INCOME TAX OFFICER, WARD-6(1)(1), MUMBAI, MUMBAI vs. BHARTULA BHANUMATHI SHARMA, MUMBAI

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ITA 786/MUM/2026Status: DisposedITAT Mumbai31 July 2026AY 2017-187 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged its onus by providing documentary evidence for the purchase and sale of shares. Following jurisdictional High Court judgments, the Tribunal found the addition made by the Assessing Officer to be unwarranted.

What were the facts?

The assessee purchased shares in 2014 and sold them in 2016 through banking channels and a recognized stock exchange. The Assessing Officer disallowed the long-term capital gain claim based on investigation wing reports without specific allegations against the assessee.

What were the issues?

Whether long-term capital gains from share transactions are taxable when the assessee provides documentary evidence and there are no specific allegations of manipulation against them.

Which sections of the Income-tax Act were involved?

Section 10(38),Section 68,Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “H (SMC

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI MAKARAND VASANT MAHADEOKAR

For Appellant: Mr. Prakash Jhunjhunwala
For Respondent: Shri Pravin Salunke, SR. D.R
Hearing: 28.07.2026Pronounced: 31.07.2026

Per : Narender Kumar Choudhry, Judicial Member:

This appeal has been preferred by the Assessee against the order dated 21.11.2025, impugned herein, passed by the National Faceless Appeal Centre (NFAC), Delhi (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.

2 ITA No. 786/MUM/2026 And CO 97/MUM/2026 Bhartula Bhanumathi Sharma 2. In the instant case, the Assessee purchased 18,000 shares of M/s Ojas Asset Reconstruction Company Limited, now known as Toyam Industry Limited, @ Rs.11/- per share and for a total consideration of Rs.1,98,000/-, which was paid through an account-payee cheque on 03.05.2014.

3.

Subsequently, the Assessee was allotted 1,60,000 shares on splitting.

4.

The Assessee during the year under consideration, between 10.08.2016 and 18.08.2016, sold 1,80,000 shares at the rate of Rs.16/- per share for a total consideration of Rs.28,87,535/- through the online platform of the Bombay Stock Exchange (“BSE”).

5.

It is a fact that the Assessee held the shares in its demat account for around 27 months and carried out the purchase and sale transactions through banking channels and sold through online platform of recognized stock exchange.

6.

Further, in order to discharge its prima facie onus cast under sections 68/69 of the Act, the Assessee qua purchase of shares furnished the following relevant documents:

(i) Purchase bills, (ii) Confirmation of account of seller, (iii) Bank Statement, (iv) De-mat Statement, (v) Rate publication of BSE, (vi) Stock split advice and (vii) Balance sheet for earlier years with regard to the purchase of the shares.

7.

With regard to the sale of the shares, the Assessee also furnished contract notes-cum-sale bills, bank statements, confirmation of account of the stockbroker, demat statements and rate publications of the BSE. Further, no allegation has ever been specifically levelled or proved against the Assessee.

3 ITA No. 786/MUM/2026 And CO 97/MUM/2026 Bhartula Bhanumathi Sharma 8. However, the Assessing Officer still disallowed the Assessee’s claim under section 10(38) of the Act in respect of the long-term capital gain of Rs.27,07,535/- and made an addition of the said amount merely on the basis of the investigation carried out by the Investigation Wing, Mumbai, without specifying any particular role of the Assessee in any manipulation, price rigging or unfair practice qua scrip involved.

9.

Thus, the Assessee being aggrieved, preferred the first appeal before the Ld. Commissioner against the aforesaid disallowance/ addition. The Ld. Commissioner, considering the peculiar facts and circumstances of the case and taking cognizance of the documentary evidence furnished by the Assessee, such as sale bills- cum-contract notes, ledger account of the SEBI-registered stockbroker, bank statements, demat statements, purchase bills, confirmations, stock split advice, balance sheets of the earlier years and various judicial precedents, held that the Assessee had duly proved the genuineness of the purchase and sale of the shares.

10.

The Ld. Commissioner accordingly, treated the long-term capital gain of Rs.27,07,535/-, earned by the Assessee from the sale of equity shares of M/s Toyam Industry Limited, as genuine.

11.

Thus, the Revenue being aggrieved, has preferred the instant appeal, whereas the Assessee has filed the Cross Objection challenging the impugned order to the extent that the Ld. Commissioner has not adjudicated the legal issue raised before him.

12.

We have heard the parties, perused the material available on record and considered the rival submissions. Though the Ld. DR specifically relies upon the judgments in Principal Commissioner of Income-tax v. Swati Bajaj [(2022) 446 ITR 56 (Cal.)] and CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)] in support of the addition made by the Assessing Officer, however, the facts involved

4 ITA No. 786/MUM/2026 And CO 97/MUM/2026 Bhartula Bhanumathi Sharma in the said cases are distinguishable from the facts of the instant case.

13.

The Ld. DR failed to controvert the Judgments by the Hon’ble Jurisdictional High Court in the case of CIT v. Jamnadevi Agarwal [(2010) 328 ITR 656 (Bom.)], and Principal Commissioner of Income-tax v. Indravardhan Jain, HUF [(2023) 156 taxmann.com 605 (Bombay)/(2024) 463 ITR 711 (Bombay), dated 12.07.2023] as relied upon by the Ld. Commissioner in support of its decision qua deletion of addition .

14.

The Hon’ble High Court in the case of Principal Commissioner of Income-tax v. Indravardhan Jain, HUF {supra}, has held as under:

"1. This appeal is impugning an order dated 27th May 2016 passed by the Income Tax Appellate Tribunal (ITAT) rejecting two appeals that Revenue had filed against the order of Commissioner of Income Tax (Appeals) (CIT(A)) for Assessment Year 2005-06 in the matter of order passed under section 143(3) read with section 147 of the Income Tax Act, 1961 (the Act) against Respondent. Respondent though served is not present before us. Affidavit of service is also filed.

2.

It was the case of Revenue before the ITAT that the CIT[A] was wrong in deleting the addition made by the Assessing Officer (A.O.) in respect of long term capital gain treated by A.O. as unexplained cash credit under section 68 of the Act.

3.

Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gain and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs.3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs.155.04/- per share. It was A.O.'s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. In view thereof, respondent's case was reopened under section 148 of the Act.

4.

The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under section 68 of the Act. The CIT(A) has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively

5 ITA No. 786/MUM/2026 And CO 97/MUM/2026 Bhartula Bhanumathi Sharma

proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.

5.

We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises. 6. Appeal dismissed."

15.

We further observe that the Hon’ble Jurisdictional High Court, in the case of PCIT v. Ziauddin A. Siddique [Income Tax Appeal No.2012 of 2017, decided on 04.03.2022], also dealt with identical facts and circumstances and affirmed the decision of the Tribunal deleting an identical addition by observing and holding as under:

“2. We have considered the impugned order with the assistance of 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 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. 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 the assessee that it has participated in any price rigging in the market on the shares of RFL. The

3.

Therefore we find nothing perverse in the order of the Tribunal.

4.

Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different.

6 ITA No. 786/MUM/2026 And CO 97/MUM/2026 Bhartula Bhanumathi Sharma 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.”

16.

Admittedly, in this case, the Assessee purchased the shares through banking channels, held them in its demat account for more than 27 months and sold them through the online platform of the Bombay Stock Exchange. Further, by furnishing the relevant documents, the Assessee has duly discharged its onus cast under sections 68/69 of the Act, which is not in dispute. The Assessing Officer neither doubted the documents and evidence furnished by the Assessee nor brought any adverse material against it. Further, no allegation has ever been levelled or proved against the Assessee by any investigation agency.

17.

Even otherwise, we do not find any reason or material to interfere with the findings of the Ld. Commissioner in deleting the addition under consideration.

18.

Thus, respectfully following the aforesaid judgments of the Hon’ble Jurisdictional High Court as applicable to the facts of this case, we are of the considered view that the addition made by the Assessing Officer was unwarranted and therefore has rightly been deleted by the Ld. Commissioner. Thus, the Revenue’s appeal stands dismissed.

19.

Coming to the Cross Objection (“CO”), we observe that the Assessee has raised a legal issue regarding the passing of the order by the National Faceless Appeal Centre, Delhi, in violation of Notification No.18/2022 dated 29.03.2022, which came into effect from 29.03.2022. As we have already affirmed the decision of the Ld. Commissioner in deleting the addition on merits, thus we deem it appropriate not to delve into the legal issue raised by the Assessee, as its adjudication would be a futile exercise. Hence, the Assessee’s CO, is dismissed as infructuous.

7 ITA No. 786/MUM/2026 And CO 97/MUM/2026 Bhartula Bhanumathi Sharma 20. In the result, the Revenue’s appeal stands dismissed and the Assessee’s CO stands dismissed as infructuous.

Order pronounced in the open court on 31.07.2026.

Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (NARENDER KUMAR CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER

(ANKIT SWARNKAR) Private Secretary

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench

//True Copy// By Order

Dy/Asstt. Registrar, ITAT, Mumbai.

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