INCOME TAX OFFICER -19(1)(5), MUMBAI vs. HRIDAYA RAMESH MERCHANT, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL“E” BENCH: MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 7593/Mum/2025 (Assessment Year: 2013-14)

Income Tax Officer -19(1)(5) Hridaya Ramesh Merchant Room No. 502, 5thFloor, Piramal 110/111 Crescent Mansion, Chambers, Lalbaug, Parel, vs. Gamdevi Lane, Gamdevi, Grant Mumbai, Maharashtra, 400012. Road, Mumbai, Maharashtra, 400007.

PAN: AFIPM3645N (Appellant) (Respondent) For Assessee : Shri Viral Shah For Revenue : Shri Hemanshu Joshi, SR.DR Date of Hearing : 29.04.2026 Date of Pronouncement : 24.07.2026 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 10.09.2025, pertaining to Assessment Year (AY) 2013-14.

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant case of the assessee was re-opened and notice u/s. 148 was issued and duly served upon the assessee. Thereafter, after issuing notices u/s. 143(2) and 142(1) and calling for the necessary information and documentation, the Assessing Officer held that the long term capital gains (‘LTCG’) were booked by the assessee as per pre-arranged method to evade taxes and the long term capital gains of Rs. 217,79,240/- claimed exempt u/s. 10(38) cannot be allowed and the same was brought to tax u/s. 68 of the Income Tax Act, 1961 (‘the Act’). Further, an amount of Rs.4,35,585/- being 2% of the alleged commission paid to the entry operator was brought to tax u/s. 69C of the Act on account of unexplained expenditure.

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant preceding paras it is concluded that long term capital gains booked by assessee in her books were pre-arranged method to evade taxes and launder money. Following are the findings and the reasons which substantiates the findings. a. Mode of acquisition of the shares: Shares of shreenath has been purchased by assessee through broker Naman Securities & Finance Pvt. Ltd. b. Sale of shares and unusual rise in the price: 340000 Shares of ShreenathItd are sold at a price of 2,54,00,000/-and a long term capital gain of Rs. 2,17,79,240/-has been claimed. As discussed the rise in share prices is not holding to any commercial principles and market factors. c. Findings of Investigation wing: The findings of the Directorate of Investigation of Mumbai and Kolkata as discussed above have proved that Shri Anil Agarwal and associated brokers, entry operators and the assessee had worked out an arrangement in which the shares were acquired by the assessee, the share prices were rigged and then with the help of entry operators by routing the cash, shares were sold at high price to arrive at tax free capital gains. d. Analysis of transactions: Facts revealed that such trading transactions of purchase and sale of shares are not been effected, for commercial purpose but to create artificial gains, with a view to evade taxes- i. Transactions of shares were not governed by market factors prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators. ii. The assessee resorted to a preconceived scheme to procure long-term capital gains by way of price difference in share transactions not supported by market factors. iii. Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bona fide and, hence, impugned long term capital gain is not allowable. iv. The order of SEBI referred above has also given the similar finding that the prices of the shares were determined artificial by manipulations and cannot be a product of market factors and commercial principals. e. Failure of Assessee to discharge his onus: The assessee has not been able to prove the unusual rise and fall of share prices to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly structured one. f. of the assessee about shares and penny stock companies: Assessee has failed to show of having any knowledge about the shares traded and having any knowledge about the fundamentals of the penny stock companies. g. Financial analysis of the penny stock companies: The networth of the penny stock company is negligible. Even though the networth of the company and

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant the business activity of the company is negligible the share prices have been artificially rigged to unusual high. h. Order of the SEBI: SEBI has passed an order where the main operator Shri Anil Agarwal and M/s Comfort Fincorp are said to be indulging in to share manipulations. i. Cash trail in the accounts of the entry providers: The investigations in the fund flow analysed in the accounts of the entry providers have established that the cash has been routed from various accounts to provide accommodations to assessee. j. Arranged transactions: The transactions entered by the assessee involve the series of preconceived steps, the performance of each of which is depending on the others being carried out. The true nature of such share transactions lacked commercial contents, being artificially structured transactions, entered into with the sole intent, to evade taxes. 11.2 The facts and circumstances of the case, as recorded above, clearly suggest that the revenue cannot take or accept such make-believe transactions, as presented by the assessee. Truth or genuineness of such transactions must prevail over the smoke screen, created by way of pre-meditated series of steps taken by the assessee, with a view to imparting a colour of genuineness and character of commercial nature, to such share transactions. Needless to say that one has to look at the whole transactions and a series of steps taken to accomplish such share transactions, in an integrated manner, with a view to ascertaining the true nature and character of such transactions. 11.3 Thus considering the findings of the search/ survey, inquiries conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by the assessee the LTCG of Rs. 2,17,79,240/ claimed exempt u/s 10(38) of the act by the assessee cannot be allowed and the amount of Rs. 2,17,79,240/- received back as sales proceeds on sale of shares is required to added back towards her taxable income under section 68 of the act. Further, an amount of Rs. 4,35,585/- i.e. 2% of 2,17,79,240/- (commission paid to the entry provider) is being added to the total income of the assessee u/s. 69C of the I.T. Act, 1961 on account of unexplained expenditure. Penalty proceeding u/s 271(1)(c) is initiated for furnishing inaccurate particulars of income with a view to concealment of income.”

