounds raised by the revenue are dismissed for the A.Y.2015-16.

23. In the result, the appeal of the revenue in the case of Anuj Rajinder Miglani for A.Y. 2015-16 in ITA No. 2528/Mum/2021 is dismissed.

Ankit Rajinderkumar Miglani – ITA No. 2529/Mum/2021 – Asst Year 2015-16 – Revenue Appeal

24. At the outset, there is a delay of 291 days in filing of appeal by the revenue before us. We find that the order of ld. CIT(A) was passed during the covid pandemic period and appeal was preferred before us by the revenue on 31.12.2021. Pursuant to relaxation granted by the Hon’ble Supreme Court considering the Covid-19 pandemic with regard to the limitation for preferring appeals , we are inclined to condone the delay in filing of appeal before us by the revenue and admit the appeal for adjudication.

25. The facts of this assessee and issues involved in the appeal of the revenue for A.Y. 2015-16 are identical with facts and issues prevailing in A.Y. 2015-16 in the case of Priyanka Ankit Miglani in ITA No. 2531/Mum/2021. Hence the decision rendered by us in A.Y. 2015-16 in ITA No. 2531/Mum/2021 shall apply mutatis mutandis to this assessee also for A.Y. 2015-16 also, except with variance in figures and dates. Accordingly, the grounds raised by the revenue are dismissed for the A.Y.2015-16.

26. In the result, the appeal of the revenue in the case of Anjit Rajinderkumar Miglani for A.Y. 2015-16 in ITA No. 2529/Mum/2021 is dismissed.

27. To sum up, all the appeals of the revenue are dismissed and all the cross objections of the assessee are dismissed.

Order pronounced on 21/03/2023 by way of proper mentioning in the notice board.