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Facts
The Assessee's case was reopened for Assessment Year 2011-2012 under Section 147 due to information regarding bogus Long Term Capital Gains (LTCG) from the sale of Splash Media and Infra Ltd. shares. The Assessing Officer (AO) made additions under Section 68 (for sale consideration of INR 60,38,196/-) and Section 69C (for unexplained expenditure of INR 1,81,146/-), concluding that the share transactions were sham devices to introduce unaccounted cash. The CIT(A) upheld these additions, dismissing the Assessee's appeal.
Held
The Tribunal noted that the Assessing Officer had not considered a crucial SEBI Report (dated 11.10.2017) which found no manipulation in the scrip of Splash Media & Infra Ltd. and drew no adverse inferences. Citing a similar case where additions were deleted based on this report, the Tribunal decided to set aside the additions made by the Assessing Officer. The matter was remitted back to the Assessing Officer for fresh adjudication, with directions to procure and consider the SEBI Report and all other relevant assessment records.
Key Issues
Whether the Long Term Capital Gains from the sale of shares, claimed as exempt under Section 10(38), were genuine transactions or bogus/accommodation entries, and the validity of additions made under Section 68 and Section 69C of the Income Tax Act.
Sections Cited
147, 143(3), 10(38), 68, 131, 142(1), 69C, 143(1), 133(6), 132(4), 133A, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
order : 23.12.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 21/05/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 22/12/2017, passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2011-2012.
The Assessee has raised following grounds of appeal :
1. 1. 1. 1. “1. The Ld. CIT(A) erred in ignoring the fact that the acquisition of shares was on the floor of stock exchange and NOT in an offline/physical manner.
Assessment Year 2011-2012 2. The Ld. CIT(A) was not justified in ignoring the third proviso to section 10(38) which, though inserted by Finance Act 2018, supports the case of the Assessee.
3. The Ld. CIT(A) erred in not taking into consideration the evidences placed before him.
4. The Ld. CIT(A) failed to note that the Ld. AO had placed sole reliance on a third party statement(s) and the assessee had not been given any opportunity of cross-examination.”
The relevant facts in brief are that the Assessee is an Individual. For the Assessment Year 2011-2012, the Assessee filed his Return of Income on 10/01/2013 declaring income of INR.4,44,110/-. The said Return was initially processed under Section 143(1) of the Act. Subsequently the case of the Assessee was taken up for reassessment under Section 147 of the Act for the reasons that the Assessing Officer received certain information from the Director General of Income-tax (Investigation), Kolkatta about penny stock companies; and that the Assessee was one of the beneficiaries who has availed such bogus/accommodation entry of Long Term Capital Gains arising from purchase/sale of shares of Splash Media and Infra Ltd. During the assessment proceedings, the Assessing Officer noted that the Assessee has earned Long Term Capital Gains on sale of shares of Splash Media and Infra Ltd. [hereinafter referred to as ‘the Shares’] of INR.51,92,689/- which was claimed to be exempt under Section 10(38) of the Act. The Assessing Officer took into consideration the report of the Investigation Wing and thereafter, recorded the statement of the Assessee under Section 131 of Act. Sequent thereto, a show cause notice, dated 12/12/2017, was issued by the Assessing Officer under Section 142(1) of the Act requiring the Assessee to provide explanation regarding the capital gains exemption claimed by the Assessee and to show cause why the same should not be denied and an addition of INR.60,38,196/- should not be made under Section 68 of the Act. In response the Assessee filed Reply Letter, dated Assessment Year 2011-2012 22/02/2017, reiterating its contention that the transactions of purchase/sale of Shares were genuine transactions. The purchase/sale of Shares was made through stock exchange and made payment through regular banking channel. However, the Assessing Officer is not convenience with the explanation offered by the Assessee and after taken into consideration reply/documents furnished by the Assessee, the Assessing Officer concluded that the Assessee had earned huge Long term Capital Gains from purchase/sale of Shares which have been claimed to be exempt under Section 10(38) of the Act. The entire edifice was a colourable device adopted to give colour of genuineness the transactions through which the Assessee had brought back own unaccounted cash into the books. The Assessing Officer concluded vide Assessment Order, dated 22/12/2017, passed under Section 147 read with Section 143(3) of the Act that considering the findings of the search/survey, inquiries conducted in the case of Assessee, brokers, operators and the entry providers and the nature of transaction entered into by the Assessee, the Long Term Capital Gains exemption claimed by the Assessee on account of sale of Shares of Splash Media & Infra Ltd. under Section 10(38) of the Act cannot be allowed. Thus, amount of INR.60,38,196/- received as sales consideration on sale of Shares was added in the hands of the Assessee under Section 68 of the Act under the head 'Income from Other Sources'. Further, the Assessing Officer also made an addition of INR.1,81,146/- under Section 69C of the Act holding the same to be unexplained expenditure incurred by the Assessee for obtaining bogus accommodation entry of Long Term Capital Gains.
4. Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) challenging the assessment framed by the Assessing Officer vide Assessment Order dated 22/12/2017 passed under Section 147 read with Section 143(3) of the Act. The Learned CIT(A) dismissed the appeal preferred by the Assessee vide order 21/05/2025. The Learned Assessment Year 2011-2012 CIT(A) confirmed the additions made by the Assessing Officer concluding that the transaction of purchase/sale of Share entered into by the parties were sham transaction undertaken to avoiding tax liability.
Being aggrieved, the Assessee has preferred the present appeal before the Tribunal on the grounds reproduced in Paragraph 2 above.
6. During the appellate proceedings both the sides have reiterated the stand taken before the authorities below.
The Learned Authorised Representative for the Assessee submitted as under:
The Assessee has earned Long Term Capital Gain on sale of (a) 57,100 shares of Spalsh Media and Infra Ltd [also referred to as ‘the company’] during the year. The total sale proceeds of the shares is INR.60,13,055/- (as against INR.60,38,196/- wrongly considered by the assessing officer) and the cost for the same is INR.8,20,366/-. The shares are sold through M/s. Comfort Securities Ltd. on the recognized stock exchange and due STT has been paid on the sale of the shares. The details about the acquisition of shares and the other relevant events are explained in the subsequent paragraphs.
On 25/3/2009, the appellant had purchased 15000 shares of (b) Splash Media and Infra Ltd. The shares were purchased through the broker M/s. Comfort Securities Ltd. It is pertinent to note that the shares were purchased on the recognized stock exchange and due STT was also paid at the time of purchase of the shares. In the assessment order, the assessing officer has mainly proceeded on a presumption that the shares were purchased by an appellant in an off market transaction. However, it is respectfully submitted that the said assumption of Assessment Year 2011-2012 the assessing officer is absolutely incorrect and the shares have been purchased on the floor of the stock exchange.
The total cost of 15000 shares was INR.15,28,848/- which was (c) paid by the appellant through account payee cheque. A.s such, it is pertinent to note that the cost of the share at the time of the purchase of shares was INR. 101.92 per share. It is obvious that a share having market price of INR. 101.92 cannot be considered to be a penny stock as is understood in common parlance.
The delivery of the shares was received in the demat account of (d) the Assessee immediately on purchase of the shares and the same has since been lying in the said demat account of the Assessee.
On 17/11/2009, the company issued bonus shares to the (e) shareholders. The bonus shares were issued in the ratio of 1:3 i.e. three bonus shares were issued against each original share held by the shareholders. Accordingly the Assessee received 45000 shares as bonus shares by virtue of his holding 15000 shares in the company. Here also it is very relevant to note that the company had issued bonus shares. As per the provisions of the Companies Act, a company has to issue bonus shares out of its free The bonus shares cannot be given in absence of suitable amount of free available with the company. Accordingly, it is very relevant to note that the company had sufficient free reserves so as to give bonus shares in the ratio of 1:3 which is very huge ratio. A company which issues 3 bonus shares for each share held by the shareholders cannot be treated as a penny stock by any stretch of imagination.
On receipt of 45000 bonus shares, total holding of the Assessee (f)
Assessment Year 2011-2012 became 60000 shares. Out of these, the appellant sold 2600 shares during the period of 04/06/2010 to 22/07/2010. Total sale proceeds for these 2600 shares was INR.18,82,077/- (Average price of INR. 723.88). As such the balance shares left as on 22/7/2010 was 57,400/-.
On 31/7/2010, the company did a stock split in the ratio of 1:10 (g) by reducing the paid up capital per share from INR.10/- to INR.1/- per share. Accordingly the appellant got 5,74,000 shares, with paid up value of INR. 1/- per share, against his holding of 57,400 shares with paid up value of INR.10/- per share.
Out of total 5,74,000 shares, the Assessee had sold 54,500 (h) shares in five different lots during the period from on 30/8/2010 to 4/1/2011. Total Sale proceeds of these shares was 41,30,978/-. As such the total sale proceeds of the shares for F.Y. 2010-11 is INR. 60,13,055/- and the resultant Long Term Capital Gains is INR. 51,92,689/-.
The shares were sold on Bombay Stock Exchange through M/s. (i) Comfort Securities Ltd., who is the regular stock broker of the appellant. The sale consideration for the sale of shares was also received by cheque from Comfort Securities Ltd. and the same credited in the regular bank account of the Assessee with Abhyudaya Co. Op. Bank Ltd., Sewri Branch, on various dates during the F.Y. 2010-11.
The Assessing Officer and the Learned CIT(A) has failed to (j) consider the fact that the acquisition of Shares as well as the Sale of Shares was done through stock exchange.
The Assessing Officer had placed sole reliance on a third party (k) statement(s) and that the Assessee was not given any Assessment Year 2011-2012 opportunity of cross-examination Reliance was placed upon, inter alia, the decision of Mumbai (l) Bench of the Tribunal in the case of Varshaben Laherikant Bhadra Vs. ITO 25(3)(1) [ITA No.1665/Mum/2024, Assessment Year 2011-2012, dated 19/05/2025.
8. Per Contra, the Learned Departmental Representative placed reliance upon the order passed by the Assessing Officer and made following submission:
(a) the Assessment Order as well as order passed by the Learned CIT(A) were well-reasoned orders based on cogent evidence from investigations by the Directorate of Investigation, Kolkata and Mumbai, SEBI findings, and the modus operandi of penny stock manipulations. The transactions in shares of Splash Media and Infra Ltd. (now Luharuka Media and Infra Ltd.) were pre- arranged to convert unaccounted income into exempt LTCG, warranting the additions. The Appellant's grounds lack merit and are liable to be dismissed.
(b) Mere listing on a stock exchange or payment of STT does not immunize rigged transactions from scrutiny. Investigations had revealed Splash Media and Infra Ltd. was a penny stock manipulated by operators like Shri Anil Agarwal (Director in Comfort Securities Ltd., the Appellant's broker) to provide accommodation entries for bogus LTCG.
(c) The AO and CIT(A) had analyzed the modus operandi. The investigations revealed that (a) the Shares were acquired at low prices, (b) the prices were artificially rigged (e.g., from Rs. 101.92 to over Rs. 700 in months, despite poor fundamentals) and (c) the Shares were sold to entry providers routing unaccounted cash. BSE data had shown unnatural price surges Assessment Year 2011-2012 (nearly 4x) not aligned with market trends or company performance. The Appellant's Demat Statements and contract notes are self-serving documents drawn up to support a pre- arranged scheme. Surrounding circumstances (e.g.no knowledge of company fundamentals, as admitted in statement u/s 131) indicate human conduct inconsistent with genuine investment. The acquisition, though on exchange, was part of a controlled circuit to evade tax.
(d) The Revenue does not dispute that the transactions happened on the stock exchange or that the assessee possesses contracts notes and bank statements. However, form cannot override substance. The Revenue has successfully demonstrated that the stock exchange platform was misused as a facade for a pre- ordained scheme. The sheer astronomical rise in the share price (from-2102 to 2724) of a company with negligible net worth and business activity defies all fundamental market logic. The presence of documents only proves the movement of shares and money, not the genuineness of the underlying intention, which was to launder unaccounted money. The Hon'ble Supreme Court in CIT vs. Durga Prasad More and Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), has consistently held that the Revenue is entitled to look behind the apparent form of a transaction to discover its true nature. In Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), the Court held that apparent transactions must be tested against human probabilities and surrounding circumstances, if unnatural, they can be treated as bogus, Here, the phenomenal rise (4849% in similar cases) defies logic without manipulation. In the case of ITO vs. Kailash Chandra Gupta (HUF) (2024), the Court upheld addition w/s 68 for penny stock LTCG, denying exemption u/s 10(38) despite exchange transactions, as evidence showed price rigging.
(e) The Assessee claims that the evidences (contract notes, demat statements, bank records) were ignored by the Assessing Officer and the Learned CIT(A). However, all the evidence were examined and rejected as it was but found during the investigation that the transaction of sale/purchase of Shares were part of a sham. The Assessee had failed to explain poor fundamentals or connections to operators.
(f) The Assessing Officer had confronted the Assessee with the statements on 20/11/2017, and the Assessee stated that the Assessee had ‘no comments’ to offer. Further, the Assessee did not even request for cross-examination. In the present case, reliance was not based solely upon the aforesaid statements as the same were corroborated by BSE data, SEBI findings, and modus operandi.
(g) The principle of natural justice is not an absolute rule to be followed in a vacuum, especially when dealing with a large- scale, orchestrated scheme. The statements of Shri Anil Agarwal (the operator) and others were recorded by the Investigation Wing and were not merely hearsay but formed part of a larger investigation report that uncovered a specific modus operandi. The Assessee's transaction perfectly fit this modus operandi. Furthermore, the Assessee was confronted with these statements during assessment proceedings and failed to provide a credible rebuttal. The inability to cross-examine becomes less critical when the circumstantial evidence is overwhelming and the Assessee's own testimony recorded under Section 131 of the Act revealed a complete lack of knowledge about the company he invested in, which is fatal to his case. Assessment Year 2011-2012 (h) Proper investigation was carried out by the Assessing Officer during the assessment proceedings. Notices under Section 133(6) of the Act were issued to the buyers of the Shares who provided the exit and the same were returned unclaimed or unanswered, proving they were paper entities/exit providers.
(i) The Assessee in statement recorded under Section 131 of the Act revealed that he was a non-serious investor with zero knowledge of the company's fundamentals, who invested based on ‘friends and family’ advice. This behavior is inconsistent with a genuine investor making a high-stakes investment.
(j) It is well-settled that the Revenue can base its findings on circumstantial evidence, surrounding circumstances, and human probabilities to uncover the truth, especially in cases of sophisticated tax evasion where direct evidence is rarely available. The standard of proof is not "beyond reasonable doubt" but "preponderance of probability," which has been conclusively met in this case by the Assessing Officer.
(k) The estimation of commission expenses of 3% is based on the statements of brokers and operators recorded during the investigation, which revealed a standard rate of 2-4% charged for such accommodation entries. Given that the main transaction of introducing 260 lakhs of unaccounted money has been established as non-genuine, the incurrence of expenditure to facilitate it is a logical corollary. The Assessee had offered no explanation for the source of such expenditure. Therefore, the addition under Section 69C of the Act was justified on the principles of human conduct and probability.
(l) The appeal of the assessee is devoid of merit. The orders of the AO and the CIT(A) are based on a meticulous appreciation of Assessment Year 2011-2012 facts, a correct application of the law regarding the nature of evidence in tax proceedings, and a proper invocation of the ‘preponderance of probability’ doctrine. The Assessee has failed to discharge the primary onus of proving the genuineness of the transactions, the creditworthiness of the counterparties, and the commercial rationale behind the investment.
We have given thoughtful consideration to the rival submission and have perused the material on record.
We find that the Assessee had placed before the Assessing Officer following documents and details to discharge the primary onus cast upon the Assessee under Section 68 of the Act: S. Document Page No. No. 1. Return/computation for Assessment Year 2011-2012 - 1 to 7 2. Brokers’ note/Brokers’ Ledger pertaining to - 8 to 9 purchase/acquisition of shares, payment of securities transaction tax 3. Depository Statement disclosing acquisition/purchase - 10 to 11 of shares 4. Bank Statement of the Assessee evidencing payment - 12 to 13 of purchase consideration 5. Depository Statement after recording transaction of - 14 to 24 bonus and splitting of shares 6. Brokers’ note pertaining to sale/transfer of shares for - 25 to 34 each of the five lots in which the shares were sold 7. Depository Statement disclosing sales of shares - 35 to 40
On perusal of the Assessment Order, we find that the Assessing Officer had carried out necessary inquiry/investigation from which it emerged that a search under Section 132 of the Act was carried out in the case of Mr. Anil Agarwal and his group entities. It was found that Mr. Anil Agarwal was an operator and was engaged in manipulation of price of shares of Splash Media and Infra Limited. Mr. Anil Agarwal Assessment Year 2011-2012 was a director in, both, Splash Media and Infra Limited and Comfort Secutities Pvt Ltd. (a stock broking company). The Assessee had carried out purchase/sale of shares with Comfort Securities Pvt. Ltd. as registered stock broker. The Assessing Officer also identified exit providers (listed in paragraph 9.1 of the Assessment Order) and had issued notices, dated 21/09/2017, under Section 133(6) to the Act calling for demat account details, period of holding of shares, source of funds utilized and return of income. It has been recorded in Paragraph 9.2 of the Assessment Order that many of the said notices were returned unclaimed and even in case of notices which were served, no reply was received. After taking into consideration the report of investigation wing, statements of various parties recorded under Section 132(4)/133A of the Act and the order passed by SEBI in the case of First Financial Services Limited (dated 19/12/2014), the Assessing Officer rejected the documentary evidence furnished by the Assessee and made additions under Section 68 (INR.60,38,196) and Section 69C (INR.1,81,146) of the Act. In appeal the Learned CIT(A) has concurred with the Assessing Officer and confirmed the additions made by the Assessing Officer under Section 68/69C of the Act. In our view, in the present case on account of inquiries/investigation carried out by the Assessing Officer the onus had shifted on the Assessee. Based upon the material on record the Assessing Officer/CIT(A) had made/confirmed the additions. However, in the appellate proceedings before us, the Assessee has placed before us a decision of Co-ordinate Bench of the Tribunal, dated 19/05/2025, passed in in the case of Varshaben Laherikant Bhadra Vs. ITO 25(3)(1), for the Assessment Year 2011-2012. On perusal of the aforesaid decision we find that that the co-ordinate Bench of the Tribunal had deleted identical additions made by the Assessing Officer under Section 68 of the Act in respect of purchase/sale of shares Splash Media and Infra Limited holding as under: Assessment Year 2011-2012 “3. Brief facts are that assessee is an individual, derives income from other sources, dividend income and capital gains. She has filed return of income for the A.Y. 2011-12 on 30.07.2011 declaring total income of Rs. 6,98,041/-. Later on, on the basis of information received through ITD system that Pr. DIT (Inv.), Kolkata had made investigation regarding sale of bogus capital gain / loss to penny stock, Assessee case was reopened u/s. 147 of the Act and accordingly notice u/s. 148 of the Act was issued on 09.10.2016. Ld. AO in his assessment order has mostly reproduced the findings of the investigation wing and the general modus operandi adopted by the entry providers. Assessee had purchased 2500 shares of M/s. Splash Media (name changed to Luharuka Media & Infra Ltd from 19.08.2015 onwards) for Rs. 3,27,496/- on 19.08.2009 through Alliance Finstock, a broker duly registered with SEBI by executing purchase order online on BSE's electronic trading platform for execution of sale & purchase order of securities for which she has received delivery directly in D-MAT account maintained with Axis Bank Ltd. For the purchase of shares, assessee has made payment on 18.09.2009 though an account payee cheque drawn on Axis Bank Limited and the shares were delivered in D-Mat form in her D-Mat account on 08.12.2009. There after company has declared Bonus in the ratio of 3:1 on 23.12.2009 i.e. three bonus shares for every share held on record date. Hence the assessee was eligible to 7,500 bonus shares. The said bonus shares were credited to her D-Mat account on 31.12.2009 making total holding of 10,000 shares as on 31.12.2009. The company split the stock in the ratio of 10:1 i.e. Rs.10 per share was split into Re. l per share. Thereby taking the assessee's holding of shares to 100,000 shares of Rs. 1 each as on 02.08.2010. The contention of the ld. AO is that the shares of M/s. Splash Media & Infra Ltd. was received on preferential basis or in amalgamation or merger of any private company with listed company or in off-market transaction has been stated to be incorrect.
The assessee has sold the shares through Bombay Stock Exchange through broker M/s. Alliance Finstock Limited on various dates for a total value of Rs. 1,00,99,878/- after paying STT. The details of sale are as under: Date of Sale Quantity Gross Net Consideration Consideration 16.12.2010 2500 1,87,500 1,89,172 Xx xx xx xx 1,00,000 1,00,99,878 99,75,116 Assessment Year 2011-2012 5. The sale consideration was credited in bank account, thus the purchase and sale were done online on the electronic platform of Bombay Stock Exchange.
Ld. AO observed that the market prices of the shares were around Rs.3.26 in August 2009 and the price was jacked up to Rs.72 till September 2010 which was nearly 22 times and thereafter the prices went steeply low. Apart from that, he noted that M/s. Splash Media & Infra Ltd. had network of Rs.15 Crores during March, 2011 and reserves were Rs.1.89 crores and the total turnover of the company was Rs. 5.35 crores. Accordingly he deduced that it is a penny stock. In the assessment order he has also mentioned that some letters u/s. 133(6) of the Act were issued to the exit providers who purchased the shares from the assessee along with other details, however, these notices were returned back un-served. But nowhere AO has brought on records who were the entry providers or is there any adverse information or material against exit providers who has bought the shares online from BSE. Thereafter he has highlighted the observations of the Investigation Wing and treated the entire amount received through sale of shares of Rs. 1,00,99,878/-as bogus and added the same u/s. 68 of the Act. He further added commission @3% u/s. 69C of the Act which assessee might have incurred for making the arrangement of bogus long term gain.
7. Ld. CIT(A) has confirmed the addition on the same reasoning as done by the ld. AO which is mostly relying upon the investigation report.
We have heard the rival submissions and also perused the relevant findings in the impugned orders. Apart from the fact that the shares were purchased and sold only on electronic platform of Bombay Stock Exchange through registered stock broker from SEBI after paying STT, it has been brought on record by the Ld. Counsel that husband of the assessee was a regular trader and investor in shares and assessee had also made investments in several other shares. Thus assessee was also a regular investor in shares. During the course of hearing we had enquired from the assessee whether there is any investigation or finding of the SEBI on the scrip of M/s. Splash Media & Infra Ltd., now known as Luharuka Media & Infra Ltd. It has been brought on record that on 31.10.2017 the department had sent a letter along with the report of Director of Income Tax, Investigation, Kolkata with regard to investigation of the scrip of M/s.
Assessment Year 2011-2012 Splash Media & Infra Ltd. The General Manager, Investigation Department of SEBI vide report dated 11.10.2017 have submitted the report of the Investigation Wing and also to the ACIT, Central Circle - 4(4), Mumbai that the investigation of SEBI did not find violation of provisions of the SEBI Act, 1992 and SEBI (PFUTP) Regulations. Along with the letter there is a confidential report given to Pr.DIT (Investigation), Kolkata which had sought for the information regarding the alleged manipulation in market price of shares of certain companies including M/s. Splash Media & Infra Ltd. The SEBI in his report has analysed the volume and price of the trading of the M/s. Splash Media & Infra Ltd. for various patch starting from 15.09.2009 onwards. In their exhaustive report they categorically stated that there was no manipulation pattern observed in the trading of M/s. Splash Media & Infra Ltd. and therefore no adverse inference is drawn. The report deals with all the buyers and the sellers of the scrip in the Stock Exchange in various periods and after detailed examination and inquiry, in the report it is categorically stated that in none of the period there was no specific instance or manipulative pattern which can show that price was rigged or scrip was manipulated to provide any accommodation entry. Thus it was reported that there was no manipulation and no adverse has been drawn. Since it is an exhaustive report, therefore the contents of the same cannot be reproduced. This SEBI report itself clarifies the doubts of the ld. AO and also Director, Investigation Wing, Kolkata who had specifically referred this matter that it should be further investigated by the SEBI. SEBI did not find any manipulation in the prices or that the prices were rigged by some entities either by the buyers or by the sellers and no adverse inference have been drawn even with regard to the exit providers. Thus, the SEBI report itself absolves the case of the assessee.