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant the relevant findings therein are contained at paragraph 8 to 11 and contents thereof reads as under:

“8. We heard rival contentions and perused the record. We notice that the assessing officer has primarily placed reliance on the report given by the Investigation wing of the Income tax department, Kolkata in order to arrive at the conclusion that the long term capital gains reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation wing, Kolkata is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of prices. The Ld A.R also submitted that the regulator of stock market SEBI has not conducted any enquiry against the assessee. 9. We notice that the assessee has furnished reply to the notice issued by the AO and the AO could not find any adverse features from the said reply. Further, the AO also could not disprove the share transactions by bringing any material on record. We also notice that the assessee has (a) purchased and sold these shares by paying consideration through banking channels and through stock exchange platform. (b) the shares were received and issued through the Demat account of the assessee. We notice that the assessee is a regular investor in shares. Further, the AO has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group which involved in the manipulation of prices of shares. We notice that the shares were purchase in an earlier year and the said purchase has not been suspected by the AO. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee. 10. The Ld D.R placed his reliance on certain case laws to contend that addition relating to penny stock transactions has been confirmed in those cases. There should not be any dispute that the purchase and sale of shares reported by the assessee is a factual matter and each of the case has to be examined on the basis of facts prevailing therein. In respect of decision rendered by co-ordinate Mumbai benches, we notice that they did not refer to the jurisdictional Bombay High Court decisions. 11. We noticed earlier that the AO did not establish any link between the assessee and the reports of investigation wing. At this stage, we may refer to the decision rendered by Hon’ble Supreme Court in the case of Adamine Construction P Ltd (99 taxman 45), wherein, while dismissing the appeal of Revenue, the Hon’ble Supreme Court has referred to the following observations made by Hon’ble Delhi High Court:-

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant “What is evident is that the AO went by only the report received and did not make the necessary further enquiries – such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO.” Further, the facts available in the present case are that the shares were purchased and sold through the stock exchange platform. In the case of PCIT vs. Indravadan Jain HUF (ITA No.454 of 2018 dated 12th July, 2023), the Hon’ble Bombay High Court held as under:- “….The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkatta 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 Kolkatta 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 instruction slips and also received payment from Kolkatta Stock Exchage. 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.” The facts available in the instant case are similar to the above said case. Accordingly, following above said decision, we hold that, in the facts and circumstances of the instant case, there is no reason to suspect the genuineness of purchase and sale of shares of M/s Shreenath Commercial and Finance Ltd. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of sale proceeds of shares made. Since the above said addition is deleted, the addition relating to alleged expenses in procuring bogus long term capital gain is also liable to be deleted. We order accordingly.” 6. Further, our reference was drawn to the earlier decision in case of another family member, Shri Barkha Ramesh Merchant vs. ACIT, (ITA No. 779/Mum/2020), wherein the Coordinate Bench has again deleted the addition and the relevant findings therein are contained at paragraph 8 and 9 of its order and contents thereof reads as under:

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant

“8. Considered the rival submissions and material placed on record, we observed that the issue involved in this case are squarely covered in the case of Mrs. Palavi Pandey v. DCIT (supra) and for the sake of clarity it is reproduced below: - “11. We have heard the rival submissions of both the parties and perused the material on record including the various case laws referred by the rival parties during the course of hearing. The undisputed facts are that the assessee has purchased 28 lakhs of shares of M/s. Shrinath Commercial and Finance Ltd. between 04.03.2011 to 15.03.2011. M/s. Shrinath Commercial and Finance Ltd. thereafter issued bonus shares in the ratio of 1:1 on 22.03.2011 and thus the assessee came to hold 56 lakh shares in the said company. We note that these shares were purchased through recognised stock exchange through registered broker and were credited in the D-mat account of the assessee. Similarly the bonus shares were also credited in the said D-mat account held by the assessee. All these purchase of shares were supported by the contract notes issued by the authorised brokers of the stock exchange and the payments were made through banking channels. Thereafter, the assessee sold these shares during the period commencing on 23.08.2012 to 08.02.2013 for a total consideration of Rs.41,48,39,241/- and was received through banking channel thereby making a long term capital gain of Rs.35,44,38,501/- which was claimed as exempt under section 10(38) of the Act as long term capital gain on sale of shares. We notice that all these transactions were carried out on a recognised stock exchange by the assessee through registered brokers duly evidenced by the contract notes and entries in the D-mat account and the sale and purchase consideration reached through banking channels. The AO has also only relied on the investigation carried out by the Investigation wing, Kolkata and Mumbai that assessee is a beneficiary of these bogus long term capital gain entries. Nowhere the AO has brought on record any other evidence than relying on the report of investigation wing that the assessee is beneficiary of this huge racket of taking bogus entries of long term capital gain. The AO has disbelieved these documents by observing that these are sham and bogus documents without pointing out any specific defect or infirmity as these were issued as per the system of the recognised stock exchange through registered brokers. Similarly, the Ld. CIT(A) has upheld the order of AO by holding that the assessee is beneficiary of a big racket whereby the prices of the shares were rigged and manipulated to yield bogus gain to various entities/individuals of which assessee was one. Thus we find merit in the arguments of the Ld A.R. that assessee has furnished all the informations, details, documentary evidences before the AO but the AO has not done any further verification to find out the truth or done anything to prove the money trail of the funds as has been alleged in the order. Under these circumstances, we are not in a position to sustain the order of Ld. CIT(A) upholding the order of AO wherein the long term capital gain has been held to be non genuine and bogus. The case of the assessee is supported by a series of decisions as relied upon by the Ld. A.R. which are discussed as under:- • In case of CIT vs. Shyam R. Pawar (supra) the Hon’ble Bombay High Court has dismissed the appeal of the revenue by observing and holding as under: “5. We have perused the concurrent findings and on which heavy reliance is placed by Mr. Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt. Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt. Ltd. is listed in the appraisal report and it is stated to be involved in the modus-operandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, al! that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs.25,93,1507-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DM AT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But The Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected itself and in law.

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs.” • In the case of CIT Vs Sumitra Devi(supra), the Hon’ble Rajasthan High court has held that where the assessee has furnished all the documents comprising contract notes, brokers note, cash book extracts, copies of share certificates and D-Mat statements etc and the AO has fai;ed to show that the material documents placed on records by the assessee were false, fabricated or fictitious , then the transactions of purchase and sale of shares can not be treated as non genuine. • We have also perused other decisions of the coordinate Mumbai benches wherein under similar facts the issue has been decided in favour of the assessee. 12. We do not find merit in the argument of the Ld. D.R. as the decisions relied by the Ld. D.R. clearly are distinguishable on facts. In view of the above facts and the ratio laid down as discussed above, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition made under section 68 of the Act of Rs.41,48,39,241/-. 13. Since we have deleted the addition as made by the AO under section 68 of the Act by setting aside the order of Ld. CIT(A), the other addition of Rs.2,07,41,962/- as made by the AO towards commission paid on the accommodation entry is a consequential one and is also deleted.” 9. Respectfully following the above said decision and the facts in the present appeal are exactly similar, we are inclined to allow the grounds raised by the assessee.”

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant sequence of events and related documentation available on record are as follows:

Sr. Date Event Supporting Documents Page No. No. 1. 10.03.2011 The assessee purchases Contract Note No: 66956 13 50000 shares of Shreenath containing details of trade Commercial & Finance Ltd viz Order No, Time, Quantity at Rs. 20 per share through of shares, Rate of Purchase, Shree Naman Securities & STT paid Details and all Finance Pvt Ltd Registered other charges of purchase of Member with Bombay Stock shares. Exchange. 2. 14.03.2011 The assessee purchases Contract Note No: 67158 14 120000 shares of containing details of trade Shreenath Commercial & viz Order No, Time, Quantity Finance Ltd at Rs. 21 per of shares, Rate of Purchase, share through Shree Naman STT paid Details and all Securities & Finance Pvt Ltd other charges of purchase of Registered Member with shares. Bombay Stock Exchange. 3. 12.03.2011 Payment for purchase of Copy of Bank Statement 21 And shares was made to broker reflecting payment made 16.03.2011 Shree Naman Securities & Finance through banking channel amounting to Rs 10,04,146.11/- and Rs 25,30,117.28/-. 4. 10.03.2011 Assesse's Ledger Copy Ledger Copy of FY 2010-11 15 reflecting transaction reflecting Bill Posting of carried out with Shree Contract Note No 66956 and Naman Securities & Contract Note No 67158 in Finance Pvt Ltd for FY 2010- assesse's ledger and 11 payment made in relation to the said purchase 5. 14.03.2011 Receipt of Shares in the Demat statement 16-17 Demat D Account with highlighting receipt of shares Standard Chartered re in assesse's account. bank having DP ID: IN300360 and a Client ID: 10562119 6. 22.03.2011 Bonus Shares Receipt. Demat Statement reflecting 17 Announcement of bonus inward shares as bonus shares by company shares. Extract of date of announcement of bonus share and record date

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant

20 7. 24.01.2013 The assesse sold 1,00,000 Contract Note No: 16371 22 shares of Shreenath containing details of trade Commercial &Finance Ltd viz Order No, Time, Quantity at Rs. 79 per share through of shares sold, Rate of Sale, Shree Naman Securities STT paid details and all &Finance Pvt Ltd other charges for sale of Registered Member with shares. Bombay Stock Exchange 8. 29.01.2013 The assesse sold 2,00,000 Contract Note No: 16592 23 shares of Shreenath containing details of trade Commercial & Finance Ltd viz Order No, Time, Quantity at Rs. 73 per share through of e shares sold, Rate of Shree Naman Securities & Sale, STT paid details and Finance Pvt Ltd Registered all other charges for sale of Member with Bombay Stock shares. Exchange 9. 30.01.2013 The assesse sold 40,000 Contract Note No: 16657 24 24 shares of Shreenath containing details of trade Commercial & Finance Ltd viz Order No, Time, Quantity at Rs. 72.50 per share of shares sold, Rate of Sale, through Shree Naman STT paid details and all Securities & Finance Pvt Ltd other charges for sale of Registered Member with shares Bombay Stock Exchange 10. 30.01.2013 Assesse's Ledger Copy Ledger Copy of FY 2012-13 15 reflecting transaction reflecting Bill Posting of carried out with Shree Contract Note No 16592 and Naman Securities & Contract Note No 16657 in Finance Pvt Ltd for FY 2012- assesse's ledger and 13 payment received in relation to the said sale. 11. 30.01.2013 Outward transfer of Shares Demat statement 19 from the Demat Account highlighting transfer of with Standard Chartered shares on sale from bank having DP ID: assesse's account. IN300360 and Client ID: 10562119 12. 29.01.2013, Receipt for sale of shares Copy of Bank Statement 26 31.01.2013 was received from broker reflecting payment made And Shree Naman Securities & 01.02.2013 Finance through banking channel amounting to Rs 78,74,145.38/-, Rs

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant 1,45,49,657.84/- and Rs 28,89,954.35/-.

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant Further, there is no evidence on record that the assessee’s own unaccounted money has come back in the form of exempt long term capital gains. Hence, there is no basis in the finding of the Assessing Officer that the assessee was part of the pre-arranged transaction.

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant shares of the said company. Both the purchase and sale transactions are undertaken on the floor of the stock exchange, duly reflected in the assessee’s demat account and payments routed through the banking channel. The necessary documentary evidence has been submitted during the course of assessment proceedings and no adverse findings have been recorded by the Assessing officer in respect of documentation so submitted. As per the Assessing officer, long term capital gains booked by the assesse were pre-arranged method to evade taxes and launder money and the entire case of the Revenue rest on the investigation wing report and manipulation in the price of the scrip being traded by the assessee during the relevant period. To our mind, these are serious charges levied against the assesse and it is essential for the Revenue to bring on record necessary credible evidences to substantiate these charges. However, on perusal of the assessment order, we find that except for referring to the investigation wing report in general (no reference to any material, statement, etc) and price movement in the subject scrip, there is no specific finding recorded by the Assessing officer establishing the chain of events right from purchase of shares to ultimate sale thereof where the share broker through whom the assesse has transacted on the stock exchange or any other third person or the direct involvement of the assesse whereby it can be demonstrated that the assesse involvement was part of pre-mediated or pre-arranged method whereby assessee’s own funds have been routed back in form of long-term capital gains and which has resulted in evasion of taxes. Therefore, in absence of any credible evidence brought on record, the charges so levied cannot be sustained. Regarding movement in price of the scrip which was being traded in the stock exchange, there is no independent findings of the SEBI which been reported by the AO and merely price fluctuation cannot be sole basis to reject the claim of the assesse as section 10(38) talks about “any income arising from transfer of a long term capital asset, being an

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant equity share in a company” and it doesn’t distinguish shares being sold at varying price levels so long as it satisfies the conditions prescribed under section 10(38) of the Act. It is not the case of the Revenue that the assesse doesn’t satisfy the conditions so prescribed therein and therefore, taking away the exemption benefit which the law statutorily provides to the assesse cannot be sustained. Further, we find that the matter stand covered in favour of the assessee by the decisions of the Coordinate Benches in case of Srikant Ramesh Merchant (supra) and Barkha Ramesh Merchant (supra) wherein similar scrip was involved and claim of exemption u/s 10(38) was upheld by the Coordinate Benches.

Sd/- Sd/- SANDEEP SINGH KARHAIL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 24.07.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent

ITA No. 7593/Mum/2025; A.Y. 2013-14 Hridaya Ramesh Merchant 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai