DCIT-CC-8(4), MUMBAI, MUMBAI vs. AMIT BURAKIA, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by Revenue is directed against the order of ld. CIT(A) dated 13.10.2025 for Assessment Year (AY) 2015-16. The assessee has raised following grounds of appeal: “1. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 4,07,16,372/- made by the Assessing Officer u/s 68 of the Income-tax Act, 1961, on account of unexplained cash credits arising from alleged Long-Term Capital Gains (LTCG) claimed as exempt u/s 10(38) of the Act on sale of shares of M/s PS IT Infrastructure & Services Ltd., without appreciating that the assessee had failed to establish the genuineness of the transaction and the creditworthiness of the counterparties. 2. Whether on the facts and the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the shares of M/s PS IT Infrastructure & Services Ltd. were part of a larger network of penny stock companies identified by the Investigation Wing, Kolkata, as entities engaged in providing accommodation entries in the guise of LTCG, and the assessee was one of the beneficiaries of such arranged transactions.

a. Vikram N. Chandan vs ITO 165 taxmann.com 340 b. Abhishek Doshi vs ACIT ITA No. 3122 (MUM) of 2022 7. The assessee also relied on various case laws of Jurisdictional High Court and Delhi High Court and Tribunal, wherein it has been held that when the assessee has discharged his primary onus in furnishing complete evidence to substantiate the long term capital gain and no material is brought on record to suggest that assessee was involved in price rigging and AO simply relied upon report of Investigation Wing without allowing opportunity of cross- examination, on the basis of whose statement, the reliance was placed, there was no justification for sustaining such addition and decided the issue in favour of assessee. 8. The ld. CIT(A) on considering such submission recorded his finding at page no. 20 to 29 of his order. The ld. CIT(A) held that while remanding case back to the file of AO the Tribunal directed to allow cross examination of Raj Kumar Kedia. The AO in the assessment order has noted that an opportunity of cross-examination was scheduled on 11.01.2024. However, Raj Kumar Kedia did not appear on the said date and time. Thereafter, another opportunity was provided by issuance of summons under section 131 of the Act, but on the scheduled date again Raj Kumar Kedia failed to appear. Thus, the AO again failed to provide cross examination due to the non-appearance of the witness, hence no reliance can be made on his statement. Further, the AO recorded that the addition made by AO was not based solely on the statement of Raj Kumar Kedia but was also based on other parameters and findings. The ld CIT(A) recorded that the AO of treated long term capital gain claimed by assesse under section 10(38) of the Act of Rs. 4,07Crore on sale of shares of PS IT Infra as unexplained cash credit under section 68 of the Act. The ld CIT(A) on considering the submissions of assessee held that in this case the original assessment, order under section 143(3) was passed on 30.12.2017 by the DCIT -35(1), Mumbai wherein he has held that the long term capital gain is nothing but trading in stocks commonly known as penny stocks and accordingly the profit on sale of such shares of PSIT Infra at Rs. 4,07,16,372/- was taxed under the head ‘Profits and Gains from Business and Profession’. The CIT(A) – 46, Mumbai vide order dated 23.01.2020 has accepted the assessees claim of income arising on sale of PSIT shares as Long Term Capital Gain and not business income and allowed the exemption under section 10(38) of the Act. The revenue filed appeal before the ITAT Mumbai. During the course of hearing the Ld. DR for the revenue filed the statement of Raj Kumar Kedia as additional evidence which had bearing on the issue in dispute. The Tribunal admitted the same as additional evidence and restored back the matter to the AO and also directed to the AO that following the principle of natural justice, the assessee should be provided an opportunity to cross examine the said witness. In compliance to the direction of the Tribunal, the AO/ ACIT (Central Circle)-8(4), Mumbai passed order under section 143(3) r.w.s 254 on 31.03.2024 wherein he has treated the long term capital gain on sale of shares of PSIT as unexplained cash credit under section 68 of the Act. While doing the AO held that rise in price of shares of PS IT Infra is not supported by the financial fundamentals of the company. The rise in price was rigged by beneficiaries by way of circular trading. Notice under section 133(6) was issued requesting information from BSE Ltd. On perusal of the reply, some buyers of the shares from Amit Burakia are identified suspicious and lack creditworthiness. Statement of Raj Kumar Kedia was recorded under section 132(4) wherein he has stated that role of bogus buyers which were used for buying shares off-loaded by the beneficiaries. The ld CIT(A) further recorded that from the submission and material placed on record by the assessee, it is to be noted that transactions for purchase was undertaken in a offline mode which is an acceptable mode and the sale of the aforesaid shares were undertaken on the stock exchange platform through SEBI registered broker, namely Anmol Share Broking Limited, 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 e.g. such as copy of purchase bill, copy of broker transaction statement, copies of contract notes for sale, copies of Demat Transaction, Statement for the year ended 31.03.2013 and 31.03.2014, copy of relevant extracts of bank statements highlighting payment made towards purchase and receipt of consideration from sale of shares. All these documents substantiate the complete trail of transactions. It was held that while making the addition, the AO has not pointed out any discrepancies, defects or deficiencies pointed in the documents and details furnished by the assessee. The evidences furnished have neither been contravened by the AO nor anything substantive has been bought on record to justify the addition made by him. Further, the AO has not brought on record any material suggesting participation of the assessee with such dubious transaction relating to price rigging or accommodation entries or exit provider to suggest that the assessee was involved in converting his unaccounted money into long term capital gain. The AO has proceeded on the basis of analysis of the financials of the company. According to him sharp jump in share prices of the aforesaid script is not justifiable. The said finding arrived by the AO is purely based on assumption surmises and conjecture. The assessee has discharged his onus by submitting the relevant documents in support of his claim. Further, the AO also issued notice under section 133(6) to BSE and on perusal of its reply, had observed that some of the purchasers of the shares which were sold by the assessee, lacked creditworthiness. It was held that is worth noting that impugned share sale transactions were undertaken by the assessee vide SEBI Registered Broker, on the online digital trading platform of stock exchange of BSE which is a regulated market under SEBI. The operations and modus operandi of this regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. No such information or evidence was provided to the assessee by the AO to suggest that the purchasers were merely exit providers. Further, sale proceeds are received through the stock market process into the pre-identified bank account of the seller i.e., the appellant which cannot be tainted as 'unexplained or unaccounted or undisclosed' money for the sake of addition made under section 68 of the Act. The case of the appellant was restored to the AO in light of Raj Kumar Kedia’s statement, wherein he admitted his involvement in providing accommodation entries for long term capital gains w.r.t. various companies. One of such companies named by him was PS IT Infra. However, on perusal of his statement it is seen that the name of the assessee or his broker was nowhere mentioned by him. He has not stated anything to suggest that the assesse or his broker, have taken accommodation entries w.r.t. scrip of PS IT Infra or involved in price rigging by way of circular trading. During the course of hearing, the appellant’s representative also stated that Raj Kumar Kedia is totally unconnected to the appellant insofar as no financial transactions were undertaken with the said person, so much so that the assessee does not have any financial or other relationship with the said individual. Even otherwise the statement of third party cannot be the basis for making any addition without any corroborative evidence. The AO has also not brought on record any cogent material or corroborative evidence to prove the assessees involvement in price rigging or taking accommodation entries. The assessee has no opportunity to cross examine the said witness, the statement of whom was relied by AO. Further, the assessee has relied on Tribunal wherein it was held that if the said ex-parte statement of same person (Raj Kumar Kedia) is excluded, there is nothing on record to doubt/suspect, much less establish, the transaction of long term capital gains. The sole basis of entire adverse inference is the statement of R.K. Kedia, which was explained/retracted on 14.10.2014 and thereafter, he withdrew the retraction vide letter dated 31st March, 2015. Therefore, no reliance can be placed on the testimony of the said person who was indulging in double speak and was taking intrinsically mutually contrary stands. He was an unreliable witness. It was held that it is settled law that once a statement is retracted, the same cannot be relied by the AO. It was held that the purpose of assessment is to tax the correct taxable income of the assessee under the provisions of the Act. That being so, it is not at all permissible to make any addition solely on the basis of any statement/allegation, which is not backed by real/tangible evidence, and that too, a statement which is subsequently retracted by the said party. On the basis of aforesaid observation, the ld. CIT(A) held once, the assessee has duly discharged the onus cast upon him by producing documentary evidence to substantiate the genuineness of the impugned transactions. The AO,on the other hand, has failed to bring on record any cogent material or independent evidence to demonstrate his case. The addition made under section 68 is thus based on mere suspicion and conjecture and cannot be sustained. The ld. CIT(A) deleted that addition under section 68 of Rs. 4.07Crore made by the AO.Aggrieved by the order of ld. CIT(A), the revenue has filed present appeal before Tribunal. 9. We have heard the submissions of ld. Sr. Departmental Representative (ld. Sr. DR) and the ld. Authorised Representative (ld. AR) of the assessee. The ld. Sr. DR for the Revenue supported the order of AO. The ld. Sr. DR for the Revenue submits that during assessment the AO issued notice to Bombay Stock Exchange (BSE) regarding trading conducted by assessee about the sale of shares by assessee. The BSE provided details of certain buyers who purchased impugned scrips of assessee. The AO on examination of details of such buyers doubted the creditworthiness. The AO considered them as exact providers and doubted the transaction. The AO issued summons under section 131 to Rajesh Kumar Kedia for his cross-examination who was not attended the office of AO. However, the statement recorded under section 132(4) is important and admissible as evidence. The mere approval of scheme of amalgamation is a malpractice and can be investigated by the Revenue Authorities. The assessee is beneficiary of penny scrip which were thoroughly investigated by Investigation Wing. There is huge increase in the price of impugned share which is not possible without manipulation. Hence, he fully supports the finding of AO and pray to reverse the finding of AO and to reverse the finding of ld. CIT(A). 10. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee carried us through the order of Tribunal in first round of litigation wherein the Revenue has challenged the treatment of capital gain as business income. The Tribunal while remanding the matter back to the file of AO directed to allow cross-examination of Raj Kumar Kedia, on the basis of which the AO made addition in original assessment order. In the order giving assessment proceedings, the AO issued summons for appearance of Raj Kumar Kedia, however, Raj Kumar Kedia never appeared for his cross-examination. The AO has not taken coercive action for his attendance. The statement of third party cannot be treated as evidence against the assessee unless the statement is tested by cross-examination. The AO while passing assessment order afresh has added entire capital gain under the different heads by treating it as unexplained credit. There was no such ground of appeal raised by Revenue before Tribunal in first round of appeal. In the remand case head of income cannot be changed. To support such contention the ld AR of the assessee relied on the decision of Madras High Court in Cholamandalam Ms General Insurance Co Limited Vs DCIT (2019) 102 taxmann.com 292 (Madras). The matter was remanded only for limited purpose for cross-examination of Raj Kumar Kedia, thus, the AO cannot take a different stand. The scheme of amalgamation approved by High Court cannot be questioned by Revenue Authorities. To support such view, the ld. AR of assessee the decision of Kolkata Tribunal in DCIT vs G.K. & Sons Private Ltd. ITA No. 240/Kol/2022 dated 20.10.2022. The ld. AR submits that during assessment he has furnished complete details to substantiate the transaction of long term capital gain. The AO doubted the transaction merely on the basis of report of investigation wing and the statement of Raj Kumar Kedia. The AO has not brought any contrary evidence again the evidences filed by the assessee. There is no evidence on record to prove price risewas rigged by beneficiaries by way of circular trading, such findings of AO are based on suspicious.The AO cannot change the head of income in the second round of assessment. Once, the assessee has duly discharged the onus cast upon him by producing documentary evidence to substantiate the genuineness of the impugned transactions. The AO, on the other hand, has failed to bring on record any cogent material or independent evidence to demonstrate his case.To support his various submissions, the ld AR of the assessee relied on the following decisions;

 Vikram N. Chandan Vs ITO (2024) taxmann.com 340 (Mumbai-Trib),  Abhishek Doshi Vs ACIT in ITA No. 3122/Mum/2022,  PCIT Vs Indravadan Jain HUF 463 ITR 711 (Bom),  PCIT Vs Krishna Devi & others (2021) 431 ITR 361 (Delhi),  Rajni Kant Prabhudass Mandavia Vs DCIT (2023) 157 Taxmann.com 316 (Ahd- Trib),  Pavan Kumar Chandan Vs DCIT (2023) 114 ITR (T) 364 (Mumbai),  Ramprasad Agarwal Vs DCIT (2018) 100 taxmann.com 172 (Mumbai)  Mukesh Shah (HUF) Vs DCIT (2025) 39 NYPTTZ 425 (Mumbai) 11. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that the assessee in his return of income the assessee claimed long term capital gain on sale of sharesof PSIT Infra Ltd. However, the AO, initially while passing assessment order the AO treated such capital gain as “business income”. On appeal before CIT(A), the action of AO was reversed and the assessee was allowed relief exempt capital gain. However, on further appeal by revenue before Tribunal, the revenue filed application for admitting additional evidence in the form of statement of Raj Kumar Kedia being crucial and necessary. The Tribunal considered such evidence as relevant for determination of issue and accepted the such additional evidence and remanded the matter to the file of AO to allow cross examination of Raj Kumar Kedia. Admittedly, the AO failed to call such witness for his cross examination. The AO while passing the assessment order treated the ‘long term capital gain’ as unexplained cash credit on the basis of report of investigation wing. Thus, the AO took different view than the view taken in the original assessment order. Moreover, the AO has not taken any coercive action for enforcing attendance of Raj Kumar Kedia. Thus, the statement of Raj Kumar Kedia cannot be treated as evidence against the assessee. Mere statement of third party recorded at the back cannot be read as evidence unless it is tested in cross examination. The AO has not brought any material on record to strengthen his view that rise in price was rigged by beneficiaries by way of circular trading. There is no such evidence on record. Such finding of AO is based on suspicious. Suspicious, however strong may be cannot replace the value of documentary evidence on record. We are in full agreement with the findings of ld CIT(A) that when the share sale transactions were undertaken through SEBI Registered Broker, on the online digital trading platform of stock exchange of BSE, which is a regulated market under SEBI. Such operations and modus operandi controlled through regulated market does not in any way provide for any mechanism by which assessee can bring forth the identity of the buyers of his shares and their creditworthiness. We find that the AO claimed that he issued notice to purchasers of shares from assessee, but no such information or evidence was shared with the assessee by the AO. No fact is brought on record to suggest that the purchasers were merely exit providers. In our view such findings of AO are just based on his suspicion. 12. We find that before ld CIT(A), the assessee has furnished complete evidence including contract note of shares, Demat account details, detail of bank account. The ld CIT(A) after considering the submissions of the assessee passed a detailed order in accepting the submissions of the assessee and allowed relief to the assessee. We find that during remand assessment proceedings, the AO made adverse comment on the various evidences filed by the assessee. The AO has not made any independent investigation of facts to connect the assessee or his broker with the transaction of alleged price rigging. So far as allegation of price rigging is concerned, no role or the activities of the brokers of assessee in price manipulation is brought on record.We find that there is no allegation or adverse finding or report of SEBI about price manipulation by the broker of assessee. The assessee paid transaction tax on the sales of such shares. Moreover, the assessee was a regular investor in various scrips as has been seen from his portfolio with his broker. The sale of shares was made on BSE platform through SEBI registered broker. It is not the case of AO that the assessee indulged only in the scrips of the share of PSIT Infra Ltd. 13. We find that Hon'ble Gujarat High Court in the case of Himani M. Vakil (2014) 41 taxmann.com 425 (Guj) held that where assessee duly proved genuineness of sale transaction by bringing on record contract notes of sale and purchase, bank statement of broker and Demat account showing transfer in and out of shares, AO was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. Gujarat High Court in the case of Parasben Kasturchand Kocher (2021) 130 taxmann.com 176 (Guj), also held that when assessee discharged his onus by establishing that transactions were fair and transparent and all relevant details with regard to transfer furnished to Income Tax Authority and the Tribunal have also took the notice of fact that the shares remained in the account of assessee, the assessee also furnished Demat account and details of bank transaction about the sale and purchase of shares, the addition was deleted. 14. Further, we find of Hon'ble Jurisdictional High Court in the case of PCIT Vs. Indravadan Jain, HUF in Income Tax Appeal No.454 of 2018 dated 12.07.2023 also held that when Assessing Officer nowhere alleged that transactions made by assessee with a particular broker or share broker was bogus, merely because investigation was done by SEBI against the broker or its activities, the assessee cannot be said to have entered into ingenuine transaction. In a recent decision in PCIT Vs Mamta Rajiv Kumar Agarwal (2023) 155 taxmann.com 549 (Gujarat) also held that where the assessee had sold the shares and earned LTCG and the Assessing Officer alleged that transaction was penny stock deal aim at illegitimately claiming LTCG exemption under section 10(38), since there was no allegation on record suggesting the assessee or his broker involved in rigging up the price of scrips, the addition was rightly deleted by Tribunal. We find that assessee made sale of shares through BSE and paid security transaction tax and there is no allegation against the share broker through whom assessee has made sales that they were indulging any price manipulation. Therefore, we do not find any justification in treating the LTCG as unexplained cash credit in absence of any cogent evidence against the assessee specific. 15. We find that while considering the similar scrips that is on sale of share of PSIT Infra Ltd, the coordinate bench of this Tribunal in Vikram N Chandan Vs ITO (supra) deleted similar additions by taking view that held that where there is nothing on record from the market regulator SEBI for relevant period which established “tainted” status of scrips involved in sale of shares by the assessee so as to hold share sale transaction as bogus/ accommodation entry as alleged by AO, impugned addition made under section 68 towards sale of listed shares was to be deleted. We find that similar view was taken by various bench of Tribunal that when the assessee has discharged his primary onus in furnishing complete evidence to substantiate the transaction and the AO neither commented on such evidence nor brought any adverse material on record, the reliance on the third party statement for making addition is not justified. Hence, we affirm the order of ld CIT(A), with our additional observation. In the result, the grounds of appeal raised by the revenue are dismissed. 16. In the result, appeal filed by Revenue is dismissed. Order was pronounced in open court on 27/07/2026 Sd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated: 27/07/2026 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai