KAVITA MANISH KHENI,MUMBAI vs. INCOME TAX OFFICER,WARD 22(2)(1), MUMBAI

PER SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER: This appeal is filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals), [“Ld. CIT(A)”], dated 12.01.2026 for the assessment year 2014-15 in sustaining the addition made by the Assessing Officer in respect of the claim for exemption u/s 10(38) in respect of long-term capital gain on sale of shares of Cupid Trade and Financials Limited.

“[14] Learned Senior Standing Counsel Mr. Karan Sanghani for the appellant reiterated the submissions made before the Tribunal and submitted that the Assessing Officer, after analyzing the data made available from the Bombay Stock Exchange, came to the conclusion that the price of script, which the assessee sold, was fluctuating by 24 times and after sale of shares made by the assessee, the price has reduced to Rs.0.49. It was, therefore, submitted that the Assessing Officer, taking into consideration the volatility of the share price of the script sold by the asssessee, was justified in relying upon the report of the Investigation Wing of Kolkata as well as the fact that the SEBI has suspended the transaction of the said script for some time and accordingly, the Assessing Officer was justified in making addition of unaccounted income of the assessee on the ground of accommodation entries availed by the assessee. [15] It was further submitted that the CIT(A), after considering the documents available on record, has upheld the view taken by the Assessing Officer. It was submitted that the Tribunal, after considering the submissions made by the assessee and the Departmental Representative, allowed the appeal. It was submitted that the Tribunal, therefore, contrary to the facts and evidence on record, has allowed the appeal without considering the findings of the Assessing Officer and the CIT(A) in its true perspective. [16] Considering the contentions raised on behalf of the Revenue, the Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the assessee cannot be doubted as bogus and exemption under Section 10(38) of the Act was rightly availed by the assessee. The Tribunal has also concluded that the presumption drawn by the Assessing Officer was not corroborated by any evidence to establish the alleged non-genuine transaction by the assessee. It was, therefore, rightly held by the Tribunal that the claim of the assessee for exemption of Long Term Capital Gains under Section 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. The Tribunal has also considered that the assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai (supra), wherein this Court has held as under: "5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span. 6. The finding recorded by the appellate authority and confirmed by the appellate tribunal is based on material before them. They are in the realm of findings of fact. No error could be noticed in the findings and conclusion that the investment was longstanding and genuine and was not penny stock on the basis of which the capital gain was wrongly claimed. 6.1 On the facts of case, no question of law much less substantial question of law arises. 7. Resultantly, appeal is dismissed." [17] In view of the above, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order passed by the Tribunal. The appeal, being devoid of any merit, is, accordingly, dismissed.” 9. SLP filed by the Revenue against this judgment was also dismissed by the Hon'ble Supreme Court. We find that the Coordinate Bench of the Tribunal in the case of Suresh Maheswari vs. DCIT in ITA No. 3370/Mum/2025, dated 29.10.2025 held as under:

“4. We have heard learned DR, gone through the written synopsis of the assessee, in the light of judicial precedents relied upon and perused the materials on record. Undisputed facts are, on 16.01.2013, the assessee purchased 16000 shares of M/s. Pine Animation Ltd. having face value of Rs.10/- per share at a total sales consideration of Rs.1,75,000/- from a broker, by name, M/s Bhushit Trading Pvt. Ltd. This is evident from copy of 8 invoice placed in the paper book. It is the case of the assessee that after getting information from an advertisement published in the Economic Times, the assessee contacted the said broker and purchased the shares. Subsequently, the shares got sub divided into 1,60,000 shares having face value of Rs.1/- per share. In the previous year relevant to the assessment year under dispute, assessee sold 1,32,000 shares for an aggregate sale consideration of Rs.99,34,233/- Suresh Maheshwari Since the shares were held over a period of more than 12 months, the assessee claimed the resultant long term capital gain of Rs.97,89,858/- exempt u/s. 10(38) of the Act. 5. From the materials placed on record, it is evident, the shares of M/S. Pine Animation Ltd. on purchase were credited to the Demat account of the assessee and were held in the said account till the date of the sale. The shares were sold on the Bombay Stock Exchange through a SEBI registered broker, M/s Allwin Securities Ltd. It is further evident, the purchases and sales were through banking channel and there is no cash transaction. Pertinently, in the statement recorded oath u/s. 131 of the Act, in reply to the specific question asked by the AO, the assessee has categorically stated that he had been investing/trading in equity market since last 25 years, which can be verified from the Demat account. The assessee had also furnished details of Demat account, the brokers through whom the purchase and sales transaction were made, the details of scrip purchased in the earlier as well as in the current assessment year, the details of transaction through banking channel etc. From the copy of the Demat account furnished before us, the statement of the assessee that he was regularly investing/trading in equity market stands corroborated. On a perusal of the Demat Account of the assessee, it is observed that the assessee is holding scrips of a number of companies including many reputed companies. Therefore, the fact that the assessee has knowledge of the share market and well acquainted with share transactions cannot be brushed aside. On a reading Suresh Maheshwari of the assessment order, it is very much clear that the entire decision-making process of the AO is based on the Investigation Wing Report. 6. From the assessment order it transpires that the AO has not conducted any independent enquiry to further corroborate the allegations made in the Investigation Wing Report. The limited investigation made by the AO worth its name is, he has referred to the financial statement of the M/s. Pine Animation Ltd. downloaded from the website and recorded a statement u/s. 131 of the Act from the assessee. The financial statement of the M/s. Pine Animation Ltd. can at best be a starting point of the investigation but cannot be made basis for making the addition. In so far as the statement recorded u/s. 131 of the Act, we do not notice any ambiguity in the replies of the assessee.The assessee has clearly and categorially asserted that not only is he well acquainted with equity market and is regularly investing/trading in scrip but the choice of investments is as per his own decision. Further, the entire purchase and sales transactions are not only through registered Demat account standing in the name of the assessee but through verifiable banking channel and registered stock brokers. Though, the AO has not spoken in so many words, however, it appears that the Investigation Wing Report is based on some preliminary report of SEBI alleging role of certain entities in manipulation of scrip of M/s. Pine Animation Ltd. However, in its final report dated 19.09.2017, the SEBI having found that there is nothing adverse against the entities, has held that direction issued against the entities named in the preliminary report should not continue. Thus, the final report of SEBI Suresh Maheshwari clearly establishes that there is no manipulation or wrong doing in relation to pricing of the scrips of M/s. Pine Animation Ltd. 7. Having carefully perused the orders of the Departmental Authorities, we do not find any material or substance brought on record to corroborate the allegations made in the Investigation Wing Report. Pertinently in case of ITO vs. Manisha Narpatkumr Chopra, ITA No. 2443/Mum/2023 and order dated 28.08.2024, which is for the very same assessment year 2015-16, the Coordinate bench while dealing with similar addition made in case of another assessee on account of sale of shares of M/s. Pine Animation Ltd. has held as under: "11. We heard rival contentions and perused the record. We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkatta in order to arrive at the conclusion that the Long Term Capital Gain reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation Wing, Kolkatta is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report, without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people, who were involved in the alleged rigging of prices. We notice that the promoters and their associations of M/s. Pine Animation Ltd., were initially debarred from accessing stock market, but the same has been revoked by the SEBI, vide its order dated 19th September, 2017. The following observations made by the SEBI in the above said order are worth "10. Considering the fact that there are no adverse findings against the aforementioned 114 entities with respect to their role in the manipulation of the 10 scrip of PAL, I am of the considered view that the directions issued against them vide interim order dated May 08, 2015 which were confirmed vide Orders dated June 02, 2016, July Suresh Maheshwari 05, 2016, August 22, 2016 and June 02, 2017 need not be continued." 11.1. We noticed earlier that the assessee has sold the shares during the period from June 05, 2014 to September 15, 2014. Thus, the transactions of purchase and sale of shares by the assessee have happened prior to the passing of initial order by SEBI, which has been later revoked. Hence, we are of the view that the transactions of purchase and sale of shares of M/s. Pine Animation Ltd., by the assessee would not be affected by the above said orders of the SEBI. 12. In the statement recorded from the assessee, she has stated that she was guided by her husband in making the investment, who is a Chartered Accountant by profession. The AO has also recorded statement from her husband, but did not find any adverse feature in the statements given by both the parties. We also notice that- (a) the assessee has purchased these shares by paying consideration through banking channels. (b) the shares of M/s. Pine Animation Ltd., have been purchased from an existing share holder in the off market. The copy of physical share certificate is given, wherein the name of the assessee has been to have been endorsed. (c) the shares have been later dematerialised and kept in the Demat account. (d) the assessee has sold the shares through stock exchange platform (e) the assessee has received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group, which involved in the manipulation of prices of shares. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee. 13. Both the parties relied on various case laws before us. We may refer to the some of the decisions rendered by Hon ble jurisdictional Bombay High Court. In the case of Shyam Pawar (54 taxmann.com 108) (Bom), the Hon’ble Bombay High Court has observed as under:- Suresh Maheshwari "3. 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 4. 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 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. 5. We have perused the concurrent findings and on which heavy reliance is placed by Mr.Sureshkumar. While it is true that the 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 Suresh Maheshwari 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 S003and 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 modusoperandi. 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 Assessce'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. 6. 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 DAT 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 is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. Suresh Maheshwari The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected 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.

Order pronounced in the open court on 09/09/2026

Sd/- Sd/- PRABHASH SHANKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: /09/2026 Prabhat Copy to: KAVITA MANISH KHENI, 2101 RAHEJA EMPRESS,392 VEER SAVARKAR 1 MARG,PRABHADEVI,MUMBAI, MUMBAI-400025, MAHARASHTRA

INCOME TAX OFFICER,WARD 22(2)(1), 2 PIRAMAL CHAMBERS,MUMBAI, MUMBAI-400012, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE