Amit Sajjankumar Gupta v. DCIT

Case snapshot

Sections / provisions: 10(38); 68; 69C

Questions before the Court / Tribunal

• Penny-stock allegation where off-market purchase and sale evidence was produced: The reported Tribunal decision rejects a penny-stock addition where the off-market acquisition was explained, the shares were later sold through the stock exchange and the taxpayer produced transaction documentation without a specific investigation nexus to the taxpayer.

Material facts and background

2. The brief facts of the case are that, the assessee is engaged in the business of trading activities in steel & steel pipes and also investor in shares and securities. The assesse derives income from salary, income from business, income from capital gains and income from other sources. The assesse has filed the return of income for the A.Y 2015-16 on 31.10.2015

Subsequently, the case was selected for scrutiny under CASS and notice u/sec 143(2) and U/sec 142(1) of the Act along with the questionnaire are issued.

notice, the Ld. AR of the assesse appeared from time to time and filed the details and the case was discussed. On perusal of the information, the Assessing Officer (AO) found that the assessee has claimed long term capital gains on sale of shares of M/s Maa Jagdambe Tradelinks Limited (MJTL) u/sec 10(38) of the Act of Rs.1,49,14,697/- and the assessee was asked to furnish the details of shares purchase, mode of payment, share certificate, broker details, contract note, dematerialization details, bank details etc. It was explained

3 ITA.No.1378/Mum/2024. Amit Sajjan Kumar Gupta.Mumbai

that, the assessee has purchased 30000 equity

Rs.10/- paid up each in the F.Y 2012-13 for Rs.3,30,300/at Rs. 11/- per share (which includes a

Rs.1/- per share) from M/s Dolex Commercial Pvt Ltd vide invoice dated 02.03.2013 through cheque no 51082335 on 02.03.2013

Appellant / assessee submissions

notice, the Ld. AR of the assesse appeared from time to time and filed the details and the case was discussed. On perusal of the information, the Assessing Officer (AO) found that the assessee has claimed long term capital gains on sale of shares of M/s Maa Jagdambe Tradelinks Limited (MJTL) u/sec 10(38) of the Act of Rs.1,49,14,697/- and the assessee was asked to furnish the details of shares purchase, mode of payment, share certificate, broker details, contract note, dematerialization details, bank details etc. It was explained

has filed appeal with the Hon’ble Tribunal. 5. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the

income. The Ld. AR mentioned that no independent enquiry was conducted by the revenue. The Ld.AR substantiated the submissions with the paper book and judicial decisions and prayed for allowing the appeal. Per Contra, the Ld.DR submitted

shares overlooking the material information and evidences filed in the course of the assessment proceedings and appellate proceedings. The Ld. AR submitted that the assesse has furnished the information with evidences of purchase price, financial statements and summary of shares sold in F.Y 2014-15, ledger account copy, copies of bank account statement, copy of the contract notes of sale of the shares,

Ld. AR also referred to the share purchase invoice at page32 of the paper book in F.Y 2012-13 to justify the genuineness of the purchases. The shares

Revenue / respondent submissions

20 ITA.No.1378/Mum/2024. Amit Sajjan Kumar Gupta.Mumbai 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. Mr. 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...

Court / Tribunal analysis and reasoning

9 ITA.No.1378/Mum/2024. Amit Sajjan Kumar Gupta.Mumbai 4. The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under Section 68 of the Act While allowing the appeal filed by respondent, the CITIA] deleted the addition made under Section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year After a period of one year...

the case of CIT Vs. Shyam R. Pawar, 54 taxmann.com 108 has observed as under: Section 68 of the Income-tax Act, 1961 Cash credit (Share dealings) - Assessment years 2003-04 to 2006-07 Assessee declared capital gain on sale of shares of two companies. Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices. held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted Held, yes [Para 7] [In favour of assessee] It was revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange - words showed that the shares were purchased for code numbers S003 and R121 of STPL and...

14 ITA.No.1378/Mum/2024. Amit Sajjan Kumar Gupta.Mumbai established by producing documentary evidence -Purchase and sale price of the shares declared by the assessees is in conformity with the market rates prevailing on the respective dates-Thus, the fact that some of the transactions were off market transactions cannot be a ground to treat the transactions as sham transactions-Tribunal has arrived at a finding of fact that the transactions were genuine-Nothing has been brought on record to show that the findings recorded by the Tribunal are contrary to the documentary evidence -Also, no fault can be found with the finding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessees Therefore, the decision of the Tribunal is based on findings of fact and no substantial question of law arises. The fact that the assessees in the group have purchased and sold shares of similar companies hrough the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in...

15 ITA.No.1378/Mum/2024. Amit Sajjan Kumar Gupta.Mumbai has further recorded a finding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to show that the shares purchased and sold by the assessees were in conformity with the market price, the Tribunal recorded a finding of fact that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No fault can be found with the above finding recorded by the Tribunal. Therefore, the decision of the Tribunal is based on finding of facts. No substantial question of law arises from the order of the Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal (Indl.) & Ors. (2010) 41 DTR (Nag) (Trib) 105: (2010) 133 TT) (Nag) 818 affirmed; Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124: (1995) 80 Taxman 89 (SC) distinguished. (Paras 11 to 14 & 16) Conclusion: Assessees having established the genuineness of purchase and sale of shares by producing documentary evidence and declaring the purchase and sale price of shares in conformity with the market rates prevailing on the respective dates, the finding of the...

Operative decision and relief

appeal in favour of the assessee. 19. In the result, the appeal filed by the assessee is allowed.

Mumbai, Dated 10/10/2024 KRK, PS आदे श की प्रतितलति अग्रेतिि/Copy of the Order forwarded to :

अपीलार्थी / The Appellant प्रत्यर्थी / The Respondent. संबंधित आयकर आयुक्त / The CIT(A) आयकर आयुक्त(अपील) / Concerned CIT धवभागीय प्रधतधनधि, आयकर अपीलीय अधिकरण, मुम्बई / DR, ITAT, Mumbai

सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीलीय अतिकरण, मम् ु बई / ITAT, Mumbai

Authorities and precedents appearing in the judgment

• Tribunal.-Asstt. CIT vs. Kamal Kumar S. Agrawal
• Sumati Dayal vs. CIT (1995) 125 CTR (SC)
• Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron &
• Commissioner of Income Tax (Central)- 1 vs. NRA Iron & Steel (P) Ltd (2019)
• Calcutta High Court in the case of PCIT vs Swati Bajaj reported in 139
• Supreme Court in the case of Union of India vs Kamalakshi Finance

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Penny-stock allegation where off-market purchase and sale evidence was produced. The operative result is classified as Quashed / set aside. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Penny-stock allegation where off-market purchase and sale evidence was produced. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Build a transaction-level evidence file: confirmations, bank trail, invoices, ledger, tax/GST records and counter-party material rather than relying on a generic explanation.
• Where the addition depends on a third-party statement or investigation report, record the request for the relied material and cross-examination at the earliest stage.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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