Signature Not Verified v. J U D G M E N T

Signature Not Verified $~S-44 versus CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMOHAN, J (Oral): CM Appl. 50158/2022 Keeping in view the averments in the application, delay in re-filingthe appeal is condoned. Accordingly, the application stands disposed of. ITA 477/2022 1.Present Income Tax Appeal has been filed challenging the Orderdated 6[th]August, 2019 passed by the Income Tax Appellate Tribunal(‘ITAT’) in ITA No. 2772/Del/2019 for the Assessment Year 2015-16. 2.Learned counsel for the appellant states that the ITAT has erred indeleting the additions of Rs.1,60,18,923/- as unexplained credit under Signature Not Verified Section 68 read with Section 115BBE of the Income Tax Act, 1961 (‘theAct’) on account of bogus Long-Term Capital Gain on sale of penny stockcompany namely M/s Goldline International Finvest Ltd. on the ground thatthe assessing officer has not made independent enquiry. 3.Though Revenue has mentioned in the present appeal that the issueinvolved is covered by the judgment of this Court in Suman Poddar v. ITO423 ITR 480, wherein appeal of the Assessee was dismissed taking judicialnotice of the fact that there was an astronomical increase in the share priceof a company which was not commensurate with the financial parameters ofthe said company, yet this Court finds that a Coordinate Bench of this Courtin PCIT vs. Smt. Krishna Devi & connected ITAs hasupheld the ITAT order which is impugned in the present appeal. 4.The relevant portion of the order in PCIT vs. Smt. Krishna Devi(supra) is reproduced hereinbelow:- “11. On a perusal of the record, it is easily discernible that in the instantcase, the AO had proceeded predominantly on the basis of the analysis of thefinancials of M/s Gold Line International Finvest Limited. His conclusion andfindings against the Respondent are chiefly on the strength of the astounding4849.2% jump in share prices of the aforesaid company within a span of twoyears, which is not supported by the financials. On an analysis of the dataobtained from the websites, the AO observes that the quantum leap in theshare price is not justified; the trade pattern of the aforesaid company did notmove along with the sensex; and the financials of the company did not showany reason for the extraordinary performance of its stock. We have nothingadverse to comment on the above analysis, but are concerned with theaxiomatic conclusion drawn by the AO that the Respondent had entered intoan agreement to convert unaccounted money by claiming fictitious LTCG,which is exempt under Section 10(38), in a pre-planned manner to evadetaxes. The AO extensively relied upon the search and survey operationsconducted by the Investigation Wing of the Income Tax Department inKolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out themodus operandi adopted in the business of providing entries of bogus LTCG.However, the reliance placed on the report, without further corroboration onthe basis of cogent material, does not justify his conclusion that the transactionisbogus,shamandnothingotherthanaracketofaccommodation entries. We do notice that the AO made an attempt to delveinto the question of infusion of Respondent’s unaccounted money, but he didnot dig deeper. Notices issued under Sections 133(6)/131 of the Act wereissued to M/s Gold Line International Finvest Limited, but nothing emergedfrom 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 whenthe notices were returned unserved, the AO did not take the matter anyfurther. He thereafter simply proceeded on the basis of the financials of thecompanytocometotheconclusionthatthetransactionswereaccommodation entries, and thus, fictitious. The conclusion drawn by the AO,that there was an agreement to convert unaccounted money by takingfictitious LTCG in a pre-planned manner, is therefore entirely unsupported byany material on record. This finding is thus purely an assumption based onconjecture made by the AO. This flawed approach forms the reason for thelearned ITAT to interfere with the findings of the lower tax authorities. Thelearned ITAT after considering the entire conspectus of case and the evidencebrought on record, held that the Respondent had successfully discharged theinitial onus cast upon it under the provisions of Section 68 of the Act. It isrecorded that “There is no dispute that the shares of the two companies werepurchased 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 bankingchannels.” The above noted factors, including the deficient enquiryconducted by the AO and the lack of any independent source or evidence toshow that there was an agreement between the Respondent and any otherparty, 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 thatmoney changed hands between the Respondent and the broker or any otherperson, or further that some person provided the entry to convertunaccounted money for getting benefit of LTCG, as alleged. In the absence ofany such material that could support the case put forth by the Appellant, theadditions cannot be sustained. 12. Mr. Hossain’s submissions relating to the startling spike in the shareprice and other factors may be enough to show circumstances that mightcreate suspicion; however the Court has to decide an issue on the basis ofevidence and proof, and not on suspicion alone. The theory of humanbehavior and preponderance of probabilities cannot be cited as a basis toturn a blind eye to the evidence produced by the Respondent. With regard tothe claim that observations made by the CIT(A) were in conflict with theImpugned Order, we may only note that the said observations are general innature and later in the order, the CIT(A) itself notes that the broker did notrespond to the notices. Be that as it may, the CIT(A) has only approved theorder of the AO, following the same reasoning, and relying upon the report of Signature Not Verified the Investigation Wing. Lastly, reliance placed by the Revenue on SumanPoddar v. ITO (supra) and Sumati Dayal v. CIT (supra) is of no assistance.Upon examining the judgment of Suman Poddar (supra) at length, we findthat the decision therein was arrived at in light of the peculiar facts andcircumstances demonstrated before the ITAT and the Court, such as, interalia, lack of evidence produced by the Assessee therein to show actual sale ofshares in that case. On such basis, the ITAT had returned the finding of factagainst the Assessee, holding that the genuineness of share transaction wasnot established by him. However, this is quite different from the factualmatrix at hand. Similarly, the case of Sumati Dayal v. CIT (supra) too turnson its own specific facts. The above-stated cases, thus, are of no assistance tothe case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of theevidence brought on record, has rightly come to the conclusion that the lowertax authorities are not able to sustain the addition without any cogentmaterial on record. We thus find no perversity in the Impugned Order.” 5.Consequently, this Court is of the view that no substantial question oflaw arises for consideration in the present appeal. Accordingly, the same isdismissed. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J NOVEMBER 23, 2022TS