VINOD BHAGERIA HUF,MUMBAI vs. IT ASSESSING OFFICER, WARD 41(4)(4), MUMBAI

This appeal has been preferred by the Assessee against the order dated 10.09.2025, impugned herein, passed by the National Faceless Appeal Centre (NFAC)/Ld. Commissioner of Income-tax (Appeals) (in short “Ld. Commissioner”) under section 250 of the Income-tax Act, 1961 (in short “the Act”) for the Assessment Year 2016-17, whereby the Ld. Commissioner affirmed the additions of ₹96,38,300/- towards alleged unexplained sale proceeds and ₹1,92,766/- under section 69C of the Act.

We observe that in the instant case, the assessment was reopened under section 147 of the Act, on the basis of information received from the Investigation Wing alleging that the Assessee had obtained bogus Long-Term Capital Gain from transactions in the shares of M/s. Goenka Business and Finance Ltd. (in short “GBFL”).

The Assessee before the Assessing Officer {in short „AO} submitted that 21,000 shares of GBFL had been purchased for ₹2,10,000/- through banking channels and were reflected in its demat account. The shares were subsequently sold through M/s. Choice Equity Broking Pvt. Ltd., a SEBI-registered broker, for ₹96,14,214/- and sale proceeds were received through RTGS and regular banking channels. The transaction- wise details furnished by the Assessee were as under:

The Assessee also furnished the contract notes, broker‟s ledger, bank statement, demat statement and Form No.10DB and submitted that the sale transactions had been carried out on the recognized stock exchange after payment of brokerage, service tax, Securities Transaction Tax, stamp duty and SEBI charges. The Assessee further denied any connection with the alleged entry operators, brokers or purchasers and sought copies of the adverse material and an opportunity of cross- examination.

The AO, though considered the claim of the Assessee, however, not being satisfied and by referring to the weak financials of GBFL, abnormal movement in its share price, investigation report and statements of certain third parties, treated the alleged sale proceeds of ₹96,38,300/- as unexplained income and further added ₹1,92,766/- towards alleged commission expenditure.

Thus, the Assessee being aggrieved preferred the first appeal before the Ld. Commissioner. The Ld. Commissioner, though reproduced the detailed Statement of Facts filed by the Assessee, however, affirmed the additions principally on the ground that the Assessee had not filed further submissions or documentary evidence during the appellate proceedings.

Thus, the Assessee being aggrieved by the impugned order passed by the Ld. Commissioner has preferred the present appeal before the Tribunal.

We have heard the parties and considered the rival submissions and perused the material available on record. We observe that the purchase, holding and sale of the shares stood supported by the banking records, demat statement, contract notes and stock-exchange documents. The AO did not point out any specific defect or falsity in these documents. Further, no material was brought on record to establish that the Assessee had paid unaccounted cash, participated in price rigging or had any nexus with the alleged accommodation-entry providers.

The statements and investigation material relied upon by the AO were general in nature and did not specifically name the Assessee as a beneficiary. The abnormal increase in the share price or weak financials of GBFL might justify further enquiry; however, the same could not substitute cogent evidence connecting the Assessee with the alleged manipulation.

The Hon‟ble jurisdictional High Court in PCIT v. Indravadan Jain, HUF [2023] 156 taxmann.com 605 (Bom.) affirmed the deletion of the addition where the purchase and sale of shares were supported by contract notes, banking transactions and demat records and the Revenue had failed to prove that the assessee‟s transaction was bogus.

More importantly, the Co-ordinate Bench of the Tribunal in the latest directly applicable decision in DCIT (CC)-8(4) v. Reena Ratnesh Jain, ITA No.3888/Mum/2025, order dated 06.02.2026, considered an identical dispute involving the shares of the very same company, GBFL, for the very same Assessment Year 2016-17. The Tribunal held that the investigation report, substantial increase in the share price and weak financials, without any independent enquiry or evidence demonstrating that the assessee‟s own money had been routed back, could not justify the addition. The deletion of the LTCG addition and the alleged commission was accordingly upheld.

Thus, considering the peculiar facts and circumstances in totality, and respectfully following the aforesaid binding and directly applicable judicial precedents, we are of the considered view that the addition was based upon general investigation material, suspicion and abnormal price movement without any specific evidence against the Assessee. Consequently, the addition of ₹96,38,300/- cannot be sustained and is accordingly deleted. The AO is directed to allow the consequential exemption under section 10(38) of the Act, in accordance with law.

Coming to the addition of ₹1,92,766/- under section 69C of the Act, the same was made merely by applying an estimated commission rate of 2%, without any evidence that such expenditure had actually been incurred by the Assessee. Since the substantive addition has been deleted and the alleged commission expenditure is otherwise based purely upon presumption, the addition of ₹1,92,766/- is also deleted.

In the result, the Assessee’s appeal is allowed.