INDU KIRIT SHAH,MUMBAI vs. INCOME TAX OFFICER WARD 41(2)(2), MUMBAI

When the appeal was called for hearing, none appeared on behalf of the assessee to represent the case. There was also no application seeking adjournment. Considering the circumstances and the material available on record, we proceed to dispose of the appeal ex-parte qua the assessee, after hearing the Ld. DR and on the basis of the material available on record.

The brief facts of the case are that the assessee is an individual and was engaged in trading in securities. For the impugned assessment year, the assessee originally filed the return of income on 28.02.2013 declaring total income of Rs.2,79,160/-. Subsequently, information was received from the DDIT (Investigation), Unit-7(1), Mumbai regarding transactions in penny stocks. The information indicated that the assessee had traded in the shares of M/s VMS Industries Limited, involving a traded value of Rs.2,92,284/-.

On the basis of the aforesaid information, the assessment was reopened under section 147 of the Act after obtaining approval under section 151(1), and notice under section 148 dated 31.03.2019 was issued. In response thereto, the assessee filed the return of income on 11.07.2019 declaring total income of Rs.3,00,440/-. The assessment order records that the assessee made only partial compliance with the notices issued under section 142(1).

The Ld. AO observed that M/s VMS Industries Limited was identified in the investigation material as a penny-stock company allegedly used by operators, entry/exit providers and beneficiaries for claiming artificial LTCG/STCG/business losses. A final show-cause notice dated 16.12.2019 was issued to the assessee requiring an explanation as to why the cost of acquisition of the shares should not be treated as undisclosed income. According to the impugned assessment order, the assessee did not respond to the said notice. Consequently, the Ld. AO made an addition of Rs.2,92,284/- under section 68 of the Act. Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A), challenging both the validity of reopening under section 147 and the addition of Rs.2,92,284/- under section 68 of the Act. Before the Ld. CIT(A), the assessee also produced contract notes issued by M/s Religare Securities Ltd. and contended that 18,500 shares had been purchased for Rs.3,09,582.60 and sold during the same year for Rs.2,91,896.75, resulting in short-term capital loss of Rs.17,685.85.

The Ld. CIT(A), however, observed that the investigation report identified M/s VMS Industries Limited as a penny-stock scrip used for providing accommodation entries. The Ld. CIT(A) further observed that the assessee had not furnished cogent material establishing the genuineness of the transaction and source of investment. Accordingly, the Ld. CIT(A) upheld the action of the Ld. AO and dismissed the appeal. Being aggrieved the assessee filed an appeal before us.

Before us, the assessee has challenged the impugned order, inter alia, on the ground of violation of principles of natural justice and against the confirmation of addition of Rs.2,92,284/- under section 68 of the Act. The assessee has also pleaded that the investment in the securities of M/s VMS Industries Limited was made through M/s Religare Securities Ltd. and that the transaction had actually resulted in short-term capital loss of Rs.17,685.85.

The Ld. DR relied upon the orders of the lower authorities and submitted that the reopening was based upon specific information received from the Investigation Wing relating to transactions of the assessee in the penny-stock 3 scrip of M/s VMS Industries Limited. It was further submitted that the assessee had failed to satisfactorily explain the transaction before the Ld. AO despite opportunity being granted. The Ld. DR accordingly supported the addition sustained by the Ld. CIT(A).

We have heard the Ld. DR and carefully perused the orders of the revenue authorities and the material available on record. The reassessment was initiated on the basis of specific information received from the DDIT (Investigation), Mumbai identifying the assessee's transaction in the scrip of M/s VMS Industries Limited involving an amount of Rs.2,92,284/-. The assessment record further shows that statutory notices were issued and that the assessee did not respond to the final show-cause notice dated 16.12.2019 concerning the proposed addition. We further find that the assessee was afforded an opportunity before the first appellate authority and had filed written submissions as well as contract notes issued by M/s Religare Securities Ltd. The Ld. CIT(A) considered the contention that 18,500 shares were purchased for Rs.3,09,582.60 and sold for Rs.2,91,896.75, resulting in a short-term capital loss of Rs.17,685.85. However, after considering the investigation material and the evidence furnished by the assessee, the Ld. CIT(A) recorded a finding that the assessee had failed to place cogent material on record to establish the genuineness of the transaction and the source of investment.

In the present proceedings also, the assessee has chosen not to appear and no further material or explanation has been placed before us to controvert the factual findings recorded by the revenue authorities. The ground alleging violation of principles of natural justice also remains unsupported in view of the opportunities recorded as having been afforded during the assessment and first appellate proceedings.

In these circumstances, on the basis of the material presently available on record, we find no sufficient basis to interfere with the findings recorded by the Ld. CIT(A). Accordingly, the grounds raised by the assessee challenging the reassessment proceedings and the addition of Rs.2,92,284/- under section 68 of the Act are rejected.

In the result, the appeal of the assessee bearing ITA No. 6237/Mum/2026 is dismissed. Order pronounced in the open court on 20th day of August 2026 Sd/- Sd/- (OM PRAKASH KANT) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 20/08/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI