ANKIT AGARWAL,MATUNGA EAST MUMBAI vs. ASSESSING OFFICER WARD 20(1)(1), PIRAMAL CHAMBER

Brief facts of the case are that the assessee filed its return of income declaring a total income of Rs.22,72,880/-. During the relevant assessment year, the assessee disclosed Short-Term Capital Gain (STCG) of Rs.15,81,043/- and paid tax thereon at the concessional rate of 15%. Subsequently, an investigation was conducted by the PDIT (Investigation)-1, New Delhi, into alleged bogus claims of Long-Term Capital Gain/Loss and Short-Term Capital Gain/Loss arising from transactions in the scrip of Stampede Capital Ltd. ("SCL"). Based on the information available on record, the Ld. AO observed that, during the Financial Year 2015-16, the assessee had purchased 7,500 shares and sold 14,000 shares of SCL, resulting in an alleged profit of Rs.29,39,417/-. The Ld. AO issued the requisite notices and, after considering the material available, treated the entire share transactions as sham and non- genuine. Consequently, instead of accepting the assessee's claim of short-term capital gain, the Ld. AO treated the sum of Rs.29,39,417/- as unexplained income arising from accommodation entries and added the same to the total income of the assessee. The Ld. AO further presumed that the assessee had paid commission for obtaining the alleged accommodation entries and, accordingly, estimated such commission at 1% of the impugned amount, i.e., Rs.29,394/-, which was also added to the total income under Section 69C of the Act. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), however, dismissed the appeal and affirmed the additions made by the Ld. AO. Being further aggrieved, the assessee has preferred the present appeal before us.

The Ld. AR filed a paper book comprising pages 1 to 59, which has been taken on record. The Ld. AR invited our attention to pages 2 to 6 of the APB, containing the computation of total income. On perusal thereof, it is observed that the assessee had disclosed the transactions in the shares of SCL as Short- Term Capital Gains ("STCG") and had paid tax thereon at the applicable rate of 15%. It was further submitted that all the purchase and sale transactions in the said scrip were executed within a period of one year and were accordingly offered to tax as short-term capital gains. The summary of the capital gains is placed at APB page 29. The Ld. AR further submitted that all the purchase and sale transactions in the scrip SCL were executed through a recognised stock exchange by way of an online trading platform. In support of the genuineness of the transactions, the assessee had furnished the relevant documentary evidence before the revenue authorities, and the same has also been placed before the Bench, comprising the following: “(i) Bank statements (APB pages 12 to 28); (ii) Capital gains summary (APB page 29); (iii) Broker's ledger account issued by M/s. Sharekhan Ltd. (APB pages 30 to 31); and (iv) Contract notes (APB pages 32 to 45).” 4. The Ld. AR contended that the assessee had regularly undertaken transactions in the said shares and that all the purchase and sale transactions were executed through a recognised stock exchange in the ordinary course of business. It was further argued that the impugned addition had been made solely on the basis of the report of the Investigation Wing, without the Ld. AO conducting any independent enquiry or verification to arrive at his own satisfaction regarding the alleged accommodation entries. The Ld. AR further submitted that an identical issue had been considered by the Coordinate Bench of the ITAT, Hyderabad "SMC" Bench, in the case of Sudhir Babu Chalasani v. ITO, ITA Nos. 1348 to 1352/Hyd/2025, order dated 19.11.2025. The relevant observations contained in paragraph 12 of the said order were relied upon and reproduced before us. “12. We have heard both the parties and perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that, the assessee is a regular investor in shares, which is evident from the shareholding statement of the assessee for the relevant assessment year where the assessee is holding more than 145 scrips of different companies as investments. It is also not in dispute that, the assessee has disclosed relevant Long Term Capital Gains derived from sale of shares of Stampede Capital Ltd and claimed exemption u/s 10(38) of the Act, for the assessment year under consideration and further, subsequent assessment years. The A.O. reopened the assessment on the basis of the information received from the Insight Portal of the Department which shows that, the assessee has sold the shares of Stampede Capital Ltd as a penny stock company as identified by the Directorate of Investigation Wing, Kolkata and modus operandi employed by certain individuals for providing accommodation entries of bogus Long Term Capital Gains to various beneficiaries. The A.O. had discussed the issue at length in light of financial statements of Stampede Capital Ltd and its sudden rise in the share price in the stock market and concluded that, without any supporting financials, the share price of the above company has raised to all-time high in the share market. Further, the above company has declared penny stock by SEBI and an investigation has been ordered. The A.O. on the basis of report of the Directorate of Investigation Wing, Kolkata coupled with the financial statements of Stampede Capital Ltd has arrived at a conclusion that, the above company has been used by various individuals for the purpose of conversion of unaccounted cash into bogus Long Term Capital Gains to derive the benefit of exemption provided u/s 10(38) of the Act. Therefore, it is necessary for us toexamine the reasons given by the A.O. and Ld. CIT(A) to assess the consideration received from the sale of shares of Stampede Capital Ltd, as unexplained money u/s 69A of the Act in light of relevant evidences submitted by the assessee.” 5. The Ld. DR argued that the assessee had entered into a sham transaction and received an accommodation entry. Accordingly, the Ld. AO rejected the assessee's claim and treated the entire transaction as long-term capital gain. The Ld. DR supported the orders of the revenue authorities.

We have heard the rival submissions and examined the documents on record. The assessee filed a return declaring short-term capital gain of Rs.15,81,043 and paid tax at the rate of 15%. Reassessment proceedings were initiated under Section 147 of the Act following receipt of a report from the investigating authority indicating that the assessee was a beneficiary of an accommodation entry involving the scrip SCL. The Ld. AO treated the short- term capital gain as long-term capital gain in relation to the SCL scrip transaction. However, upon perusal of the assessee's computation, we find that no claim for exemption under Section 10(38) of the Act was ever made in respect of long-term capital gain. The assessee paid tax at the rate of 15% on the transactions, which were executed through a recognised stock exchange. Details of these transactions were duly annexed to the return at the time of filing. Both the Ld. AO and the Ld. CIT(A) acknowledged that the assessee had declared the entire transaction as short-term capital gain and paid the applicable tax. The assessee submitted all relevant documents, thereby discharging the onus of proof, which then shifted to the revenue. The documents submitted by the assessee were not rejected. The Ld. DR raised a specific objection that the scrip had been banned by the Securities and Exchange Board of India. However, no such ban pertaining to the relevant assessment year is mentioned in the order under appeal. An identical issue was considered by the Coordinate Bench of the ITAT Mumbai in Sudhir Babu Chalasani (supra). We find that no independent evidence was brought on record to establish that the transaction constituted bogus long-term capital gain. Accordingly, we set aside the impugned appellate order. The addition made by the Ld. AO in respect of this transaction, together with the consequential addition on account of commission for providing accommodation entry, is deleted.

Ground No. 1 of the assessee's appeal is dismissed as not pressed. Ground Nos. 2 and 3 are allowed. 8. In the result, the appeal of the assessee bearing ITA No.5213/Mum/2024 is allowed.