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Facts
The Assessing Officer made an addition of Rs. 1,76,860/- as unexplained money under Section 69A for AY 2016-17, alleging that the assessee obtained an accommodation entry as Short Term Capital Loss by trading in penny scrips. The Ld. CIT(A) subsequently deleted this addition.
Held
The Tribunal upheld the CIT(A)'s deletion, finding that the AO's addition was based on suspicion without cogent evidence and lacked proper appreciation of material. The assessee's transactions were through a registered broker on a recognized stock exchange, with supporting documents, demonstrating an actual trading loss of Rs. 14,018/-, not the alleged accommodation entry.
Key Issues
Whether the Ld. CIT(A) erred in deleting the addition under Section 69A made by the AO for unexplained money/accommodation entry from trading in penny scrips, considering the alleged failure of the assessee to furnish certain documents and the nature of the transaction.
Sections Cited
147, 144B, 69A, 139, 148
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Income Tax Appellate Tribunal, MUMBAI “SMC” BENCH : MUMBAI
Before: JUSTICE (RETD.) SHRI C.V. BHADANG & SHRI VIKRAM SINGH YADAV
Assessment Year : 2016-17 Income Tax Officer, Wasundhara Vinay Joshi, Room No. 830D, C-111, Sunrise Apts., 8th Floor, vs. Raheja Vihar, Kautilya Bhavan, Chandivali Farm Road, Bandra Kurla Complex, Chandivali, Bandra East, Mumbai-400007. Mumbai-400051. PAN : AFJPK0008C (Appellant) (Respondent) For Assessee : Shri Chetan Shinde For Revenue : Shri G.J. Ninawe, Sr.DR Date of Hearing : 26-11-2025 Date of Pronouncement : 28-11-2025 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟], dated 18-08-2025, pertaining to Assessment Year (AY) 2016-17, wherein the Revenue has taken the following grounds of appeal: "1) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,76,860/- u/s 69A of the Income Tax Act, 1961 without considering the fact that the assessee fail to furnish demat account and copy of bank statement.
2) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee is one of the beneficiary of accommodation entry in the form of Short Term Capital Gain/Loss by way of trading in the Penny Scrip of M/s. Kyra Landscape Ltd without considering the facts and circumstances of the case. 3) "The appellant craves leave to add, amend, alter substitute or modify any of the above grounds or add a fresh ground as and when found unnecessary either before or at the time of hearing."
Briefly stated, facts of the case are that assessment proceedings were completed u/s. 147 r.w.s. 144B of the Income Tax Act, 1961 („the Act‟), vide order dt. 28-03-2023, wherein the AO has brought to tax a sum of Rs. 1,76,860/- as un-explained money u/s. 69A of the Act. As per the AO, the assessee has obtained accommodation entry of Rs. 1,76,860/- in the form of Short Term Capital Loss by way of trading in penny scrip of M/s. Kyra Landscape Ltd.
The assessee thereafter carried the matter in appeal before the Ld.CIT(A), who has since deleted the said addition, and against the said findings, the Revenue is in appeal before us.
The relevant findings of the Ld.CIT(A), which are under challenge reads as under:
“3. I have carefully considered the assessment order, the submissions of the Appellant dated 22.02.2024, and the material placed on record. The assessing officer has proceeded to add a sum of Rs. 1,76,860/- under Section 69A of the Income-tax Act, 1961, treating the same as unexplained money. The reasons recorded by the assessing officer, however, are cryptic and internally inconsistent. Vide page 3 of the assessment order, it is noted that the AO has not even undertaken the basic exercise of perusing the documents properly, let alone the price action and volume analysis of the stock prices involved. On the one hand, it has been observed by the AO in the assessment order that the Appellant did not furnish contract notes; on the other hand, the assessing officer himself records that a "contract note- cum-bill" was submitted and has been perused. Such contradictory findings undermine the reliability of the conclusion drawn.
4. Even assuming for a moment that Kyra Landscape Ltd., erstwhile Ancient Infra Ltd., could be categorised as a penny stock company and transactions therein invite closer scrutiny, the surrounding circumstances of this case do not justify the conclusion of bogus dealings. The Appellant is a professional engaged in human resources management and management consultancy, deriving a regular and decent salary income which has been consistently disclosed in the returns filed under Section 139 as well as in the return filed under Section 148. It defies commercial logic that such an individual would seek to engineer a bogus short-term capital loss of a mere Rs. 1,76,860/-. This is further fortified by the fact that the Appellant has traded in a number of scrips, including but not limited to the shares of Kyra Landscape Ltd., and has furnished supporting documents such as contract notes and broker statements. The assessing officer, however, has overlooked these documents and chosen to single out this isolated transaction to draw adverse inference. In my considered view, such an approach is not sustainable when the overall conduct of the Appellant and the circumstantial evidence point to genuine transactions.
Further, I find force in the contention of the Appellant that the transactions in question were routed through a registered broker on the Bombay Stock Exchange in the ordinary course of business, and that evidences in the form of contract notes and related details had been filed. More importantly, it is not disputed that the Appellant has disclosed a total income of Rs. 24,53,820/- in the return filed under Section 148. Against this background, the suggestion that the Appellant would enter into an accommodation entry for as small an amount as Rs. 1,76,860/- is not convincing. On evaluation, it is very clearly noted that the addition is based on suspicion rather than on cogent evidence of concealment, the conclusion given by the AO lacks due application of mind as no efforts have been made to establish that the company under reference is a penny stock company. Considering the circumstances and the inherent infirmities in the assessment order, I am inclined to hold that the addition made under Section 69A is unsustainable in law. Accordingly, the addition of Rs. 1,76,860/- is directed to be deleted. The ground of appeal
and in result, the appeal is allowed.”
5. Heard the parties and perused the material available on record. We find that the Ld.CIT(A) has duly take into consideration the factual matrix of the case and evidences so produced by the assessee in the form of contract notes, the statement of capital gains, the fact that the transaction has been undertaken on the recognized stock exchange and transacted through a registered stock broker. The Ld.CIT(A) has further held that the addition is made by the AO merely basis the suspicion rather than cogent evidence of any concealment and to establish that the company under reference is a penny stock company. During the course of hearing, the said findings of the Ld.CIT(A) have remain unrebutted before us. Further, we find that as against the accommodation entry of Rs. 1,76,860/- by way of Short Term Capital Loss as so alleged by the AO, the assessee has submitted during the appellate proceedings before the Ld.CIT(A) that it has carried out both buy and sale transactions in the scrip of M/s. Kyra Landscape Ltd., wherein the buy transaction are to the tune of Rs. 1,87,713/- and sell transaction are to the tune of Rs. 1,73,695/- and, therefore, it has actually incurred a loss of Rs. 14,018/- as part of regular trading in shares as against the amount of Rs. 1,76,860/- as so alleged by the AO. Even on this account, we find that there is clear lack of appreciation of material available on record by the AO and the addition has been rightly deleted by the Ld.CIT(A). We therefore, do not find any infirmity in the findings of the Ld.CIT(A) and the same are hereby confirmed.
In the result, the appeal of the Revenue is dismissed.