Calcutta High Court
Principal Commissioner Of Income Tax 5 ... vs M/S B L Tak And Sons Huf on 9 June, 2025
Author: T.S Sivagnanam
Bench: T.S Sivagnanam
1
o-7
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION [INICOME TAX]
ORIGINAL SIDE
ITAT/243/2024
IA NO: GA/1/2024
PRINCIPAL COMMISSIONER OF INCOME TAX 5 KOLKATA
VS
M/S B L TAK AND SONS HUF
BEFORE :
THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM
-A N D-
HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)
DATE : 9th June, 2025.
Mr. Prithu Dudheria, Adv. ...for appellant.
The Court : This appeal by the revenue filed under Section 260A of the
Income Tax Act, 1961 (the Act) is directed against the order dated 14.3.2024
passed by the Income Tax Appellate Tribunal "C" Bench, Kolkata (the Tribunal)
in ITA/2622/Kol/2018 for the assessment year 2014-15.
The revenue has raised the following substantial questions of law for
consideration :
"a. Whether on the facts and in the circumstances of the case the learned
Income Tax Appellate Tribunal has committed substantial error in law by not
appreciating the fact that Short Term Capital Loss of Rs.54,13,374/- claimed
and set-off by the assessee from sale of scrips of M/s. Tuni Textile Mills Ltd.,
M/s. Nikki Global Ltd., M/s. Unno Industries Ltd. etc. was correctly disallowed
by the assessing officer on the ground that the said scrips had been identified
as penny stocks used for generating bogus Short Term Capital Losses?
b. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT
has erred in law in failing to give credence to investigations made by the
Investigation Wing of the Income Tax Department and the findings of the
assessing officer duly recorded in the assessment order on the astronomical rise
in price of shares of M/s. Tuni Textile Mills Ltd., M/s. Nikki Global Ltd., M/s.
2
Unno Industries Ltd. etc. which had no net worth and no financial foundation
and the immediate sharp fall is share prices without any jurisdiction?
c. Whether the learned Income Tax Appellate Tribunal has committed
substantial error in law in deleting the disallowance of Short Term Capital Loss
made by the assessing officer in the order u/s. 143(3) even though the ratio of
the decision of the Hon'ble Jurisdictional High Court in the lead case of Pr. CIT
vs. Smt. Swati Bajaj squarely covers the issue of bogus Short Term Capital
Loss/Long Term Capital Gain from sale of penny stocks and also covered by
exceptions laid in respect of para 3.1(h) of CBDT's Circular no.5 of 2024 dated
March 15, 2024?
We have heard Mr. Prithu Dudheria, learned senior standing counsel for the
appellant/department. Despite service of notice on the respondent/assessee through
post as well as through e-mail, none appears for the respondent/assessee.
The assessing officer by an order dated 28.12.2016 completed the assessment
by the assessee for the year under consideration under section 143(3) of the Act. After
taking note of the facts and circumstances the assessing officer held that the entire
transaction done by the assessee was a pre-mediated scheme on the part of the
assessee to avoid taxes in the grab of bogus long term capital loss. Further, the
assessing officer on facts found that the market sources revealed that accommodation
entries are normally given at brokerage charge of @ 0.2% to 0.5% of the amount
involved. Accordingly, the assessing officer held that the observations of expenditure
remained unexplained and added back the same to the total income of the assessee
under section 69C of the Act. The assessee carried the order on appeal before the
Commissioner of Income Tax (Appeals)-10, Kolkata, [CIT(A)]. The CIT(A) re-appreciated
the factual position and by an order dated 14.9.2018 affirmed the order passed by the
assessing officer. The assessee carried the order on appeal to the learned Tribunal and
the learned Tribunal by the impugned order has allowed the assessee's appeal. The
discussion and finding of the learned Tribunal is contained only one paragraph,
3
namely paragraph 8 and the only observation made by the learned Tribunal is that the
addition cannot be sustained on the ground that it was based on the basis of the
surmise and conjecture. We are unable to persuade ourself to agree with the
conclusion arrived at by the learned Tribunal since the learned Tribunal did not
examine the factual aspect which was considered in detail by the assessing officer as
well as CIT(A). This Court had an occasion to consider another case which also related
to manipulation of the share price of penny stocks of M/s. Tuni Textile Mills Ltd. in
the case of Principal Commissioner of Income Tax-9, Kolkata vs. P.L. Goenka HUF,
ITAT/241/2024 and the appeal filed by the revenue was allowed by judgment dated
6.5.2025. The facts in the instant case are identical to that of the facts in the case of
P.L. Goenka HUF and the penny stocks in question also is in respect of the very same
company, namely, M/s. Tuni Textile Mills Ltd.
At this juncture, we refer to the relevant paragraphs of the judgment in the case
of P.L. Goenka HUF which are as follows:
"11. We have carefully perused the assessment order dated 25.09.2021. In
paragraph 2, the assessing officer sets out the information received from the
investigation wing vide letter dated 6.3.2020. It is not in dispute that the
assessee's name also figures in the information furnished by the investigation
wing. After setting out those details the assessing officer has taken note of the
return filed by the assessee dated 21.10.2020 and thereafter issued notice
under Section 143(2) of the Act. In paragraph 3, the assessing officer has
discussed the entire facts relating to the transactions done by the assessee in
respect of purchase of shares of M/s. Tuni Textiles Mills Ltd. and noted that the
value of the shares of the assessee is almost 4.5 times in a span of one year
and 2 months resulting in huge capital gains to the assessee. Thereafter, the
assessing officer has verified the contract note and the share certificate
submitted by the assessee and other details of the transactions done by the
assessee as well as the details furnished in the return of income and then has
stated that the facts and circumstances surrounding the transaction of shares of
M/s. Tuni Textiles Mills Ltd. and subsequent earning of exempt LTCG by the
assessee through the transaction in the said shares clearly indicate that the
4
claim of the assessee regarding earning of significant LTCG exempt under
Section 10(38) requires deeper investigation and analysis to uncover the real
nature of the alleged regular/prudent transaction. Thereafter, the assessing
officer has taken note of the background of the investigation done by the
department, discussed about the background of the company namely M/s. Tuni
Textiles Mills Ltd. and taken note of the profit and loss account of the said
company and its balance sheet, asset dt. March 31, 2012, statement of cash
flow for the year ended 31.03.2012 and come to the conclusion that the
fundamentals of the company are very weak and it clearly indicates that
abnormal price rise in the shares of the company is not natural or normal but
artificially manipulated. Further, noting the financial strength of the said
company the assessing officer has noted that the price of the shares rose
astronomically during the period May 2010 to March, 2011 from Rs.16/- to Rs.
271/-. With all these details, show cause notice was issued to the assessee on
03.09.2021 for which the assessee submitted their reply on 10.09.2021 and the
assessing officer took into consideration the stand taken by the assessee in
their reply and has recorded reasons to hold that the assessee has failed to
discharge the onus and, therefore, the only escapable conclusion is that
numerous individual assessees have taken entry to LTCG by paying its
unaccounted money. Furthermore, that the transaction in shares of M/s. Tuni
Textiles Mills Ltd. by the assessee was a pre-arranged transaction in the form of
accommodation entry managed through collusive transactions by group of entry
operators and shell entities. Thereafter the assessing officer has taken note of
the various decisions, namely, CIT Vs. Durga Prasad More reported in (1971)
82 ITR 540(SC), Sumati Dayal Vs. Commissioner of Income Tax reported
in (1995) 214 ITR 801 (SC), applied the test of human probabilities as
propounded in the said decisions and then completed the assessment and has
pointed out that before finalizing the assessment a final show cause notice was
issued on 18.09.2021 for which the assessee submitted reply on 22.09.2021
and the said reply was also considered and the assessing officer has pointed
out that the assessee has not submitted any new evidence in response to the
show cause notice. Therefore, the learned Tribunal committed an error in
coming to a conclusion that the assessing officer has not applied his mind for
reopening the assessment under Section 147 of the Act.
5
12. That apart, the learned Tribunal has not examined the reasons set out by the
appellate authority which has re-examined the factual position, taken note of the
grounds raised by the assessee and their oral submissions and has in detail
discussed about the lowering of funds and how the funds reached the
concerned beneficiaries and has factually found that the assessee is one of the
beneficiaries who received accommodation entry which was used to avail bogus
LTCG/STCL. The various decisions of the Hon'ble Supreme Court were taken
into consideration and the appeal was dismissed. Therefore, we find that the
learned Tribunal committed a serious factual error in coming to the conclusion
that there was no application of mind of the assessing officer and erroneously
elevated the status of CBDT which is meant as a guiding note of the assessing
officer to have an effect of regulation. Therefore, the order impugned in this
appeal deserves to be quashed.
13. Accordingly, the appeal filed by the revenue is allowed and the substantial
questions of law raised by the revenue are answered in favour of the revenue."
As noted above, since in the present appeal the shares of the very same
company, namely, M/s. Tuni Textile Mills Ltd. is concerned, the findings recorded in
the decision in P.L. Goenka HUF will squarely apply to the facts and circumstances of
the case.
For the above reason, the revenue succeeds in this appeal. Accordingly, the
appeal is allowed and the order passed by the learned Tribunal is set aside and the
order passed by the assessing officer as affirmed by the CIT(A) are restored.
Consequently, the substantial questions of law are answered in favour of the
appellant/revenue.
GA/1/2024 stands disposed of accordingly.
.
(T.S. SIVAGNANAM)
CHIEF JUSTICE
(CHAITALI CHATTERJEE (DAS), J.)
Pkd./mg
AR[CR]
