RAJ SHARADKUMAR AGARWAL,MUMBAI vs. VINAY SINHA, COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI

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ITA 1583/MUM/2025Status: DisposedITAT Mumbai13 August 2026AY 2011-201213 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the SEBI report did not find any manipulation in the trading of the shares in question, and the trading on the stock exchange was genuine. Following coordinate benches' decisions in similar cases, the Tribunal deleted the additions made by the AO.

What were the facts?

The assessee claimed long-term capital gains (LTCG) on the sale of shares of 'Splash Media'. The Assessing Officer (AO) treated these gains as unexplained cash credit under Section 68, alleging accommodation entries based on an investigation report. The assessee provided documentary evidence to support the genuineness of the transactions.

What were the issues?

Whether the long-term capital gains on sale of shares were genuine or constituted unexplained cash credit. Whether the reassessment proceedings were validly initiated.

Which sections of the Income-tax Act were involved?

Section 68,Section 147,Section 148,Section 10(38)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SANDEEP GOSAIN & BIJAYANANDA PRUSETH

Pronounced: 13.08.2026

PER SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. OFFICE OF COMMISSIONER OF INCOME TAX, APPEALS, 51 vide DIN: ITBA/APL/S/250/2024-25/1072278234(1) dated 17-Jan-2025 for the Assessment Year 2011-2012. The Assessee has raised the following grounds of appeal:

1.

The listed shares had been sold on floor of recognized stock exchange on which STT had been paid by the appellant, The period of holding of the listed shares in D-mat account exceeds 12 months; 2. That the order of learned CIT (Appeals) being contrary to the facts of the case, evidence and material on record and law applicable thereto should be set aside, amended or modified in accordance with ground of appeal deduced above. 3. Each of the ground of appeal enumerated above are independent 3 of and without prejudice to one another. 4. That the appellant craves leave to reserve to herself the right to add to, alter or amend any of the aforesaid ground of rounds of 4 appeal at or before the time of hearing and to produce such further evidence, documents, and papers in support of its claim as may be necessary. 5. That On facts and circumstances of the case and in Law, Ld CIT(Appeals) erred in affirming of issuing the notice u/s. 148 without fresh tangible material, without independent application 5 of mind and without having valid reason to believe that income had escaped assessment simply on the basis of information received, share price movements and without any specific material against assessee. 6. That On facts and circumstances of the case and in law, Ld. CIT(Appeals) erred in making the addition as unexplained cash 6 credit u/s 68 of Rs. 5,33,61,673/- and commission of Rs.15,63,105/-on rejecting the appellant's claim u/s 10(38) of Long- Term capital gain on sale of listed shares. 7. The Ld CIT(Appeals)., before affirming the addition of long-term capital gain of Rs. 5,33,61,673/- and commission of Rs.15,63,105/- ought to have considered the understated vital facts, being; 8. The contract-cum-bill, D-mat statement, bank statements, confirmation of broker etc. to justify the genuineness of the purchase and sales had been filed on record; The appellant, in statement u/s 131, confirmed the transactions and files several documentary evidences to justify the genuineness of long term capital gain and also explained the trail of shares and funds; 9. The Ld CIT(Appeals) had not objected to the correctness of documentary evidences filed on record or rejected the substantiations filed, however still made the addition on the basis of assumption, surmise and flimsy reasons; The genuineness of shares acquired in earlier year cannot be disputed In current year;

10.

The substantial increase in price of the shares listed in recognized stock exchange, suspicion formed and merely on the 10 basis of information received cannot be a reason to treat the bonafide transaction as non-genuine.

2.

Ground Nos. 2 to 4 are general in nature and, therefore, require no adjudication.

3.

Ground Nos. 1 and 6 to 10 are interrelated, interconnected, and relates to challenging the order of the Ld. CIT(A) in confirming the additions made by the AO on account of unexplained cash credit under section 68 of the Income-tax Act. Therefore, we have decided to adjudicate these grounds by way of the present consolidated order.

