JCIT VS. Amandeep Singh Bhatia

Case snapshot

Sections / provisions: See packaged judgment

Questions before the Court / Tribunal

• Penny-stock LTCG: evidentiary burden where CIT(A) finds documentary record and transaction genuineness sufficient.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

ITA No.744/Ind/2013 Assessment Year: 2009-10 JCIT, Range-3 Shri Amandeep Singh Indore Bhatia बनाम/ 8/5, BCC House, Vs. Manoramaganj, Indore (Appellant / Revenue) (Respondent / Assessee) PAN: AGOPB 3205 E Revenue by Shri Ashish Porwal, Sr. DR Assessee by Shri Harsh Vijayvargiya, AR Date of Hearing 06.02.2023 Date of Pronouncement 28.04.2023

1.4 On the facts and in the circumstances of the case, the Ld. CIT(A) was further not justified in deleting the addition by placing reliance on certain case laws because the facts of the case laws relied upon by the Ld. CIT(A) were entirely different from the facts of the instant case in as much as in those cases the brokers were neither tainted nor any penalty was imposed on them by SEBI whereas in the case under reference the broker was tainted and penalty was also imposed by SEBI.

3. Briefly stated the facts are such that the assessee-individual filed his return of income of relevant AY 2009-10 on 18.09.2009 declaring a total income of Rs. 54,64,570/- from salary, other sources and dividend. In the return so filed, the assessee also declared a long-term capital gain of Rs. 2,48,02,084/- exempted u/s 10(38) of the act, earned from sale of 88,550 equity shares of 21st Century Finance Ltd. The assessee claimed to have purchased the impugned shares for Rs. 7,70,856/- in the year 2004-05; sold the same for Rs. 2,55,72,940/- in the year 2008-09 and thereby earned the capital gain of Rs. 2,48,02,084/-. The case was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued from time to time. The AO confronted the assessee on the capital gain declared in return, in response to which the assessee submitted details/documents. However, the AO was not satisfied and finally did not accept the exempted gain declared by

assessee. Hence, the AO made an addition of Rs. 2,48,02,084/- as income from other sources and taxed accordingly. Being aggrieved, the assessee carried the matter in first-appeal and succeeded. Now, the revenue has come in this appeal assailing the order of first-appeal.

5. Ld. DR representing the revenue carried us to the orders of lower- authorities and made strong contentions. He submitted that the AO has rejected the exempted capital gain declared by assessee for two reasons, namely (i) The case-history of assessee is such that in earlier AY 2005-06 and 2006-07, then AO had rejected similar claim of capital gain made by assessee from shares of 21st Century Finance Ltd. and such action of AO was upheld in first-appeal.; (ii) The broker (Shri Shyam Lal Sultania) through whom the assessee had done transactions was penalized by SEBI for the period 09.06.2004 to 25.02.2005 and the assessee has purchased shares through that broker during that period only. He submitted that mere holding of shares in demat a/c and doing transactions through a/c payee cheque do not make the transactions genuine. Ld. DR placed reliance on (i) CIT Vs. Durga Prasad More 82 ITR 540 (SC), (ii) Sumati Dayal Vs. CIT 214 ITR 801 (SC), (iii) CIT Vs. P. Mohankala (2007) 291 ITR 278 (SC). Ld. DR also placed a heavy reliance on the decision of Kolkata High Court in Pr. CIT Vs. Swati Bajaj IT Appeal No. 6 of 2021, dated 14.06.2022.

Appellant / assessee submissions

5. Ld. DR representing the revenue carried us to the orders of lower- authorities and made strong contentions. He submitted that the AO has rejected the exempted capital gain declared by assessee for two reasons, namely (i) The case-history of assessee is such that in earlier AY 2005-06 and 2006-07, then AO had rejected similar claim of capital gain made by assessee from shares of 21st Century Finance Ltd. and such action of AO was upheld in first-appeal.; (ii) The broker (Shri Shyam Lal Sultania) through whom the assessee had done transactions was penalized by SEBI for the period 09.06.2004 to 25.02.2005 and the assessee has purchased shares through that broker during that period only. He submitted that mere holding of shares in demat a/c and doing transactions through a/c payee cheque do not make the transactions genuine. Ld. DR placed reliance on (i) CIT Vs. Durga Prasad More 82 ITR 540 (SC), (ii) Sumati Dayal Vs. CIT 214 ITR 801 (SC), (iii) CIT Vs. P. Mohankala (2007) 291 ITR 278 (SC). Ld. DR also placed a heavy reliance on the decision of Kolkata High Court in Pr. CIT Vs. Swati Bajaj IT Appeal No. 6 of 2021, dated 14.06.2022.

6. Replying to above, Ld. AR representing the assessee raised several contentions. He submitted that during assessment-proceeding, the assessee filed all kinds of documentary evidences which are possible to prove the genuineness of capital gain, namely (i) a statement giving complete details of the transactions, (ii) photocopies of purchase bills, sales bills and contract notes, (iii) copy of demat a/c with Indusind Bank, (iv) Bank statement, and (v) A/c copies of brokers. He submitted that the shares were purchased in

September, 2004 to October, 2004 online through recognized stock exchange and purchase price was paid through account payee cheques. He submitted that the shares were sold online during current year through recognized stock exchange and sale consideration was also received through A/c payee cheques. He submitted that immediately after purchase, the assessee got the shares credited into Demat A/c with Induind Bank and they were kept as such in that Demat A/c for a period as long as 4 years and thereafter only sold. He submitted that the assessee has sold a part of the holding and that even after sale, the assessee continued to hold remained holding in Demat A/c. He submitted that there is no iota of negative features like “purchase/sale through off-market”, “purchase/sale in cash”, “short-holding of just above 1 year to claim long-term”, “holding in demat a/c for just a few days immediately before sale”, etc. in the present case. Regarding penal action taken by SEBI on broker, Ld. AR attacked the AO’s action by submitting that the assessee purchased shares through Shri Shyam Lal Sultania [“Shyam” for short] and that too in the year 2004-05. Thereafter, there was no role of Shyam…

thereof. With these submissions, Ld. AR contended that in the present case, the AO has wrongly made addition on mere surmise and conjecture; the CIT(A) has rightly deleted the addition. Ld. AR prayed us to uphold the order of CIT(A).

Revenue / respondent submissions

The packaged judgment does not separately label the respondent's submissions in an independently extractable passage. No contention is inferred; read the full order.

Court / Tribunal analysis and reasoning

8. We have considered rival submissions of both sides and perused the material held on record including the orders of lower-authorities. First of all, from the first appellate order, we find that the CIT(A) has granted relief to the assessee by following observations and findings:

9. On perusal of same, we find that the CIT(A) has made several meritorious, objective and extensive findings; only then and thereafter he has accepted assessee’s claim and granted relief. Now, we sum up our findings/ conclusions:

Operative decision and relief

2. It is therefore, prayed that the order of the Ld. CIT (A) may be set aside and the order of the AO may please be restored.”

Bench of ITAT in the case of Smt Arzoo Anand [Appeal No ITA No 113/Ind/ 2009 dated 14-12-2009] [14 ITJ 604] and decision of the Hon'ble Jurisdictional High Court in the case of Smt. Arzoo Anand also support the case of the appellant. On the facts of the present case and as discussed in the foregoing paras, I am of the considered view that the AO was not justified in denying the claim of the appellant and making addition of Rs. 2,48,02,084/- as unaccounted cash credit u/s 68 of the Income Tax Act. The AO is hereby directed to delete such addition made on account of Long-Term Capital Gain. This ground of appeal is allowed.”

12. Resultantly, this appeal of Revenue is dismissed.

Ratio and legal principle

• The packaged judgment addresses Penny-stock LTCG: evidentiary burden where CIT(A) finds documentary record and transaction genuineness sufficient. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with penny-stock ltcg: evidentiary burden where cit(a) finds documentary record and transaction genuineness sufficient. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• See the statutory provisions identified in the packaged judgment.

Case network

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Different outcome / possible distinction

• ACIT v. Ashok W. Wesavkar - Operative order controls
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