LTCG from penny stock shares held genuine if supported by banking transactions, demat records, and exchange sales; additions u/s 68 invalid without cross-examination opportunity on relied statements or specific linking evidence.

ORDER

PER MANISH AGARWAL, AM :

The present appeal is filed by revenue against the order dated 18.09.2023 of Ld. Commissioner of Income Tax (A), 27, New Delhi [“Ld. CIT(A)”] in Appeal No. ITBA/APL/M/250/2023- 24/1056195997(1) passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 07.03.2022 passed u/s 147 of the Act for Assessment Year 2017-18.

2. The assessee is an individual and e-filed his return of income on 30.07.2017, declaring total income of INR 1,54,75,260/-. The case of the assessee was re-opened in terms of notice issued u/s 148 dated 28.03.2021. Based on the information received from Investigation Wing, New Delhi that assessee has obtained accommodation entry of long term capital gain of Rs. 93,42,350/- from the sale of shares of Yamini Investment Company Ltd. (YICL) which is a penny stock company and the assessee is held as beneficiary traded in the share of YIML and generate bogus Long term capital Gains (LTCG). Accordingly, notice u/s 148 of the Act was issued on 28.03.2021 after obtaining approval for competent authority. In response the assessee filed return of income on 22.04.2021 declaring total income of Rs. 1,54,75,260/-. A notice u/s 143(2) was issued on 12.06.2021 and, thereafter, various notices were issued along with questionnaire u/s 142(1) from time to time which were duly replied by the assessee. The AO after considering the submissions made and based on the information received from the Investigation Wing, alleged that assessee has obtained fictitious income in the shape of long term capital gain of Rs.87,21,207/- which was treated as unexplained credit u/s 68 of the Act and addition was made. Further addition of Rs. 1,74,424/- was made by holding 2% commission paid for obtaining bogus long term capital gain as unexplained expenditure u/s 69C of the Act. Accordingly, the total income of the assessee was assessed at Rs.2,43,70,890/-.

3. Against the said order, assessee filed appeal before the Ld. CIT(A) who vide impugned order dated 18.09.2023 has deleted the additions and made as unexplained credit u/s 68 of the Act.

4. Aggrieved by the said order, revenue is in appeal before the Tribunal by taking following grounds of appeal:

1. “Whether the Ld. CIT(A) has erred in holding that the information received by the AO is not prima facie applicable in the case of the assessee.

2. Whether the Ld. CIT(A) has erred in holding that the fluctuation in price of the shares is a normal phenomenon of the share market as in the case of the scrip in which the assessee has traded, the price defies all logics of a normal and natural financial market.

3. Whether the Ld. CIT(A) has erred in ignoring the detailed analysis of the scrip that is part of the Assessment Order and the Survey Report in the case of the assessee.

4. Whether the Ld. CIT(A) has erred in holding that the capital gain as declared by the assessee is genuine as the assessee has been a beneficiary of the bogus LTCG reaped through dubious mechanism.

5. Whether the Ld. CIT(A) has erred in deleting the commission expenditure, as the then Assessing Officer has clearly mentioned in the Assessment Order that the assessee has received his unaccounted income in the form of LTCG and thus, commission must have been paid by the assessee to the entry provider in such trade.

6. Whether the Ld. CIT(A) has erred in holding that the AO could not bring forward any evidence which can establi