9. Moreover, the entire premise of the ld. AO is based on that the DIT (inv.) Report which itself has been clarified by the SEBI to the Investigation Wing to whom specific information was shared by the Pr.DIT, Investigation, Kolkata. Once in the investigation it has been held that there was no manipulation in the scrip of M/s. Splash Media & Infra Ltd., and the trading at Bombay Stock Exchange was genuine and the prices quoted in the Stock Exchange over the time were in accordance with the SEBI Rules Assessment Year 2011-2012 and Regulations, no adverse can be drawn in the case of assessee. Accordingly, in view of the documents submitted by the assessee as well as the report of the SEBI specifically with regard to the M/s. Splash Media & Infra Ltd., the transaction of purchase and sale of shares online through Bombay Stock Exchange cannot be held to be bogus or nongenuine and accordingly, addition of Rs.1,00,99,878/- made u/s. 68 of the Act is deleted. Consequentially, the adhoc commission made @3% is also deleted.” (Emphasis Supplied) 12. On perusal of above, we find that the Co-ordinate Bench of the Tribunal has relying upon SEBI Report made following observations:
(a) On 31/10/2017 the department had sent a letter along with the report of Director of Income Tax, Investigation, Kolkata with regard to investigation of the scrip of M/s. Splash Media & Infra Ltd. The General Manager, Investigation Department of SEBI vide report dated 11/10/2017 have submitted the report of the Investigation Wing and also to the ACIT, Central Circle -4(4), Mumbai that the investigation of SEBI did not find violation of provisions of the SEBI Act, 1992 and SEBI (PFUTP) Regulations. Along with the letter there is a ‘confidential report’ given to Pr.DIT (Investigation), Kolkata.
(b) The SEBI in his report has analysed the volume and price of the trading of the M/s. Splash Media & Infra Ltd. for various patch starting from 15.09.2009 onwards.
(c) The report deals with all the buyers and the sellers of the scrip in the Stock Exchange in various periods and after detailed examination and inquiry, in the report it is categorically stated that in none of the period there was no specific instance or manipulative pattern which can show that price was rigged or scrip was manipulated to provide any accommodation entry.
(d) SEBI did not find any manipulation in the prices or that the Assessment Year 2011-2012 prices were rigged by some entities either by the buyers or by the sellers and no adverse inference have been drawn even with regard to the exit providers.
In the present case the Assessing Officer did not have the benefit of the above SEBI Report while framing the assessment. The said SEBI Report does not even form part of the record before us. However, in view of the above observations made by the Co-ordinate Bench of the Tribunal (noted in paragraph 11 & 12 above) which support the case of the Assessee in appeal before us, we deem it appropriate to set aside the additions made by the Assessing Officer under Section 68 (INR.60,38,196) and Section 69C (INR.1,81,146) of the Act in respect of purchase/sale of shares of Splash Media & Infra Ltd with the directions to the Assessing Officer adjudicate the issue afresh after procuring and taking into consideration the above SEBI Report (along with other material forming part of the assessment record). Since we have remitted the issue back to the file of the Assessing Officer all the rights and contentions of the Assessee are left open. In terms of the aforesaid all the grounds raised by the Assessee are treated as allowed for statistical purposes without returning any finding on merits.
In terms of above, the appeal preferred by the Assessee is treated as allowed for statistical purposes.
Order pronounced on 23.12.2025.