The Principal Commissioner Of Income Tax 1 v. Jahnavi Ashishbhai Patel

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 331 of 2022 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX 1 Versus JAHNAVI ASHISHBHAI PATEL ========================================================== Appearance: MR MANISH BHATT, SR.ADVOCATE with MR KARAN SANGHANI for M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 04/07/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned advocate Mr.Manish R. Bhatt for M.R.Bhatt and Co. for the appellant. 2. By filing this tax appeal under section 260A of the Income Tax Act, 1961 where the revenue has called in question judgment and order dated 8.12.2021 of the Income Tax Appellate Tribunal, SMC Bench, Ahmedabad in ITA No.1653 of 2019 with Cross Objection of 24 of 2020. 2.1 In challenging the said judgment and order in the appeal, the following substantial question of law is proposed before the court. “Whether on the facts and circumstances of the case and in law, the decision of Appellate Tribunal is ex-facie perverse because the Appellate Tribunal deleted the addition of Rs.3,94,375/- made on account of bogus long term capital gain, without appreciating the entire gamut of fact that the assessee transacted in penny stock namely M/s. Radhe Developers India Ltd., thus earning bogus Long term Capital Gain and claiming it to be exempt under section 10(38) of the Act?” 3. The assessee filed his return of income for the assessment year 2011-12 on 6.12.2012 declaring total income Rs.69,362/- comprising income cum house property and other sources. He has earned long term capital gain to the tune of Rs.3,94,375/-, it was claimed as exempted under Section 10(38) of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’). Subsequently the case was reopened. 3.1 On the basis of the information received by issuing notice under Section 148 of the Act, the assessing officer was of the view that transaction with one Radhe Developers regarding sale of shares was bogus and that the amount of 3,94,375/- was wrongly claimed as exempt. As noted by the assessing officer, the assessee had submitted before him that as on 1.4.2010, the assessee had 53763614 shares of Radhe Developers India Limited during the year of consideration. Out of these shares he sold 352550 shares. 3.2 According to the assessing officer, no details were furnished regarding sale of shares and purchase thereof by the assessee. The Assessing Officer concluded that it cannot be said that the shares sold were those which were purchased during the financial year 2005-06 and were not sold subsequently. It was concluded that working of capital gain was therefore not correct. Finally, the assessing officer made disallowance to the tune of Rs.3,94,375/- treating it as income from undisclosed sources and adding in the total income chargeable to tax. 4. However when assessee preferred appeal, the appellate authority rightly observed that the assessee had given evidence during the assessment proceedings that the shares were bought for genuine investment since financial year 2004-05 and 2005-06. This was substantiated by production of copy of contract note of IFCI Financial Services Limited. 4.1 The income tax tribunal referred to the findings of the Commissioner of Income Tax (Appeals) to concur observing thus, “A perusal of the findings of the revenue authorities would reveal that increase in the value of shares mentioned by AO enhanced from 3.1.2012 to 18.9.2017. The assessee’s assessment year is A.Y.2011-12. Its transaction does not fall in this period, and for this reason, the ld.CIT(A) has treated the investment with the assessee as genuine and deleted the disallowance made by the AO. After going through the well reasoned finding of ld.CIT(A), we do not find any error...” 4.1 The income tax tribunal referred to the findings of the Commissioner of Income Tax (Appeals) to concur observing thus, “A perusal of the findings of the revenue authorities would reveal that increase in the value of shares mentioned by AO enhanced from 3.1.2012 to 18.9.2017. The assessee’s assessment year is A.Y.2011-12. Its transaction does not fall in this period, and for this reason, the ld.CIT(A) has treated the investment with the assessee as genuine and deleted the disallowance made by the AO. After going through the well reasoned finding of ld.CIT(A), we do not find any error...” 5. Thus it emerges that the Assessing Officer did not accept the claim of the assessee for exemption under Section 10(38) of the Act in respect of capital gain income on the sale of shares of Radhe Developmers Limited to the tune of Rs.3,94,375/- treating the transaction as bogus transaction. However, both the Appellate Authority and Income Tax Tribunal did not agree and concurrently found that exemption claim was allowable. The investment in the shares was bound to be genuine as was supported by material such as contract note of IFCI Rnanaál Services Limited. The genuineness of the transaction was also supported with the other details like contract note of shares purchased and sold, filed before the assessing officer. The period of increase of price of the shares was not coinciding with the financial year during which the shares were sold by the assessee. The findings are reasonably arrived at supported by the facts and the pertinent material. 6. In the above view, no question of law, much less substantial question of law arises in the present appeal. It is therefore liable to be dismissed. 7. The appeal is accordingly dismissed. (N.V.ANJARIA, J) Manshi (BHARGAV D. KARIA, J)