S. 68 : Cash credits-Unexplained expenditure-Capital gains-Penny stocks-Accommodation entries-Purchase of shares at premium in off market Transaction-Sale after three years-Report of Investigation Wing-Information never provided nor cross-examination of Individuals allowed-Additions is not valid. [S. 10(38), 45, 69]

The assessee purchased 20,000 equity shares of Premier Capital Services Ltd in an off-market transaction through preferential allotment. There was a one-year lock in period on September 4, 2012 and lock in release on September 4, 2013. The payment for the purchase was made by cheque. The quantity of shares increased from 20,000 shares to 2,00,000 shares due to stock split as on March 21, 2014. The price per share was Rs. 75 inclusive of premium of Rs.65. During the previous year relevant to the assessment year 2015-16 the assessee sold 2,00,000 equity shares for a gross consideration of Rs.5,49,04,773 (at Rs.211.00 to Rs. 273.60 per share) on the stock exchange and the consideration was received by cheque. The Assessing Officer held that the scrip in which the assessee traded was insignificant, bogus, without business fundamentals and required the assessee to prove the genuineness of the transaction. The Assessing Officer added the sale proceeds of Rs.5,49,04,773 under section 68 of the Act and Rs. 16,47,143 under section 69 of the Act towards the commission paid to the entry provider to the taxable income of the assessee. The Commissioner (Appeals) sustained the addition made by the Assessing Officer. On appeal the Tribunal held that no enquiry was carried out by the Assessing Officer or by the Commissioner (Appeals) who had merely relied on the report of the Investigation Wing and statements of certain individuals recorded during the course of search who had stated that they were engaged in providing accommodation entries for long-term capital gains or loss in various shares which were called penny stocks. However, this information was never provided to the assessee. Similarly, no cross-examination was allowed by the Assessing Officer to the assessee during the assessment proceedings. In other words, the Assessing Officer had merely relied on the investigation report and did not try to collect further evidence by conducting further investigation to prove that the assessee’s own funds had changed hands. Under these circumstances, the Assessing Officer was to delete the addition made under sections 68 and 69 of the Act. Followed Amit Mafatlal Shah v. ACIT, ITA No. 5793/Mum/ 2019 dt. 20-4-2020). (ITA No. 6387/M/2019 dt. 23-12-2021). AY. 2015-16)
Mukesh Bhoormal Jain v. ITO (2022) 93 ITR 26 (SN) (Mum.)(Trib.)

[Coram : Hon’ble Shri S. Rifaur Rahman, Accountant Member and Hon’ble Ms. Suchitra Raghunath Kamble, Judicial Member]