ALPESH K. AJMERA HUF ,MUMBAI vs. INCOME TAX OFFICER WARD 18(1)(1), MUMBAI

Per: SHRI. SANDEEP GOSAIN, J.M.:

The present appeal has been filed by the assessee challenging the impugned order dt. 07.05.2025 passed by National Faceless Appeal Centre, Delhi (NFAC) / CIT(A).The assessee has raised the following grounds of appeal:
1. THE ORDER
BAD,
ILLEGAL
AND WITHOUT
JURI ICTION
1.1 In the facts and the circumstances of the case, and in law, the appellate order framed by the Commissioner of Income tax (Appeals) - 51, Mumbai ["Ld. CIT (A)"] be held as bad and illegal, as the same is framed in breach of the statutory provisions and the scheme and as otherwise is not is not in accordance with the law.

2
Alpesh K. Ajmera HUF Mumbai.

3
Alpesh K. Ajmera HUF Mumbai.

WITHOUT FURTHER PREJUDICE TO THE ABOVE
4.1 The Ld. CIT (A) erred in confirming the addition made by the A.O. of Rs.1,02,054/- u/s. 69 of the Act, on account of alleged estimated unexplained expenses.
4.2 While doing so, the Ld. CIT (A) erred in:
(i) Basing his action only on surmises, suspicion and conjecture;
(ii)
Taking into account irrelevant and extraneous considerations; and (iii)
Ignoring relevant material and considerations as submitted by the Appellant.
4.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for.
4.4 Without prejudice to the above, assuming but not admitting
- that some addition was called for, it is submitted that the computation of the addition made by the A.O. is arbitrary, excessive and not in accordance with the law.
LIBERTY
5. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.
2. All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of Ld. CIT(A) in sustaining the additions made u/s 68 and 69C of the Act. Therefore we have decided to adjudicate these grounds through the present consolidated order.
3. We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records, we noticed that a search action u/s 132 was carried out on 25.07.2013 at the residence and business premises of Shri Alpesh Kishore

4
Alpesh K. Ajmera HUF Mumbai.

Ajmera and family members, wherein it was revealed that the assessee M/s Alpesh Kumar Ajmera (HUF) is one of the beneficiaries who has taken bogus long term capital gain from sale of shares of M/s Prraneta Industries Ltd., (Now known as M/s. Aadhar Ventures India Ltd.) at Rs.
49,49,720/- for the year under consideration. Therefore case of the assessee reopened u/s 147 of the Act and AO concluded that value of sale consideration of Rs.
51,02,720/- for shares of M/s. Aadhar Ventures India Pvt
Ltd is ‘accommodation entry’, accordingly made additions u/s 68 and 69C of the Act in the total income of the assessee on account of unexplained cash credit and unexplained expenditure respectively and the said additions were also upheld by Ld. CIT(A) thereby disposing the appeal filed by the assessee.
4. After having heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records we noticed that based on the search action it was revealed that the assessee had obtained bogus long term capital gain from sale of shares of M/s. Aadhar Ventures India Pvt Ltd amounting to Rs.
49,49,720/-, however in order to counter these allegation the assessee during the course of assessment proceedings submitted explanations along with supporting documents, including demat statements, contract notes, bank statements, and other evidences to substantiate the 5
Alpesh K. Ajmera HUF Mumbai.

purchase and sale of the shares. The Assessing Officer examined the material and also took note of the findings of the Investigation
Wing,
Ahmedabad, which allegedly revealed a penny stock accommodation entry mechanism in respect of the scrip Prraneta Industries Ltd.
5. Thereafter AO concluded that there was abnormal price rise which is not backed by financial fundamentals and the entire transactions represented prearranged accommodation entry, treating the sale proceeds as ‘unexplained cash credit’ u/s 68 of the Act. Whereas Ld.
AR specifically submitted that investigation
Wing”,
“Findings in the case of Assessee”, “Share Purchase/Sale
Analysis”, the Ld. AO has explained the Modus Operandi of the Unscrupulous
Operators, who were engaged in providing accommodation entries for Profit/Loss in various
Shares considered as “Penny Stocks”.
6. Apart from the above, the assessee also furnished the following documentary evidences:
i.
Payment made from accounts payee cheque.
ii.
Said investment is duly supported with Contract Notes.
iii.
Said transaction covered in DEMAT Account.
iv.
Said Investment sold by sold by DEMAT and duly supported with contract notes.
v.
Payment received from proper banking channels.
vi.
It is under various regulations like SEBI, Service Tax and etc.
vii.
Without purchases sales cannot taken Place.
viii.
STT paid evident from contract notes.

