ACIT221, MUMBAI vs. CHANDRA ASOO NIHLANI, MUMBAI

In the assessment proceedings, the Assessing Officer treated the transaction as not genuine. The basis for such conclusion, as recorded in the assessment proceedings, was the information received from the Investigation Wing of the Department concerning an alleged scheme involving manipulation of share prices and generation of artificial long- term capital gains. The Assessing Officer referred to the fact that the shares had been purchased through an off-market transaction and subsequently sold through the stock exchange. He further referred to the involvement of Goldstar Finvest Private Limited, which was stated to have been identified as one of the market manipulators managed and controlled by Shri Mukesh Choksi. On this basis, the Assessing Officer proceeded against the claim of the assessee in respect of the capital gain arising from the sale of the shares.

The learned Joint Commissioner of Income-tax (Appeals), while considering the appeal of the assessee, examined the basis on which the Assessing Officer had arrived at the conclusion that the transaction was bogus and manipulated. The learned first appellate authority noted that the Assessing Officer had proceeded essentially on the basis of the report and information received from the Investigation Wing and that no independent inquiry had been conducted by the Assessing Officer to ascertain whether the purchase and subsequent sale of the shares of Niraj Cement Structural Limited in the assessee’s case were in fact bogus or the result of manipulation. Thus, the learned Joint Commissioner (Appeals) found that the conclusion of the Assessing Officer was not supported by any independent investigation specifically establishing that the assessee’s particular transaction was sham or manipulated.

The learned Joint Commissioner (Appeals) further noted that the assessee had not been provided with the statement of Shri M. Choksi which was relied upon against the assessee and that no opportunity for cross-examination of Shri M. Choksi had been afforded to the assessee. The learned Joint Commissioner (Appeals) also considered the aspect of the alleged receipt of the capital gain in the context of the provisions of section 68 of the Act. It was noted that the assessee did not maintain books of account and that there was no recording in any books of account of any receipt of ₹44,36,560 which could warrant its treatment as an unexplained cash credit under section 68 of the Act. The learned Joint Commissioner (Appeals) further took note of the decision of the Commissioner of Income-tax (Appeals), NFAC, for assessment year 2010-11, wherein the impugned transaction concerning the purchase of 68,000 shares of Niraj Cement Structural Limited had been held to be genuine. The learned Joint Commissioner (Appeals), taking into consideration the findings in the proceedings for the earlier assessment year as well as the deficiencies noticed in the assessment proceedings for the year under consideration, held that the transaction could not be treated as bogus merely on the basis of the Investigation Wing report without any independent inquiry or material establishing manipulation in the assessee’s specific transaction.

On the aforesaid reasoning, the learned Joint Commissioner (Appeals) held that the sale of 68,000 shares of Niraj Cement Structural Limited through a recognized stock exchange and the corresponding capital gain claimed as exempt under section 10(38) of the Act were genuine and accordingly allowed the appeal of the assessee. The Revenue, being aggrieved by the said order dated 12.12.2025, is in appeal before us. The Revenue has contended that Shri Mukesh Choksi had admitted that concerns controlled by him, including Goldstar Finvest Private Limited, were engaged in providing accommodation entries through bogus share transactions and that the assessee’s transaction formed part of a larger organised scheme for generating artificial long- term capital gains through penny-stock manipulation. It has further been contended that the existence of contract notes, demat statements and transactions through banking channels would not conclusively establish the genuineness of the transaction.

The learned Authorised representative (“ld.AR”), in support of the order of the learned Joint Commissioner (Appeals), placed before us a copy of the order of the Coordinate Bench of the Tribunal, Mumbai, in its own case, in ITA No. 8430/Mum/2025 for assessment year 2010-11 dated 29.06.2026, wherein the very issue relating to the purchase of 68,000 shares of Niraj Cement Structural Limited through Goldstar Finvest Private Limited was considered. The Coordinate Bench, while deciding the appeal for the earlier assessment year, held that the addition was founded solely upon generalized allegations arising from the statement of Shri Mukesh Choksi and that no direct incriminating material had been brought on record against the assessee. It was further observed that the documentary evidence submitted by the assessee remained unrebutted and that the addition relating to the transaction in the assessment year 2009-10 had already been deleted and had attained finality. The Revenue’s appeal was accordingly dismissed.

We have considered the rival submissions and the material placed before us. The fundamental basis of the Revenue’s case is that the assessee’s transaction was part of an alleged larger scheme involving manipulation of the price of the scrip and accommodation entries. However, the finding recorded by the learned Joint Commissioner (Appeals) is that the Assessing Officer, apart from relying upon the Investigation Wing report, did not conduct any independent inquiry to establish that the particular purchase and sale transaction undertaken by the assessee was bogus or manipulated. The material placed before us does not disclose any independent finding brought on record by the Assessing Officer specifically demonstrating that the assessee had participated in any manipulation or that the consideration received by the assessee on sale of the shares represented its own unexplained money.

The Revenue seeks to rely upon the alleged admission of Shri M. Choksi concerning the activities of concerns controlled by him. However, in the facts as placed before us, such general allegation has not been supplemented by any direct material establishing that the assessee’s particular transaction was bogus or that the assessee had received any accommodation entry. This aspect also finds support from the order of the Coordinate Bench for assessment year 2010-11, wherein it was specifically held that the addition was founded upon generalized allegations arising from the statement of Shri Mukesh Choksi and that no direct incriminating material had been brought on record against the assessee, while documentary evidence remain unrebutted.

The impugned addition for the present assessment year arises essentially from the subsequent sale of the very same 68,000 shares. The purchase transaction, which constitutes the foundation of the Revenue’s allegation of manipulation, has already been examined for the assessment year 2010-11 and has been held to be genuine by the Tribunal. In the present proceedings also, no distinguishing material has been brought before us which would establish that, notwithstanding the findings recorded in respect of the purchase transaction, the subsequent sale by the assessee through the recognized stock exchange was itself a bogus transaction. The material before us also does not disclose any fact which would warrant a conclusion different from that reached in respect of the same transaction for the earlier assessment year.

In these circumstances, we find that the findings recorded by the learned Joint Commissioner (Appeals) are duly supported by the material referred to in the impugned order. We therefore find no infirmity in the order dated 12.12.2025 passed by the learned Joint Commissioner (Appeals). The sale of 68,000 shares of Niraj Cement Structural Limited through the recognized stock exchange and the consequential capital gain claimed by the assessee as exempt under section 10(38) of the Act, are held to be genuine on the material available on record. The Revenue has not brought before us any material which would justify disturbing the findings of the learned Joint Commissioner (Appeals). The grounds raised by the Revenue are accordingly dismissed.

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