ANKIT BHOGILAL KUBADIA,DADAR WEST vs. INCOME TAX OFFICER WARD 22(2)(1), PIRAMAL CHAMBER LALBAUG

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ITA 5511/MUM/2025Status: DisposedITAT Mumbai03 August 2026AY 2015-1612 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the transactions were conducted through the stock exchange via a SEBI-registered broker, with payments routed through banking channels and STT levied. Relying on jurisdictional High Court precedents, the Tribunal found no perversity in the assessee's documentation and deleted the addition.

What were the facts?

The assessee claimed long-term capital gains (LTCG) as exempt under Section 10(38) on the sale of shares of M/s. PS IT Infrastructure & Services Ltd. The Assessing Officer treated the sale proceeds as unexplained cash credit under Section 68, disallowing the exemption.

What were the issues?

Whether LTCG from share sale is genuine and exempt, or should be treated as unexplained cash credit under Section 68 based on investigation wing's information about penny stocks.

Which sections of the Income-tax Act were involved?

Section 10(38),Section 68,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE SHRI PAWAN SINGH & HON’BLE SHRI GIRISH AGRAWAL

For Respondent: Shri Surendra Mohan, Sr. DR
Pronounced: 03.08.2026

आदेश / ORDER

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of ld. CIT(A)/National Faceless Appeal Centre vide DIN: ITBA/NFAC/S/250/2023-24/1055618043(1) dated 31.08.2023 passed against the assessment order by the National Faceless Assessment Centre Delhi, u/s 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 29.12.2017 for the Assessment Year 2015-16.

2.

Assessee has raised the following grounds of appeal:

The order dated 31/08/2023 bearing No. ITBA/NFAC/S/250/2023- 24/1055618043(1) passed under section 250 of the Income Tax Act, 1961 by the Hon'ble CIT(Appeals), National Faceless Appeal Centre (NFAC), Delhi, is excessive, unreasonable, arbitrary, against the provisions of Income Tax Act,1961 and therefore liable to be quashed. The delay in filing the present appeal, being beyond the control of the Appellant and in the interest of the justice may kindly be condoned. 3(a) On facts and circumstances ofthe case and in law, the Honourable CIT (Appeal) NFAC, Delhi has erred in confirming the addition of Rs. 1,46,67,000/- made by the Assessing Officer to the income of the Appellant under section 68 representing sale proceeds of shares of M/s. PS IT Infrastructure & Services Ltd. after rejecting the claim of the Appellate in respect of Long term capital gains being exempt under section 10(38) treating the same as not genuine on the basis of information in possession ofthe Investigation Wing, Kolkata that certain operators and intermediaries had provided accommodation entries of bogus Long term capital gains using certain penny stock companies and thereby further erred in upholding the view of the Assessing Officer that such income be taxed at special rate under section 115BBE. (b) The Id. CIT(A) failed to appreciate that:- (i) The Appellant has earned Long term capital gains of Rs.1,46,67000/- on Sale of shares of M/s. PS IT Infrastructure & Services Ltd. and the same is supported by independent and admissible evidences. (ii) The shares were sold in the open free market of Bombay Stock Exchange on BOLT. (iii) The payments for purchase of shares and receipts for sale of shares are through banking channels. (iv) The delivery of shares are taken and given from the Demat account of the Appellant and (v) The Id.Assessing Officer did not provide copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been suspected to provided accommodation entries to the Appellant. (c) In reaching to the conclusion and confirming such addition the Id. CIT(A) omitto consider relevant factors, considerations, principles and evidences while he was, influenced and prejudiced by and factors.

2.1. At the outset, registry has noted a delay of 642 days in filing the present appeal before the Tribunal for which petition for condonation of delay along with affidavit is placed on record. According to the assessee, he did not receive any information/intimation either on email or SMS about passing of the impugned order so as to comply with the limitation requirement of filing the appeal before the Tribunal. Reasons and explanations given by the assessee in the affidavit are considered and are taken note of. Upon perusal of the same and hearing both sides, we deem it fit to condone the delay on the ground that there was sufficient cause for the said delay, so as to take up the matter for adjudication.

3.

Brief facts of the case are that assessee filed his return of income on 27.10.2015, reporting total income at Rs.8,21,350/-. During the year under consideration, assessee reported salary income of Rs.3,47,900/-, business income of Rs.3,81,388/- and income from other sources of Rs.2,62,813/-. Also, reported Long Term Capital Gain (LTCG) on sale of shares of Lifeline Drugs & Pharma Limited and PS IT Infrastructure & Services Limited for Rs.1,43,14,695/-, claiming it as exempt u/s. 10(38).

3.1. Statement showing aforesaid long-term capital gain on the said two scripts alleged to be penny stock is extracted below:

4.

In the course of assessment, ld. Assessing Officer called for details and explanations in respect of the above stated transaction of sale of shares on which exemption has been claimed by the assessee. To corroborate the facts, assessee furnished the relevant documentary evidences which are placed on record in the paper book before us, containing 38 pages. These include:

1.

Copy of supporting evidence with respect to purchase and sale of shares of Lifeline Drugs Pharma Ltd. – a) Copy of summary of purchase and sale of shares b) Copy of bank statement highlighting purchase of shares c) Copy of allotment advice of shares d) Copy of DMAT account statement e) Copy of bank statement highlighting sale of shares f) Copy of contract notes issued by the broker Techno Shares and Stock Limited g) Copy of global statement of equity

2.

Copy of supporting evidence with respect to purchase and sale of shares of PSIT Infrastructure and Services Ltd. – a) Copy of summary of purchase and sale of shares b) Copy of bank statement highlighting purchase of shares c) Copy of share certificate d) Copy of DMAT account statement e) Copy of bank statement highlighting sale of shares f) Copy of contract notes issued by the broker Magnum Equity Broking Limited 3. Copy of ITR acknowledgement along with Balance Sheet 4.1. Assessee submitted that transaction in the said shares were subjected to securities transaction tax (STT) levy and consideration of sale and purchase for the said scrip had been routed through normal banking channel and no addition can be made without backing of any shred of evidence, more particularly when name of the assessee does not appear in any of the reports as beneficiary of the alleged penny scrip transaction.

4.2. After considering the submissions made by the assessee, ld. Assessing Officer arrived at the adverse conclusion by observing that there is unusual rise in the price of the shares sold by the assessee which has been investigated by the Investigation Wing of the Department to establish that cash has been routed from various accounts to provide accommodation to the assessee and that assessee had failed to discharge his bonus to prove the unusual rise and fall of share prices. Ld. Assessing Officer placed heavy reliance on the statement of unrelated third party to hold that it is only a colourful device where the apparent is not the real. He also relied on the doctrine of preponderance of human probability to hold that the assessee is indulged in bogus and dubious share transactions since he had not been able to adduce cogent evidences in this regard. He also noted that assessee did not produce the purchasers of the shares sold by him.

4.3. Ld. Assessing Officer, thus completed the impugned assessment by making an addition u/s 68 towards entire sale consideration of Rs. 1,46,67,000/- received by the assessee on the transaction of sale of shares in the aforesaid scrips.

5.

Before us, ld. Counsel for the assessee has reiterated the submissions made before the authorities below. He has also placed on record all the relevant documents and evidences in the form of paper book, details of which are already noted above, backed by judicial precedents of the Hon’ble jurisdictional High Court of Bombay. The submissions so made are not reiterated to avoid duplicity.

6.

We note that transactions for purchase were undertaken in an off-line mode which is an acceptable mode and that of the sale of the aforesaid shares were undertaken on the stock exchange platform through the SEBI registered broker on which STT was levied and the consideration was routed through normal banking channel. The entire flow of these transactions is corroborated by relevant documentary evidences placed on record. While making the addition, there are no discrepancies pointed out by the ld. Assessing Officer in the documents and the details furnished by the assessee. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, ld. AO could have taken an adverse view, only if, he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case.

7.

On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the two companies. According to him, sharp jump in the share prices of the aforesaid scrips is not justified. He has relied upon the search and survey operations conducted by the Investigation Wing of the Department at various locations in respect of alleged penny stocks which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the ld. Assessing Officer of implicating the assessee is un-supported by any cogent material on record. The finding arrived at by the ld. Assessing Officer is thus, purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already extracted above, forming part of the paper book. We also take note of the fact that assessee is a regular investor having made investments in several other scrips. He has reported his investment in shares of Rs.40,14,570/- in the balance sheet as on 31.03.2015 placed in the paper book at page 38.

7.1. For our above observations and findings, we place reliance on the decision in the case of CIT vs. Jamnadevi Agrawal [2012] 20 taxmann.com 529 (Bom), wherein it was held that transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon’ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Hon’ble Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures.

7.2. Reliance placed by the ld. Assessing Officer on the report of Investigation Wing without further corroboration based on cogent material does not justify the conclusion that the impugned transactions are bogus, sham and part of racket of accommodation entries. It does not prove that the assessee has carried out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of share prices. In absence of any such material, enquiry and examination, the addition made pertaining to receipt of sale consideration of the impugned transactions cannot be sustained. In our considered view, ld. Assessing Officer has not established that the assessee was involved in price rigging.

8.

We note that ld. Assessing Officer has not brought on record any material to show that assessee was part of any group which was involved in the manipulation of share prices. Suspicion by the ld. Assessing Officer on the purchase and sale of shares is baseless.

9.

As already noted above, ld. Assessing Officer has referred to the theory of preponderance of probability which according to us is applied to weigh the evidence of either side and draw a conclusion in favor of a party which has more favorable factor in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of fact that might go against the assessee. Once nothing has been proved against the assessee with the aid of any direct material, nothing can be implicated against the assessee on the presumption or suspicion, howsoever, strong it might appear to be true.

10.

For our observations and to arrive at the findings, we find force of binding nature from the following decisions of Hon'ble High Court of Bombay being a jurisdictional High Court:

i) Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022] held as under:- "1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was DMATed and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. ("RFL") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax ("STT") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal.” 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs."

ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: “Where shares were purchased by assessee on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange, there was no reason to add capital gains as unexplained cash credit under section 68”

iii) CIT vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bom) wherein it was held: “Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68”

11.

Ld. CIT DR placed reliance on the decision of Hon’ble High Court of Calcutta in the case of Swati Bajaj and others vs. PCIT [2022] 446 ITR 56 (Cal) wherein it was held that assessee had to establish the genuineness of rise in price of shares within a short period of time that too, when general market trend was recessive. However, we note that there are several decisions of Hon'ble jurisdictional High Court as stated supra which are in favor of the assessee. Accordingly, the same would prevail on the issue before this Tribunal. In the present case, decision of the Hon'ble non-jurisdictional High Court carries only a persuasive value. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 [1991] that the decision of Hon'ble jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon'ble non-jurisdictional High Court. Hon'ble Supreme Court emphasized therein that the orders of Tribunal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher appellate authorities. The Hon'ble Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline. Respectfully following the same, we deem it fit and appropriate to follow the decisions of Hon'ble jurisdictional High Court of Bombay referred supra wherein the impugned issue is decided in favor of the assessee. Moreover, when there are conflicting decisions of various High Courts on the same issue, the Hon'ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC) held that construction that is favorable to the assessee should be adopted. Hence by following this principle, reliance placed by ld. CIT(A) on the decision of Hon'ble High Court of Calcutta in the case of Swati Bajaj (supra) does not hold its fort. Further in the present case, we find that assessee has duly established the nature and source of credit representing sale proceeds of shares of Lifeline Drugs & Pharma Limited and PS IT Infrastructure & Services Limited.

12.

Similar issue had come up before the Coordinate Bench in the case of Vikram N. Chandan vs. ITO in ITA No. 70/Mum/2024, dated 30.07.2024 which also dealt with the scrip of PS IT Infrastructure & Services Limited as in the present case and deleted the addition made u/s. 68 towards proceeds of sales of the said scrip which gave rise to the long term capital gain claimed exempt by the assessee u/s. 10(38).

13.

Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as discussion and observations made herein above, we delete the addition made u/s 68 towards proceeds of sale of listed shares of Lifeline Drugs & Pharma Limited and PS IT Infrastructure & Services Limited which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the assessee in this regard are allowed.

14.

In the result, appeal of the assessee is allowed.

Order is pronounced in the open court on 03 August, 2026

Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Dated: 03 August, 2026 MP, Sr.P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai

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