6
Alpesh K. Ajmera HUF Mumbai.

7
Alpesh K. Ajmera HUF Mumbai.

v.
No tangible document provided to the Appellant.
vi.
The documentary evidences submitted by the Appellant during the course of assessment proceeding was neither verified nor examined nor anything contrary and conducive evidences were brought on record.
vii.
The Ld. AO made the addition on mere ground that Mr.
Shirish Chandrakant Shah had given statement that he is providing the bogus share transaction entries. However, the Ld. AO failed to consider that addition cannot be made on mere general Statement of Mr. Shirish Chandrakant
Shah where no opportunity of cross examination was given to the appellant.
viii. The fact that remains right from assessment till date is that nowhere entry operator Mr. Shirish Chandrakant
Shah has named the assessee in any of his such statement nor the Revenue has filed any such evidence to this effect.
ix. And finally Mr. Shirish Chandrakant Shah has retracted from his statement.
10. Reliance in this regard is also placed upon the decision, wherein under the identical circumstances involving the same scrip the matter was decided by the different Benches of the Tribunal in the following cases.
S.N.
CITATION
OBSERVATION

[2024]
164
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(Ahmedabad - Trib.)
IN THE ITAT
AHMEDABAD
BENCH
'D'
Vicky Rajesh Jhaveri v.
Deputy
Commissioner of Income-tax*
IT APPEAL NOS. 423
TO 428
(AHD.)
OF 2023
INCOME TAX : Where assessee, dealing in shares, claimed a trading loss in scrip of certain company, since all transactions were conducted through registered stockbrokers and there was no complaint filed by any of party either to SEBI or stock exchange about assessee or brokers that it was involved in manipulation of prices of shares, allegation of revenue that there was manipulations in scrip for providing accommodation entries could not be accepted for disallowing claim of assessee
Section 69A of the Income-tax Act, 1961 -
Unexplained moneys
-
Assessment years
2010-11 to 2012-13 - Unexplained moneys -

8
Alpesh K. Ajmera HUF Mumbai.

[ASSESSMENT
YEARS 2010-11 TO 2012-13]
Assessee was dealing in share - He claimed trading loss in script of M/s ‘P’- Revenue alleged that assessee had carried out transactions in script of M/s ‘P’ in connivance with SCS - Basis for holding so was that it was discovered during search proceedings at premises of SCS that company namely M/s ‘P’
was engaged in providing accommodation entries through involvement of SCS
-
Accordingly, trading loss claimed by assessee was disallowed - It was noted that all transactions were carried out by assessee at stock exchange through involvement of registered/ stockbrokers and revenue had not established any link between SCS/ M/s ‘P’
viz a viz registered stockbrokers which was necessary for carrying out manipulation in script in dispute - Likewise, it was also noted that there was nothing on record suggesting that there was any enquiry conducted either by SEBI or stock exchange with respect to trading in script of M/s ‘P’ - Similarly, there was no complaint filed by any of party either to SEBI or stock exchange about assessee or brokers or M/s ‘P’ that it was involved in manipulation of prices of shares - Moreover, name of M/s ‘P’ did not appear in report of investigation wing - Whether just modus operandi, generalisation, preponderance of human probabilities could not be only basis for rejecting claim of assessee, unless specific evidence was brought on record to prove that assessee was involved in collusion with entry operator/ stockbrokers for such a scam -
Held, yes - Whether in absence of any finding specifically against assessee in investigation wing report, assessee could not be held to be guilty or linked to wrong acts of persons investigated with respect to his trading loss claim - Held, yes [Paras 9.4, 9.5, 9.6, 9.7, 9.9
and 9.10] [In favour of assessee]

9
Alpesh K. Ajmera HUF Mumbai.

IN THE INCOME TAX
APPELLATE
TRIBUNAL,
‘’D’’
Circle-1(1),
Ahmedabad
Assessment
Year
:
2010-11 to 2012-13
ITA No. : Nos.423 to 428/Ahd/2023
In this case, a trading loss of Rs.
42,14,344/- claimed by the assessee in the scrip of M/s Prraneta Industries Ltd. was disallowed by the AO on the basis of search material found in the case of Shirish
Chandrakant Shah (SCS), alleging that the loss was bogus and part of an accommodation entry arrangement. The assessee submitted that all transactions were carried out through stock exchange, registered stockbrokers, duly supported by contract notes, demat statements and bank channels, and no incriminating material or cash trail was found during the survey at assessee’s premises. It was also pointed out that no evidence was brought on record by the AO linking the assessee with SCS or the company, and no enquiry was made from SEBI, BSE/NSE,
“A”
BENCH, MUMBAI
Jasmin
K.
Ajmera
VS
DCIT-2(2)
AND OTHERS
Shri Ashish K.
Ajmera
Minal M. Ajmera
Avani J. Ajmera
Manish K. Ajmera
Jiten K. Ajmera
(Legal Heir of Sh.
Kishore H. Ajmera)
International
Financial Services
Ltd.
Essem Capital
Markets Ltd.
Ajmera Associates
Ltd.
983/Mum/2020
1140/Mum/2020
1113/Mum/2020
539/Mum/2020
985/Mum/2020
1142/Mum/2020
1108/Mum/2020
1141/Mum/2020
4997/Mum/2018
AY 2011-12
In the case of Jasmin K. Ajmera & Ors vs.
DCIT
(Mumbai
ITAT, order dated
02.11.2021), the assessees had claimed
Long-Term Capital Gains from sale of shares of Prraneta Industries Ltd. (now
Aadhar Venture India Ltd.), which were treated by the Assessing Officer as bogus transactions on the basis of alleged accommodation entries of the Shirish C. Shah group. The assessments were made for non- abated years, where the original assessments had attained finality and the time limit for issue of notice under section 143(2) had expired before the date of search.
The Tribunal recorded a finding that no incriminating material was found during the course of search, and the seized documents consisted only of regular books such as ledger extracts, stock summaries and investment details, which were already disclosed and did not have any incriminating nature. The addition was made solely on the basis of a statement recorded under section 132(4) without any corroborative material, which was subsequently retracted by way of a sworn affidavit. The Tribunal held that as per settled law, no addition can be made in an unabated assessment in absence of incriminating material found during search, relying upon binding decisions in Continental
Warehousing,
Gurinder
Singh Bawa, Kabul Chawla and Harjeev
Aggarwal, and also referring to CBDT
Circulars dated
10.03.2003
and 18.12.2014, which discourage additions based only on statements. Accordingly, the ITAT concluded that the additions were 11
Alpesh K. Ajmera HUF Mumbai.

unsustainable in law, as they were made only on the basis of suspicion and 3rd party search material, and therefore all additions were deleted and the appeals of the assessees were allowed.

INCOME
TAX
APPELLATE
TRIBUNAL ‘D’ BENCH
Central Circle – 2(2)
AND OTHERS
Reena A Ajmera
Minal M Ajmera
Avani J Ajmera
Jiten K Ajmera
Manish K Ajmera
International
Financial Services
Ltd.
Ajmera
Pharmasure Ltd.
Ashish K Ajmera
Alpesh K Ajmera
Harsh J Ajmera
(Legal Heir of Late
Jasmin K Ajmera)

626/Mum/2021
1111/Mum/2020
1112/Mum/2020
1110/Mum/2020
1143/Mum/2020
986/Mum/2020
1109/Mum/2020
1137/Mum/2020
1135/Mum/2020
1144/Mum/2020
FACTS
In this consolidated group of appeals concerning the Ajmera family, the assessees were engaged in share trading and stock broking, and had subscribed to shares of Prraneta Industries Ltd. (later Aadhar
Ventures) in August 2009 at Rs. 2.25 per share through account payee cheques. These shares were later sold on 15 occasions between
16.08.2010
and 06.06.2011
through the online BSE platform, supported by contract notes, demat statements, STT and bank statements, and long-term capital gains were offered as exempt u/s 10(38). The Assessing Officer treated the gains as bogus, relying on statements recorded during search and alleged cash ledger entries from the Shirish C. Shah group, along with the fact that group companies of Shri
Shirish
C.
Shah purchased shares in the market. The AO added the capital gain as unexplained cash and also made a separate 5.25% commission addition.
The assessees rebutted these findings, filed detailed retraction affidavits explaining that the statement was taken under pressure and duress, emphasized that no incriminating material was found during search at their premises, and highlighted that all transactions were through stock exchange with no evidence of cash movement. The CIT(A) upheld the addition based primarily on the statements and search findings in the case of Shri Shirish C. Shah.

12
Alpesh K. Ajmera HUF Mumbai.

984/Mum/2020
AY 2012-13
HELD
The Tribunal held that the facts, documents and evidences clearly established purchase and sale through the stock exchange, and that no incriminating material was found during the search in the Ajmera family cases. The retraction affidavits were filed immediately after the search, and the authorities had not disproved or addressed the contents of those affidavits. It was also noted that in earlier years, transactions in the same scrip were accepted as genuine, and no material or corroborative evidence was produced to show cash movement, nor was any adverse finding given by SEBI or BSE.
The Tribunal observed that additions were made solely on statements and suspicion, without independent verification or evidence, and that mere reliance on human probabilities and third-party statements was insufficient to deny the claim.
Accordingly, the additions made on account of long-term capital gain and commission were deleted, and the appeals of the assessees were allowed.

IN THE INCOME TAX
APPELLATE
TRIBUNAL
“D”
BENCH, AHMEDABAD
ACIT,
Circle-7,
1442/Ahd/2013 & CO
No. 209/Ahd/2013
In this case, the assessee had reported Long-
Term Capital Gain of Rs. 94,49,384/- on shares of Talent Infoway Ltd. and Short-
Term Capital Gain of Rs. 32,94,684/- on shares of Prraneta Industries Ltd.. The Assessing Officer treated the gain as bogus accommodation entries on the basis of enquiries from stock exchanges and statements of Mukesh Choksi, alleging that no trades were executed in the name of the assessee, and therefore added the amounts u/s 68. The assessee produced complete supporting documents, including

13
Alpesh K. Ajmera HUF Mumbai.

Assessment
Year
:
2005-06
purchase bills, contract notes, demat statements, bank statements, trade numbers, quantity, sale rates, and account payee cheques, and explained that the transactions were carried out through registered brokers Goldstar Finvest Pvt.
Ltd.,
Mahasagar
Securities
Pvt.
Ltd.,
Neptune Securities Pvt. Ltd., and Vimla
Exim Pvt. Ltd.. It was also demonstrated that all shares were held in demat form, and BSE confirmed the transaction of 30,000 shares, while 20,000 shares were sold through Vimla Exim Pvt. Ltd., with invoices containing full trading particulars, but no enquiry was made from that broker.
The CIT(A) held that no adverse material was found against the assessee, the purchase of shares had been accepted in earlier assessments, and off-market transactions are not illegal, relying on the judgment in Mukesh
Moralia, which is confirmed by the Bombay High Court. The Tribunal observed that all documents were genuine, payments were through banking channels, and no link was established between the assessee and any alleged fraudulent activities. Therefore, the ITAT upheld the order of the CIT(A) and held that the capital gains cannot be treated as unexplained cash credit, and both LTCG and STCG were allowed. The Revenue’s appeal was dismissed.

IN THE INCOME TAX
APPELLATE
TRIBUNAL,
‘’
B’’
Circle-1(1),
FACTS
The assessee, Pinac Stock Brokers Pvt. Ltd., was engaged in the business of trading in shares and during the year had sold shares of Akshar Entertainment Ltd. to four companies, including Prraneta Industries
(Aadhar Venture), receiving a total consideration of Rs. 7.25 crores through

14
Alpesh K. Ajmera HUF Mumbai.

Ahmedabad.
ITA
Nos.
253-
254/AHD/2020
Asstt. Year: 2011-12
& 2012-13
Circle-1(1),
Ahmedabad.
Asstt. Year:2012-13
banking channels. The Assessing Officer treated the receipts as unexplained cash credits u/s 68, stating that the purchasing companies were shell entities controlled by Shirish C. Shah (SCS) and that the shares were transferred to square off alleged accommodation entries. The assessee contended that the shares were purchased in earlier years through banking channels, duly recorded in the books, and that the receipts were only sale proceeds, not loans or capital infusion. No material was found to show any cash payment or consideration outside books, and requests for cross- examination of SCS were not granted. The AO relied on a third-party excel sheet found in the search on SCS, but the assessee was not a party to those entries and there was no corroboration of cash movement.
HELD
The Tribunal observed that no incriminating evidence was found to suggest that the assessee had received any cash in lieu of the cheques, and the purchases of shares were accepted by the Revenue in earlier years. The excel sheet relied upon was seized from a third party premises, and no link was established between those cash entries and the assessee. It was held that if the purchase of shares was accepted as genuine, the corresponding sale receipts cannot be treated as unexplained u/s 68, especially when consideration was received through banking channels. The Tribunal found that there was no benefit of unexplained income flowing to the assessee and noted that the funds, if any, were connected to the promoters of Akshar Entertainment Ltd., not the assessee. Accordingly, the addition under section 68 was deleted, holding that the 15
Alpesh K. Ajmera HUF Mumbai.

assessee had discharged the onus, and the Revenue failed to bring any corroborative material. The Tribunal therefore allowed the appeal and directed deletion of the addition.

[2021]
126
taxmann.com
225
(Chandigarh - Trib.)
IN THE ITAT
CHANDIGARH BENCH
'A'
Deputy
Commissioner of Income-tax v.
Sanjay Singal
MISCELLANEOUS
APPLN. NOS. 31 TO 36 (CHD) OF 2020
IT APPEAL
NOS.
706, 707, 709, 712,
713 AND 715 (CHD.)
OF 2018
[ASSESSMENT
YEARS
2008-09,
2010-11 AND 2012-
13]
Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2008-09 - Whether where all arguments alongwith various judicial pronouncement relied upon by both parties were duly considered before deleting addition under section 68
in hands of assessee by Tribunal, there existed no manifest error in order of Tribunal, rectification application was to be rejected -
Held, yes [Para 6.7 and 7.2] [In favour of assessee] A search and seizure operation was carried out by department at the business premises of the 'BPSL'
Group alongwith residential premises of its directors and other related entities. Wherein it was found that BPSL Group had been continuously involved in introduction of its unaccounted income in grab of LTCG, OT etc. The assessee one of director of group company alongwith his wife surrendered certain sum as undisclosed income. The Assessing Officer accordingly added said income under section 68 to income of the assessee. The Tribunal however deleted the addition in hands of the assessee on ground that no incriminating material was found during search against assessee. The revenue filed instant application claiming there was apparent mistakes in impugned order of ITAT.
It was contended that submissions of the revenue with respect to the alleged non applicability of the case of Shri
Brij Bhushan Singal and others to the facts of the present case were altogether omitted to be taken note of in the impugned order of the ITAT and no cognizance was taken by the ITAT on the live nexus between the 16
Alpesh K. Ajmera HUF Mumbai.

incriminating material found during the search action at various places/premises. Held that all the submissions and the case laws relied by the Special Counsel for the revenue find place at page nos. 94 to 108 in paras 38 to 45
of the impugned order and after considering those submissions as well as case laws, the conclusion has been drawn by the ITAT. It appears that the Department wants to get the order passed by the Tribunal reviewed which is not permissible as the ITAT has no power to review its order and the right platform/forum for redressal of this grievance on any special question of law arising from the order of the ITAT would be the High Court under section 260A. In the present case the ITAT passed the order in consonance with judicial principle laid down by the Apex Court in the case of Asstt.
Commissioner,
Commercial
Tax
Department Works Compact & Leasing v.
Shukla & Brothers [2010] 3 taxmann.com 622
and all the four preposition of judgment stands fulfilled in the impugned order of the ITAT dated 7-2-2020 in Sanjay Singhal v. Dy.
CIT [IT Appeal No. 706/Chd/2018] for the assessment year 2008-09 viz; (i.) There is adequate clarity on thought. (ii.) Decision has been well reasoned. (iii.) The reason for decision have been well communicated. (iv.)
The order is well reasoned. Since all the arguments alongwith the various judicial pronouncements relied upon by both the parties, were duly considered, there exists no manifest error in the decision of the ITAT.
Therefore, no merit was found in this Misc.
Application moved by the Department.

[2024]
167
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377
(Mumbai - Trib.)
IN THE ITAT MUMBAI
BENCH 'A'
INCOME TAX : Where assessee earned capital gain on sale of shares of two companies and Assessing Officer treated said transactions as bogus and added entire amount to assessee's income under 17
Alpesh K. Ajmera HUF Mumbai.

Amrita
Abhishek
Doshi v.
Deputy
Commissioner of Income-tax *
IT APPEAL NO. 1353
(MUM.) OF 2024
[ ASSESSMENT YEAR
2014-15 ]
section 68, since assessee had carried out transactions through recognised stock exchange and she had discharged her onus by submitting documents before
Assessing
Officer and latter had not conducted independent investigation and fully relied on observations of investigating authority, impugned addition deserved to be quashed

Section 68, read with section 45, of the Income-tax Act, 1961 - Cash credit (Share transaction) - Assessment year 2014-15 -
Assessee earned long-term capital gain and short term capital gain on sale of shares of two companies - Assessing Officer treated both transactions as bogus and added entire amount to assessee's income under section 68
Whether since assessee had carried out transactions through recognized stock exchange and she had discharged her onus by submitting documents before
Assessing
Officer and latter had not conducted independent investigation and fully relied on observations of investigating authority, addition made to assessee's income deserved to be quashed - Held, yes [Paras 8 and 10] [In favour of assessee]
10. The reliance is also placed upon the following cases:
S.
N.
CITATION
OBSERVATION
1. [2015]
54
taxmann.com
108
(Bombay)
HIGH
COURT OF BOMBAY
Commissioner of Income-tax-13
v.
Shyam
R.
Pawar*
DECEMBER
10,
2014
Section 68 of the Income-tax Act, 1961 - Cash credit (Share dealings) - Assessment years
2003-04 to 2006- 07 - Assesse declared capital gain on sale of shares of two companies -
Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having

18
Alpesh K. Ajmera HUF Mumbai.

been done to convert unaccounted money of assesse to accounted income and, therefore, made addition under section 68 - On appeal,
Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted
- Held, yes [Para 7] [In favor of assesse]
2. [2014]
41
taxmann.com
118
(Hyderabad - Trib.)
IN THE ITAT
HYDERABAD BENCH
'A'
Income-tax
Officer,
Ward
2,
Nizamabad v. Smt.
Aarti
Mittal*
NOVEMBER 6, 2013
Section 10(38) of the Income-tax Act, 1961 -
Capital gains - Exemption of, on transfer of securities
[Genuineness of transactions]
-
Assessment year 2006- 07 - Assesse filed its return declaring long term capital gains on shares traded in Calcutta Stock Exchange -
Since sale transactions took place through authorized stock exchange and securities transaction tax was paid, assesse claimed entire sale proceeds arising out of transaction as long term capital gain exempt from tax under section 10(38) - Assessing Officer did not believe transactions in question as genuine and treated entire sale proceeds as 'Income from Other Sources' - Commissioner (Appeals) opined that in absence of any positive evidence, merely on basis of suspicion, transactions could not be held to be not genuine - Commissioner (Appeals) thus set aside addition made by Assessing Officer - It was noted that even though enquiry with Chennai Stock Exchange (CSE) revealed that no purchase had taken place through it, since transactions were in physical form and done through off market, question of same being routed through floor of a recognized stock exchange did not arise - It was also apparent that assesse having purchased shares in question, converted them in D-mat form and thereupon sale of those shares was carried out through
CSE after paying
Securities
Transaction
Tax
-
Whether on facts,

19
Alpesh K. Ajmera HUF Mumbai.

transactions of purchase and sale of shares were to be regarded as genuine in nature and, therefore, assesses claim was rightly allowed -
Held, yes [Para 23] [In favor of assesse]
3. [2017]
77
taxmann.com
260
(Ahmedabad - Trib.)
IN THE ITAT
AHMEDABAD BENCH
'B'
Pratik
Suryakant Shah v.
Income-tax Officer,
Ward-
10
(3),
Ahmedabad*
OCTOBER 21, 2016
Section 10(38), read with section 147, of the Income-tax Act, 1961 - Capital gains - Income arising from transfer of long-term securities
(Bogus transactions) - Assessment year 2006-
07 - Assesse purchased 3000
shares of company 'T' through a stock broker - These shares were transferred to assesses demat account
-
However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assesse was one of beneficiary of such accommodation entries -
Assessing authorities reopened assessment of assesse
-
Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assesse, assesses claim of exemptions of long- term capital gain on sale of shares could not be denied on basis of submission of said broker -
Held, yes [Paras 17 and 18] [In favor of assesse]
4. 1442/Ahd/2013
&
CO
No.
209/Ahd/2013
Assessment Year :
2005-06
Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock
Exchange is not an unlawful activity. Off-
Bogus capital gains from penny stocks: Long- term capital gains claimed exempt u/s 10(38) cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated
SEBI norms and is not traceable does not mean

20
Alpesh K. Ajmera HUF Mumbai.

:2005-06
S. 10(38)/ 68: Long-term capital gains on sale of "penny" stocks cannot be treated as bogus &
unexplained cash credit if the documentation is in order
&
there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity
7. Smt.
Sunita
Jain,
V/s.
Income
Tax
Officer, Ward10 (3),
Ahmedabad
ITA.
Nos:
501
&
502/AHD/2016
Assessment
Year:
2008-09)
The claim of the assesse cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account
8. ITO-24(3)(1) V/s M/s
Arvind Kumar Jain
HUF
Assessment
Year:
2005-06
Where assesses broker share transaction was bone fide in all respect, merely because share broker was tainted violating SEBI regulations, would not make assesses share transactions bogus.
9. Kamla
Devi
S.
Doshi
V/s.
The Income Tax Officer
Ward 16(3)(1), I.T.A.
No.1957/Mum/2015
Assessment
Year:
2006-07)
Bogus penny stocks capital gain: The s. 131
statement implicating the assesse is not sufficient to draw an adverse inference against the assesse when the documentary evidence in the form of contract notes, bank statements,
STT payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error
10. Shri Sunil Prakash
V/s.
ACIT
-15(2)
I.T.A./6494/Mum/20
14,
Assessment
Year: 2005-06
S. 68 bogus gains from penny stocks: If the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assesse and afford the opportunity of cross-examination.
Failure to do so vitiates the assessment proceedings.
A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the Dmat account, etc cannot be treated as a bogus transaction so as to attract s. 68
11. Pramod Kumar
S. 10(38) Bogus long-term gains from penny

21
stocks: The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assesse from the person other than the broker claimed by the assesse. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account.
Bogus Capital Gains From Penny Stocks: In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assesse is part of the scam. The chain of events and the live link of assesses action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi &
Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock
Exchange is not an unlawful activity. Off- stocks:
Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assesse has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has 22
Alpesh K. Ajmera HUF Mumbai.

not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated
15. Dipesh
Vardhan and others vs DCIT-
Central Circle I.T.A.
No.7648,
7649,
7650,
7651
and 7662/Mum/2019
S. 10(38)/68: Bogus Capital Gains from Penny Stocks: The AO has not discharged the onus of controverting the documentary evidences furnished by the assessee and by bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and other entities.
The whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue
Para 6 of the order states as follows:- The perusal of record would reveal that the assessee purchased certain shares of an entity namely M/s STL as early as September, 2011. The shares were converted into demat form in assessee’s account during the month of March,
2012. The transactions took place through banking channels. The investments were duly reflected by the assessee in financial statements of respective years. The copies of financial statements of M/s STL for FYs 2009-
10 & 2010-11 which led to investment by the assessee in that entity was also furnished during the course of assessment proceedings.
Subsequently,
M/s
STL got merged with another entity viz. M/s SAL(Sunrise Asian Ltd.) pursuant to scheme of amalgamation u/s 391
to 394 of The Companies Act, 1956. The Scheme was duly approved by Hon’ble Bombay
High Court vide order dated 22/03/2013, a copy of which is on record. Consequently, the 23
Alpesh K. Ajmera HUF Mumbai.

shares of M/s STL held by the assessee got swapped with the shares of M/s SAL and new shares were allotted to the assessee during
June, 2013 pursuant to the approved scheme of amalgamation. M/s SAL is stated to be listed public company
Group
‘A’
shares signifying high trades with high liquidity. The assessee has sold these shares through its stock broker namely M/s Unique Stockbro
Private Limited in online platform of the recognised stock exchange during the month of March, 2014. The selling price was in the range of Rs.489/- to Rs.491/- per share. The transactions took place through online mechanism after complying with all the formalities and procedure including payment of STT. The delivery of the shares was through clearing mechanism of the stock exchange and sale consideration was received through banking channels. The transactions are duly evidenced by contract notes, demat statements, bank statements and other documentary evidences.
The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume data and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015. The shares reflected healthy trading volume and the price range reflected therein was in the range of Rs.360/- to Rs.600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. Resultantly, the addition on account of alleged Long-Term

24
Alpesh K. Ajmera HUF Mumbai.

Capital Gains as well as estimated commission against the same, stands deleted.
The grounds of appeal, to that extent, stand allowed.
16. The Commissioner of Income Tax-16. Vs. Mrs. Kesar A.
Gada
2015 (1) TMI 1220 -
BOMBAY
HIGH
COURT
Unexplained cash credit u/s. 68 - ITAT deleted the addition - Held that:- The transaction of purchase and sale of shares done by the respondent
–
assessee was genuine.
Consequently, it was also held by both the Authorities that addition under Section 68 of the Act was not called for. We find that the impugned order has been passed relying upon the decision of this Court in the case of “Mukesh R. Marolia” [2005 (12) TMI 457 - ITAT
MUMBAI] and the findings are essentially findings of facts.
Hence, no substantial question of law arises for our consideration. -
Decided against revenue.
17. Ramprasad Agarwa l
v.
ITO2(3)(2), Mumbai[
2018]
100
taxmann.com
172
(Mumbai - Trib.)

Where assessee had produced relevant record to show allotment of shares by company on payment of consideration by cheque and assessee dematerialized shares in D-mat account and Assessing Officer had not brought any material on record to show that assessee had paid over and above purchase consideration, it could not be held that assessee had introduced his own unaccounted money by way of bogus long-term capital gain.
18. Shri
Circle-20(1),
New
Delhi.
ITA.No.5882/Del./20
18
Considering the material on record in the light of above decisions it is clear that assessee placed sufficient documentary evidences before
A.O. to prove genuineness of the transaction.
The assessee purchased shares through banking channel and actually got the shares transferred in his name. Purchase was made through cheque which is supported by bank statement. The transactions of sale have been made through Demat account. The contract note along with other 36 ITA.No.5882, 5883,
6457 to 6459/Del./2018 Shri Amar Nath
Goenka, Delhi & Oth 37 ITA.No.5882, 5883,
6457 to 6459/Del./2018 Shri Amar Nath
Goenka, Delhi & Others. . in evidence against

25
Alpesh K. Ajmera HUF Mumbai.

the assessee. I rely on the decision of Hon’ble
Supreme Court in the case of Kishan Chand
Chela Ram 125 ITR 713 (SC). The A.O. did not mention any fact as to how the claim of assessee was sham or bogus. The assessee thus, satisfied the conditions of Section 10(38) of the I.T. Act. The broker through whom transactions have been carried out have not denied the transaction conducted on behalf of the assessee. It, therefore, appears that the addition is merely made on presumption and assumptions of certain facts which are not part of the record. The issue is, therefore, covered in favour of the assessee by several Orders of the Tribunal including the case of Smt. Shikha
Dhawan, Gurgaon vs. ITO, Ward-4(2), Gurgaon
(supra). There is no other material available on record to rebut the claim of assessee of exemption claimed under section 10(38) of the I.T.
Act.
Keeping in view of the above discussion and material on record in the light of above decisions of the Tribunal and Hon’ble
Delhi High Court, I set aside the Orders of the authorities below and delete the 38
ITA.No.5882, 5883, 6457 to 6459/Del./2018
Shri Amar Nath Goenka, Delhi & Others. .
addition of Rs.14,61,585/-. The appeal of Ward-1(4),
Ghaziabad.I.T.A.
No.2766/DEL/2018
The aforesaid direction of the JCIT to the Assessing Officer clearly clinches the issue in favour of the assessee in both the cases. Thus, the addition made by the Assessing Officer by disallowing the Long Term Capital Gain and treating as unexplained money is deleted.
20. AJAY GOEL vs.I.T.O,
WARD 39(5)ITA No.
4481/DEL/2018
I find that the AO has completed the assessment by relying on the Investigation
Report, but the copy of the Investigation Report was not provided to the assessee, despite request made by him in his letter dated
23.12.2016, which is against the law settled by the Hon’ble Supreme Court of India in the 713 at page no. 714; Hon’ble Delhi High Court

26
Income-tax-I v.Maheshchandra
G.
Vakil[2013]
40
taxmann.com
326
(Gujarat HC)
Where assessee proved genuineness of share transactions by contract notes for sale and purchase, bank statement of broker, demat account showing transfer in and out of shares, as also abstract of transactions furnished by stock exchange, Assessing Officer was not justified in treating capital gain arising from sale of shares as unexplained cash credit
22. Commissioner of Income-tax v. Smt.
Sumitra Devi[2014]
49 taxmann.com 37
(Rajasthan HC)
Where transaction of purchase and sale of shares were supported with broker's note, contract note, copies of share certificates and de-mat statement, transaction of shares could
Circle-3,
Jaipur
ITA
No.
443
&
444/JP/2017
In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine.
Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account."
24. Principal
Commissioner of Income-
Section 69 of the Income-tax
Act,
1961
-
Unexplained investments
(Shares)
-
Assessment year
2008-09
-
Assessee

27
Alpesh K. Ajmera HUF Mumbai.

tax,(Central),
Ludhiana v.Prem Pal Gandhi
(P&H HC) purchased shares of a company during assessment year 2006-07 at Rs. 11 and sold same within 2 years, i.e., in assessment year
2008-09 at Rs. 400 per share - Shares were purchased in cash and not in cheque -
Assessing
Officer added appreciation to assessees' income on suspicion that these were fictitious transactions and that appreciation actually represented assessee's income from undisclosed sources - It was found that even though appreciation was very high, shares were traded on National
Stock
Exchange and payments and receipts on sale of shares were routed through bank - Further, there was no evidence to indicate that concerned company was a closely held company and that trading on National Stock
Exchange was manipulated in any manner -
Whether transaction of shares could not be said to be non-genuinene - Held, yes [Paras 4
& 5] [In favour of assessee]
25. Commissioner of Income-tax,
Jamshedpur v. Arun
Kumar
Agarwal
(HUF)[2012]
26
taxmann.com
113
(Jharkhand HC)

Section 45 of the Income-tax Act, 1961 -
Capital gains - Chargeable as - Assessing
Officer found that there was unusual rise in price of shares of some of companies and, thus, SEBI had ordered enquiry - In said enquiry, it was found that some share brokers carried out share transactions in violation of norms of SEBI regulations - Since assessee also entered into share transactions with one of such brokers, Assessing Officer held that assessee's share transactions were bogus - On appeal, it was noted that purchase of shares was shown by assessee in his balance sheet for last five years and genuineness of books of account was never questioned
-
Further, payment for purchase of shares was made through bank and it was verified from bank statement
-
Whether in aforesaid circumstances, merely because assessee bonafidely entered into share transactions with one of tainted share brokers would not lead to inference that those transactions were bogus - Held, yes - Whether, therefore, capital

28
Alpesh K. Ajmera HUF Mumbai.

gain declared by assessee in his return was to be accepted - Held, yes [Paras 10 & 11] [In favour of assessee]
26. The Pr.
Commissioner of Income
Tax
(Central), Ludhiana
Versus
Sh.
Hitesh
Gandhi2017 (4) TMI
1150 - PUNJAB &
HARYANA
HIGH
COURT
Bogus purchase/sale of shares - sham share transactions - Held that:- AO was not able to contradict the facts regarding purchase of shares and sale thereof. Further, it was recorded that the assessee had sold shares through MTL shares and Stock Broker limited which is a SEBI registered Stock Broker. The payment for sale of shares was received through banking channels. All the documentary evidence being in favour of assessee, the deletion of the addition made by the CIT(A) was correctly upheld by the Tribunal. The findings recorded by the CIT (A) and the Tribunal are pure findings of fact which have not been shown to be illegal, erroneous or perverse by the learned counsel for the appellant. He has also not been able to produce any material on record to controvert the said findings. - Decided against revenue
27. Smt.
Circle-3,
Kalyan on 29th May,
2019-ITAT-G Bench,
Mumbai
The ITAT held that the ld .CITA was not justified in upholding the action of the ld AO in bringing the long term capital gains on sale of shares of SRK Industries Ltd in the sum of Rs
2,26,36,372/- as unexplained income of the assessee treating the same as just an accommodation entry. The ld AO is directed to grant exemption u/s 10(38) of the Act in the sum of Rs 2,26,36,372/- to the assessee.
Accordingly, the ground raised by the assessee is allowed.
28. Shashikant
B.
Mhatre v/s
ITO, being order dated
29th
May, 2019
Both the parties before us agreed that the facts in ITA No. 694/Mum/2018 in the case of Shri
Shashikant B Mhatre (HUF) are identical to that of Smt Geeta Khare supra except with variance in figures and name of the scrip that was dealt with. Both the parties before ITAT stated that identical reasoning was given by both the lower authorities for denying the claim of exemption u/s 10(38) of the Act to the assessee. The decision rendered in the case of 29
Alpesh K. Ajmera HUF Mumbai.

Smt Geeta Khare would apply with ITA Nos.
4267 & 694/Mum/2018 Smt. Geeta Khare &
Shri Shashikant B. Mhatre equal force for this assessee also and accordingly, the ground raised by the assessee in ITA
No.
694/Mum/2018 is allowed.
29. Mrs.
Pratibha
S.
Mhatre,
Mumbai
ITAT
C-Bench,
Mumbai- 11th June,
2021(ITA.No.695/Mu m/2018) for Asst.
year 2014-15
The ITAT find that the issue for our adjudication relates to the disallowance under section 68
of the Act on account of unaccounted income. Exactly similar issue has been decided by the Co-ordinate Bench of the Tribunal, Mumbai, in HUF of her husband's case in Shashikant B. Mhatre v/s ITO, being
ITA no.694/Mum/2018, order dated 29th May 2019, a copy of which is placed on record, wherein the Co-ordinate Bench of the Tribunal, on identical and on similar set of facts and circumstances, after considering the submissions of the parties has decided the issue in favour of the assessee and against the Mrs. Pratibha S. Mhatre Revenue. Respectfully following the above decision, we allow the appeal filed by the assessee.(In favour of the assessee.

30
Alpesh K. Ajmera HUF Mumbai.

Mumbai:

Dated: 22/12/2025

KRK, Sr. PS.
Copy of the order forwarded to:

(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.By order

(Asstt.