YASHWANT RAJ LALCHAND BAMBOLI,MUMBAI vs. INCOME TAX OFFICER, WD-27(3)(5), MUMBAI, MUMBAI

The assessee earned Long Term Capital Gain(LTCG) in the relevant year and claimed it exempt u/s 10(38) of the Act. As per the return, the assessee had shown LTCG of Rs.54,92,932/- on sale of 1,00,000 shares of Surabhi Chemical & Investment Ltd.(‘SCIL’),

In the subsequent appeal, it was submitted that the transaction of purchase and sale ofshares of SCIL resulting in LTCG was a genuine transaction. The assessee had submitted all relevant documents pertaining to purchase and sale of the shares of SCIL. The AO did not carried out any independent enquiries or recorded the statement of the assessee u/s 131 of the Act. He has not brought anything on records to disprove the transaction. The AO has not doubted any of the documents/evidences submitted by him. The purchase and sale of shares had been done on the stock exchange at the prevailing market price. All transactions were through banking channel. All transactions were part of books of accounts. Further, merely because the assessee had earned substantial gains on sale of shares of SCIL, did not make the transaction an accommodation entry. The SEBI did not pass any adverse order in the case of the assessee. Also, AO’s allegation that he brought

1 The ld.CIT(A) however, upheld the action of the AO with the observations that on identical facts, Hon’ble High Court of Calcutta had decided the issue in favour of the Revenue in the case of PCIT Vs Swati Bajaj (Calcutta High Court) Appeal Number: IA No. GA/2/2022, dated 14/06/2022.Hon’ble High Court has discussed in details this issue of earning long term capital gains (LTCG)/ Short Term Capital Loss (STCL) on share transactions involving penny stocks. The Hon’ble Court had analysed and evaluated various aspects of the transactions in penny stocks and has, thereafter, concluded that such transactions are sham transactions incurred wholly for the purpose of availing accommodation entry either by way of LTCG/ STCL. He also upheld the estimated addition u/s 69C on estimated commission paid on these transactions.

Before us, the ld.DR has placed reliance on the orders of the authorities below. Per contra the ld.AR has reiterated the same

1 The assessee had made off-market purchase of 1,000 shares of from M/s Sarvottam Advisory Services Pvt Ltd on 31/03/2012 at a purchase consideration of Rs.2,50,000/-, on making the payment through banking channel on 03/04/2012 and such shares were credited in Demat account on 03/08/2012. He received 9,000 bonus shares credited in D-mat account on 23/10/2012 and such shares were sub- divided into 1,00,000 shares. The period of holding of shares by him , in his Demat account, exceeded 14-15 months. The acquisition of shares were properly disclosed in balance sheet of the assessee of earlier years as ‘Investments’. The sale of shares were made on floor of Bombay Stock

2 It is further argued that the SEBI vide final order dated 30/09/2021 had conducted an investigation against the listed company Surabhi Chemicals &Investments Ltd and other persons for the period from 01/08/2012 to 06/01/2015 and it is most vital to note that the SEBI had not passed any contrary orders against the appellant, listed company and stock broker M/s. Swastika Investmart Ltd and had imposed a meagre penalty of Rs.2,00,000/- on 2 unrelated persons. The SEBI’s order dated 30/09/2021 imposing the penalty of Rs.2,00,000/- on two unrelated persons would not disprove the appellant’s transaction on understated reasons:-

3 It is further stated that ITAT, Mumbai in similar cases of Seema Narendra Bapna (ITA No-1120/MUM/2024) and Smt. Bhavna Lalit Jain (ITA No-1016/Mum/2024) had considered the SEBI orders and decided the issue in favour of the assessee. The facts of assessee’s case are identical to above stated cases, since involved same scrip and same assessment year (A.Y-2014-15).

4 It is further contended that the decision of Hon’ble High Court of Calcutta in the case of Swati Bajaj (446 ITR 56) had been considered by Hon’ble High Court of Gujarat in the case of PCIT v. Sanjay Kumar Damjibhai Gangani (178 taxmann.com 276) and Hon’ble ITAT, Mumbai in the case of Yogesh Thakkar (ITA no.1605/Mum/2021) and held the long term capital gain as genuine.

We have duly considered the facts of the case, the contents of the assessment order, detailed submissions of the assessee as also various case laws. We also find that the co-ordinate benches of ITAT, Mumbai have in several cases considered similar cases of addition of LTCG arising out of Investigation wing Kolkata report in such penny shares. The coordinate bench of ITAT, Mumbai in the case of Praveen Sitaram Agarwal, Mumbai vs Income Tax Officer, Wd-24(3)(3) dated 26.08.2025 has duly considered similar transactions involving SCIL shares. Relevant parts of the order are stated as below:

We heard rival contentions and perused the record. We notice that the assessee, before the Ld.CIT(A), has submitted as under and furnished following documents to support the purchase and sale transactions of above said shares:- In respect of sale transactions Sale bills-cum-Contract notes of stock broker : In this regard, the appellant is submitting that the order number, order time, trade number, trade time, Service Tax, stamp duty and STT paid are disclosed. The entire sale of shares had been made on floor of Bombay Stock Exchange (BSE) through SEBI registered stock broker M/s Shilpa Stock Brokers Pvt. Ltd., from 20/11/2013 to 06/12/2013 at Rs.2,33,81,175/-. The contents of contract notes match exactly with online data available in public platform of the Bombay Stock Exchange (BSE);

We notice that the Ld.CIT(A) has deleted the addition with the following observations:- "7.5 I have carefully gone through the above evidence as well as the information filed before me; which was also submitted before the assessing officer. From a careful consideration of the facts on record, I of the considered opinion that the assessing officer has not properly examined the above evidence submitted by the appellant at the assessment stage. Based on the facts of the case, I am convinced that the AO has simply relied on the information received from the Investigation Wing and has not done any further enquiry to confirm the information. Further, the appellate has sold the said shares on real time basis through a SEBI approved broker. The contract note cum bill issued by the broker is on record. The appellant does not have any dealings with Exit providers. The modus operandi mentioned by the AO at Para number 7 of his order is general in nature and doesn't bring out any specific conduct of the appellant which warrants addition in his case. In view of Praveen Sitaram Agarwal this, I am in agreement with the allegation of the appellant that the addition in question was made based on suspicion, assumptions and surmises.

6 As held by Hon’ble ITAT, Kolkata in the case of Shri Navneet P a g e | 14 A.Y. 2014-15 Yashwant Raj Lalchand Bamboli, Mumbai 2281/KOL/ 2017 dated 27 2018, even if an alleged scam has taken place, it has to be established in each case by the party alleging so (Revenue in this case). It has to be established whether this assessee in question was part of this scam. The chain of events and the live link of the assessee's action giving his involvement in the scam should be established. No such attempt has been made by the AO in this case. Hon'ble ITAT in the above case, further held that just the modus operandi, generalizations, preponderance of human probabilities cannot be the only basis for rejecting the claim of the assessee. Unless the specific evidence is brought on record to counteract the validity and correctness of the documentary evidences produced, the same cannot be rejected by the department. Hon'ble Supreme Court in the case of Omar Salav Mohammad Sait reported in (1959) 37 ITR. 151 (SC) held that no addition can be made on the basis of surmises, suspicion and conjunctures. The appellant has quoted several decisions in its favour to put forth the above proposition. 7.7 In addition, the following judgments advocate the above proposition, where exactly identical issue regarding allowability of long term capital gain on sale of shares of same listed company, M/s. Surabhi Chemicals & investments Ltd. had been decided by the Hon’ble Tribunals in favour of the respective assessees : (i) Chirag Tejprakash Dangi vs. ITO (ITA No. 3256/Mum/2022) (ii) M/s. Anusmriti Sarkar vs. ITO (ITA No. 390/M/2020 dated 07-06- 2021) (iii) Shri Udit Agarwal vs. DCIT (ITA NO. 1839/KOL/2017 dated 26- 12-2018) (iv) Shashi Bala Bajaj vs. ITO (ITA No. 1457/KOL/2018 dated 16-11- 2018) The Hon‟ble Tribunals, in above four cases, had carefully analysed the facts of the case and judicial decisions of various Courts and Tribunals and held that the Long term Praveen Sitaram Agarwal capital gain earned on sale of M/s. Surabhi Chemicals & investments Ltd. is genuine in nature.

8 Applying the proposition of law as laid down in the above mentioned judgements, to the facts of this case, I am of the considered opinion that the evidences produced by the appellant in support of its claim before the assessing officer outweigh the suspicion or preponderance of probabilities. No material has been brought on record by the assessing officer to counteract the evidence furnished by the appellant. Under these circumstances, I hold that the assessing

In the case of Chirag Tejprakash Dangi (supra), the Tribunal has followed the decisions rendered by Hon‟ble High Court of Bombay in the following cases:- i) PCIT Vs. Indravadan Jain HUF (ITA No. 454 of 2018)(Bom) ii) PCIT Vs. Ziauddin A. Siddiquie (ITA No. 2012 of 2017) (Bom) iii) CIT Vs. Shyam R. Pawar (54 taxmann.com 108)(Bom) iv) CIT Vs. Smt. Jamnadevi Agrawal (20 taxmann.com 529 (Bom) In the above said cases, the Hon‟ble Bombay High Court has held that the AO is required to show that the assessee was part of the group, which were rigging the prices of shares or he should find deficiencies in the documents furnished by the assessee to prove the purchases and sale of shares, before assessing the capital gains. In the instant case, the AO has not done so and he simply placed reliance on the report given by the Investigation wing. Hence, his order cannot be sustained.

In view of the foregoing discussions, we confirm the order passed by the Ld.CIT(A) on this issue.

In the result, the appeal filed by the Revenue is dismissed.