4.

The learned AR appearing on behalf of the assessee reiterated the same arguments as were advanced before the Revenue Authorities and also relied upon the written submissions filed before the authorities below.

5.

The learned DR, on the other hand, relied upon the orders of the Revenue Authorities.

6.

We have heard the rival submissions, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we notice that the assessee filed its return of income for the year under consideration. However, the case of the assessee was reopened by issuing statutory notices and after providing an opportunity of being heard to the assessee. Subsequently, the AO passed the assessment order under section 143(3) read with section 147 of the Income-tax Act and assessed the income at Rs. 5,63,79,110/- by making additions on account of long-term capital gain (sale proceeds) of Rs. 5,33,61,673/- and commission of Rs. 15,63,105/-.

7.

The AO took note of the inquiries conducted by the Investigation Wing, Kolkata, wherein it was found that the assessee was one of the beneficiaries who had obtained accommodation entries in the form of long- term capital gain in the scrip of 'Splash Media'. The total amount of such long-term capital gain claimed by the assessee as exempt income was Rs. 5,21,03,523/-.

8.

We further notice that the assessee had purchased 14,000 shares of the company through preferential allotment. Subsequently, 42,000 bonus shares and 5,04,000 bonus shares were also issued to the assessee, resulting in an average purchase price of Rs. 2.075 per share. These shares were sold by the assessee at an average rate of Rs. 95.28 per share for a total consideration of Rs. 5,33,61,673/-, resulting in a long-term capital gain of Rs. 5,21,03,522/-.

9.

According to the Assessing Officer, the price of the company's shares had increased by nearly 72 times within a short span of time. Therefore, after analysing the investigation carried out by the Investigation Directorate, Kolkata, wherein even the cash trail in bogus LTCG cases was traced to Jama Kharchi companies, the AO concluded that Splash Media had no genuine financial prospects and was merely a penny stock company.

10.

On the contrary, the learned AR, while relying upon the following documents:

 Copy of bank statements reflecting debit from the Indian Bank account towards purchase of shares (Page Nos. 23-25);  Copy of purchase and sale reconciliation chart (Page No. 26);  Copy of all contract notes representing sale of shares on the BSE platform (Page Nos. 27-47);

 Copy of Demat transaction statement of M/s Dimensional Securities Pvt. Ltd. (Page Nos. 48-53);  Copy of statement of purchase and sale of shares of M/s Splash Media and Infra Limited (Page No. 54);  Complete copy of the Demat transaction statement for the period April 2009 to March 2010 reflecting the credit of shares upon allotment and their subsequent sub-division (Page Nos. 55-63);  Copy of ledger account from the books of M/s Dimensional Securities Pvt. Ltd. (Page Nos. 64-78);  Copy of ledger account of Splash Media in the books of the assessee (Page No. 79);  Copy of bank statement reflecting credit in the Indian Bank account on receipt of sale proceeds of shares from broker M/s Dimensional Securities (Page Nos. 80-94);  Copy of holding statement evidencing the assessee's status as a regular investor (Page Nos. 95-96);  Copies of two cheques for Rs. 2,94,000/- and Rs. 8,68,000/- (Page Nos. 98-99);  Copy of the letter dated 01.07.2009 submitted by the assessee to the Board of Directors of Splash Media Works Ltd. for subscribing to the shares of the said company (Page No. 100);  Copy of share application form and letters issued by Splash Media Works Limited (Page Nos. 101-106); and  Copy of PAN card and Demat statement (Page Nos. 106A to 106J),

submitted that all the transactions entered into by the assessee were genuine and carried out through proper banking channels. It was further submitted that, in recent months, the High Courts as well as the Tribunal have deleted similar additions made in cases where the assessments were reopened solely on the basis of the Investigation Wing's report and the long-term capital gains were treated as unexplained income.

11.

It was also submitted that the AO had not found any defect in the documentary evidence produced by the assessee and had made the additions merely on assumptions and presumptions without furnishing the Investigation Wing report relied upon and without providing the assessee an opportunity to cross-examine the persons whose statements were relied upon.

12.

After considering the documentary evidence placed on record, the orders passed by the Revenue Authorities, and after hearing the rival submissions at length, we find that the issue involved is squarely covered by a series of orders passed by the Coordinate Benches of the ITAT in favour of the assessees, wherein the same scrip and the same assessment year were involved. The Coordinate Benches, after analysing the facts of those cases, concluded that no addition could be made in the hands of the respective assessees who had dealt in the scrip of Splash Media and accordingly deleted the additions. The relevant decisions are as under:

 Varshaben Laherikant Bhadra, ITA No. 1665/Mum/2024 for A.Y. 2011-12; operative portion of the same is reproduced herein below:

8.

We have heard the rival submissions and also perused the relevant findings in the impugned orders. Apart from the fact that the shares were purchased and sold only on electronic platform of Bombay Stock Exchange through registered stock broker from SEBI after paying STT, it has been brought on record by the Ld. Counsel that husband of the assessee was a regular trader and investor in shares and assessee had also made investments in several other shares. Thus assessee was also a regular investor in shares. During the course of hearing we had enquired from the assessee whether there is any investigation or finding of the SEBI on the scrip of M/s. Splash Media & Infra Ltd., now known as Luharuka Media & Infra Ltd. It has been brought on record that on 31.10.2017 the department had sent a letter along with the report of Director of Income Tax, Investigation, Kolkata with regard to investigation of the scrip of M/s. Splash Media & Infra Ltd. The General Manager, Investigation Department of SEBI vide report dated 11.10.2017 have submitted the report of the Investigation Wing and also to the ACIT, Central Circle -4(4), Mumbai that the investigation of SEBI did not find violation of provisions of the SEBI Act, 1992 and SEBI (PFUTP) Regulations. Along with the letter there is a confidential report given to Pr.DIT (Investigation), Kolkata which had sought for the information regarding the alleged manipulation in market price of shares of certain companies including M/s. Splash Media & Infra Ltd. The SEBI in his report has analysed the volume and price of the trading of the M/s. Splash Media & Infra Ltd. for various patch starting from 15.09.2009 onwards. In their exhaustive report they categorically stated that there was no manipulation pattern observed in the trading of M/s. Splash Media & Infra Ltd. and therefore no adverse inference is drawn. The report deals with all the buyers and the sellers of the scrip in the Stock Exchange in various periods and after detailed examination and inquiry, in the report it is categorically stated that in none of the period there was no specific instance or manipulative pattern which can show that price was rigged or scrip was manipulated to provide any accommodation entry. Thus it was reported that there was no manipulation and no adverse has been drawn. Since it is an exhaustive report, therefore the contents of the same cannot be reproduced. This SEBI report itself clarifies the doubts of the ld. AO and also Director, Investigation Wing, Kolkata who had specifically referred this matter that it should be further investigated by the SEBI. SEBI did not find any manipulation in the prices or that the prices were rigged by some entities either by the buyers or by the sellers and no adverse inference have been drawn even with regard to the exit providers. Thus, the SEBI report itself absolves the case of the assessee.

9.

Moreover, the entire premise of the ld. AO is based on that the DIT (inv.) Report which itself has been clarified by the SEBI to the Investigation Wing to whom specific information was shared by the Pr.DIT, Investigation, Kolkata. Once in the investigation it has been held that there was no manipulation in the scrip of M/s. Splash Media & Infra Ltd., and the trading at Bombay Stock Exchange was genuine and the prices quoted in the Stock Exchange over the time were in accordance with the SEBI Rules and Regulations, no adverse can be drawn in the case of assessee. Accordingly, in view of the documents submitted by the assessee as well as the report of the SEBI specifically with regard to the M/s. Splash Media & Infra Ltd., the transaction of purchase and sale of shares online through Bombay Stock Exchange cannot be held to be bogus or non-genuine and accordingly, addition of Rs.1,00,99,878/- made u/s. 68 of the Act is deleted. Consequentially, the adhoc commission made @3% is also deleted.

10.

In the result, appeal of the assessee is allowed.

 Asha Himmat Bhadra, ITA No. 2154/Mum/2024 for A.Y. 2011-12, operative portion of the same is reproduced herein below:

7.

It is important to mention that the price of script M/s. Slash Media Ltd. was being determined, at recognized stock exchange, which is not in control of assessee. However, just because the Income Tax Department got the information from the Investigation Wing that M/s. Splash Media Ltd. is a penny stock, in her view it does not mean that the assessee has indulged into misappropriation. In this regard, reliance is being placed upon the decision in the case of Vinay Kumar Dhingra HUF Vs. ITO by the Coordinate Bench of ITAT Delhi dated 28.6.2021, wherein all the facts of the transactions are similar to the case of the assessee.

8.

Moreover, the Ld. AR has also relied upon the decision of the Coordinate Bench of the ITAT in the case of sister of the assessee titled Varshaben Laherikant Bhadra Vs. ITO (ITA No. 1665/Mum/2024 dated 19.5.2025), wherein it was held as under :- “8. We have heard the rival submissions and also perused the relevant findings in the impugned orders. Apart from the fact that the shares were purchased and sold only on electronic platform of Bombay Stock Exchange through registered stock broker from SEBI after paying STT, it has been brought on record by the Ld. Counsel that husband of the assessee was a regular trader and investor in shares and assessee had also made investments in several other shares. Thus assessee was also a regular investor in shares. During the course of hearing we had enquired from the assessee whether there is any investigation or finding of the SEBI on the scrip of M/s. Splash Media & Infra Ltd., now known as Luharuka Media & Infra Ltd. It has been brought on record that on 31.10.2017 the department had sent a letter along with the report of Director of Income Tax, Investigation, Kolkata with regard to investigation of the scrip of M/s. Splash Media & Infra Ltd. The General Manager, Investigation Department of SEBI vide report dated 11.10.2017 have submitted the report of the Investigation Wing and also to the ACIT, Central Circle -4(4), Mumbai that the investigation of SEBI did not find violation of provisions of the SEBI Act, 1992 and SEBI (PFUTP) Regulations. Along with the letter there is a confidential report given to Pr.DIT (Investigation), Kolkata which had sought for the information regarding the alleged manipulation in market price of shares of certain companies including M/s. Splash Media & Infra Ltd. The SEBI in his report has analysed the volume and price of the trading of the M/s. Splash Media & Infra Ltd. for various patch starting Varshaben Laherikant Bhadra from 15.09.2009 onwards. In their exhaustive report they categorically stated that there was no manipulation pattern observed in the trading of M/s. Splash Media & Infra Ltd. and therefore no adverse inference is drawn. The report deals with all the buyers and the sellers of the scrip in the Stock Exchange in various periods and after detailed examination and inquiry, in the report it is categorically stated that in none of the period there was no specific instance or manipulative pattern which can show that price was rigged or scrip was manipulated to provide any accommodation entry. Thus it was reported that there was no manipulation and no adverse has been drawn. Since it is an exhaustive report, therefore the contents of the same cannot be reproduced. This SEBI report itself clarifies the doubts of the ld. AO and also Director, Investigation Wing, Kolkata who had specifically referred this matter that it should be further investigated by the SEBI. SEBI did not find any manipulation in the prices or that the prices were rigged by some entities either by the buyers or by the sellers and no adverse inference have been drawn even with regard to the exit providers. Thus, the SEBI report itself absolves the case of the assessee.

9.

Moreover, the entire premise of the ld. AO is based on that the DIT (inv.) Report which itself has been clarified by the SEBI to the Investigation Wing to whom specific information was shared by the Pr.DIT, Investigation, Kolkata. Once in the investigation it has been held that there was no manipulation in the scrip of M/s. Splash Media & Infra Ltd., and the trading at Bombay Stock Exchange was genuine and the prices quoted in Varshaben Laherikant Bhadra the Stock Exchange over the time were in accordance with the SEBI Rules and Regulations, no adverse can be drawn in the case of assessee. Accordingly, in view of the documents submitted by the assessee as well as the report of the SEBI specifically with regard to the M/s. Splash Media & Infra Ltd., the transaction of purchase and sale of shares online through Bombay Stock Exchange cannot be held to be bogus or non- genuine and accordingly, addition of Rs.1,00,99,878/- made u/s. 68 of the Act is deleted. Consequentially, the adhoc commission made @3% is also deleted.

10.

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

9.

We noticed that the Coordinate Bench of ITAT in the case of sister of the assessee has dealt with the same script regarding same assessment year and had deleted the addition by recording well reasoned order. Apart from this, Ld. AR has also relied upon number of other cases, wherein also same script was dealt with by the Coordinate Bench of ITAT. The details of which is as under :-

1.

Damyanti Mundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1721/DEL/2019

2.

Amit H. Patel (HUF) Vs. DCIT-CC 3(4) ITA Nos.5761, 5762,5764 & 5765/M/2019

3.

Gopal Chand Mundhra and Sons Vs. ITO, Ward-55(5), New Delhi. ITA No. 1375/DEL/2019

4.

Ramdev Mundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1722/DEL/2019

5.

Shriya Devi Mundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1523/DEL/2019

6.

Gopal Chand Mundhra Vs. ITO, Ward-55(5), New Delhi. ITA No. 1524/DEL/2019

7.

Ramprasad Agarwal v. Income Tax Officer 2(3)(2), Mumbai ITA No. 1228 and 4843/Mumbai/2018.

10.

Therefore considering the totality of the facts and circumstances of the present case and also taking into consideration the decision of the Coordinate Bench in the same script more particularly in the case of sister of the assessee, wherein the same script and the same assessment year is involved and hence adhering to the principles of judicial consistency and judicial discipline, we also allow the grounds raised by the assessee and direct the Ld. AO to delete the additions made under section 68 & 69C of the Act.

13.

Thus, considering the totality of the facts and circumstances discussed above and respectfully following the decisions of the Coordinate Benches of the ITAT, in keeping with the doctrine of binding precedents and the need to maintain judicial consistency, we direct the AO to delete the impugned additions. Accordingly, Ground Nos. 1 and 6 to 10 raised by the assessee are allowed.

14.

Ground No. 5 relates to challenging the validity of the reassessment proceedings initiated under section 148 of the Act. The grievance of the assessee is that the Ld. CIT(A) erred in upholding the issuance of notice under section 148 in the absence of any fresh tangible material, without independent application of mind, and without any valid reason to believe that income had escaped assessment. The assessee contends that the reopening was based merely on information received and share price movements, without any specific material implicating the assessee.

15.

In view of our findings hereinabove, since we have already deleted the additions on merits, adjudication of Ground No. 5 has become academic and is, therefore, left open.

16.

In the result, appeal filed by the Assessee stands allowed.

Order pronounced in the open court on 13.08.2026.

Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 13.08.2026 RY-SrPS Copy to: RAJ SHARADKUMAR AGARWAL, B-1704, D B WOODS, KRISHNA VATIKA ROAD, GOKULDHAM, GOREGAON EAST 1 S.O, MUMBAI, MUMBAI, 400063, MAHARASHTRA, INDIA, MUMBAI-400063, MAHARASHTRA VINAY SINHA, COMMISSIONER OF INCOME TAX (APPEALS), 2 OFFICE OF THE COMMISSIONER OF THE INCOME TAX, (APPEALS), CIT(A) 51, MUMBAI-400020, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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