Since a Coordinate Bench of this Tribunal, in the case of the assessee's brother involving the same scrip and an identical set of facts, has already adjudicated the matter, we find no reason to take a different view. Respectfully following the said judicial precedent and applying the same reasoning to the facts of the present case, we hold that the additions made by the learned Assessing Officer under section 68 are unsustainable and are accordingly deleted. Consequently, as the addition on account of the alleged bogus long-term capital gains stands deleted, the consequential and purely notional addition made towards alleged commission expenses under section 69C also does not survive and is, therefore, deleted.”

1 The coordinate bench of ITAT, Mumbai in the case of Bhavana Lalit Jain, in ITA 1120/Mum/2024 on 15 October, 2024 has taken similar decision as per paras below:

Mr. Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding that findings of fact concurrently rendered by the Assessing Officer and the Commissioner are perverse. The Tribunal proceeded on the footing that onus was on the Department to nail the Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr. Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted.

Mr. Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of A Y : 2014-15 Income Tax Officer Versus Seema Narendra Bapna cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed.

We have perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While it is true that the P a g e | 18 A.Y. 2014-15 Yashwant Raj Lalchand Bamboli, Mumbai Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme.

It is in that regard that we find that Mr. Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note

As a result of the above discussion, we do not find any substance in the contention of Mr. Suresh kumar that the Tribunal mi irected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.

Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs. 25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law."

We may now refer to the decision rendered by Hon'ble Juri ictional Appeal No. 2012 of 2017 dated 4th March, 2022) and relevant discussions made by Hon'ble Bombay High Court are extracted below:-

We have considered the impugned order with the assistance of learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has P a g e | 20 A.Y. 2014-15 Yashwant Raj Lalchand Bamboli, Mumbai also come to a finding that there is no allegation against the assessee that it has participated in any price rigging in the market on the shares of RFL.

Therefore we find nothing perverse in the order of the Tribunal.

Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different.

In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

In the case of PCIT vs. Smt Krishna Devi (supra), the Hon'ble Delhi High Court has noticed that the reasoning given by the AO to disbelieve the capital gains declared by the assessee, viz., astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. Accordingly, the Hon'ble Delhi High Court affirmed the decision rendered by ITAT in deleting the addition of capital gains.

Accordingly, in the facts and circumstances of the case, we are of the view that the decisions rendered by the juri ictional Hon'ble Bombay High Court in the cases cited above shall apply to the present case, since the AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee.

We noticed earlier that the AO has assessed the Sale consideration of shares as unexplained cash credit u/s 68 of the Act. It is pertinent to note that the purchase of shares made in an earlier year has been accepted by the revenue. The sale of shares has taken place in the online platform of the Stock exchange and the sale consideration has been received through the stock broker in banking channels. Hence, in the facts of the case, the sale consideration cannot be considered to be unexplained cash credit in terms of sec. 68 of the Act.

Since we have held that the sale transactions of shares cannot be doubted with, the addition made by the AO with regard to estimated commission expenses is also liable to be deleted.

In view of the foregoing discussions, we hold that the sale consideration received on sale of shares cannot be assessed as unexplained cash credit u/s 68 of the Act and the long term capital gains declared by the assessee cannot be doubted with. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned additions made by him."

The above decision has considered following judicial pronouncements :-

Thus, respectfully following the above decisions which binds us judicially, we do not find any merits in the reason of the ld. AO as well as the ld. CIT (A) where the above addition is confirmed by them. Thus, orders of lower authorities are reversed. The ld. AO is directed to delete the addition u/s 68 of the act and allow assessee exemption u/s 10 (38) of the Act. Thus, ground no 2 & 3 of the appeals are allowed.”

3 Before parting, we may also refer to the order of hon’ble Calcutta High Court in the case of Swati Bajaj(supra) in which similar claims have been upheld in favour of the revenue. However, as stated in the preceding para, there are several contrary decisions of the juri ictional High Court in favour of the assessee where the issues are same. We have already relied on the said ratio laid down by the Hon'ble Bombay High Court which has binding effect.

Considering the above discussion, the facts on record and the legal position emerging out of catena of decisions of the juri ictional High Court and direct decisions rendered by the co- ordinate benches of Mumbai, ITAT(supra),and respectfully following them, we hold that the addition made by the AO u/s 68 of the Act in the year under consideration is not justified and devoid of any merit. The P a g e | 23 A.Y. 2014-15 Yashwant Raj Lalchand Bamboli, Mumbai claim of the assessee u/s 10(38) of the Act has been based on facts which could not be rebutted by the AO. The documentary evidences could not be rejected without bringing on record any substantial piece of evidence and not on the basis of admission of certain individuals. Apparently, the ld.CIT(A) in the appellate order has dittoed the assessment order rather than adjudicating by way of independent application of mind on his part. We have no hesitation in deleting the addition. The AO is therefore, directed to delete the impugned addition made thus, allowing all the grounds of appeal.

In the result, the appeal of the assessee is allowed.