ACIT-CC-4(2), MUMBAI, MUMBAI vs. RAJESH KUMAR RATILAL VANIGOTA, MUMBAI

PER SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Department against the order of Ld. CIT(APPEAL)-52, MUMBAI vide DIN: ITBA/APL/S/250/2025- 26/1083863001(1) dated 18-Feb-2026 for the Assessment Year 2015-16. The Department has raised the following grounds of appeal:

10,17,04,273/- arising from sale of shares of PS IT Infrastructure & Services Ltd., despite the abnormal price rise, weak financials of the company and adverse findings of the Investigation Wing regarding manipulation in penny stock scrips.

The appellant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be

2. All the grounds raised by the Revenue are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) deleting the additions made by the Assessing Officer (AO) by allowing exemption under section 10(38) of the Act, in respect of Long-Term Capital Gain (LTCG) and also deleting the additions made under Section 69C of the Act towards alleged commission paid for arranging accommodation entries.

investigation reports bringing out a systematic modus operandi of providing bogus LTCG through penny stock companies.

9. On the other hand, the Ld. AR submitted that the assessee had originally purchased 2,25,000 shares of Parag Shilpa Investments Ltd. through preferential allotment on 24.07.2012 for an aggregate consideration of Rs.22,50,000/-. The payment for acquisition of the shares was made through proper banking channels, and the shares were duly credited to the assessee's demat account maintained with Bank of India, Kalbadevi Branch, Client ID No.10776639.

 Share allotment letter;  Share certificates;  Demat statements;  Contract notes;  Broker's ledger account;  Bank statements evidencing payments and receipts; and

 STT payment details.

 the investment was made based on his own commercial prudence;  the shares were acquired through preferential allotment;  payment was made by cheque directly to the company;  all transactions were genuine and undertaken in accordance with SEBI regulations; and  no accommodation entry had been taken from any person whatsoever.

v. Payment received from proper banking channels. vi. It is under various regulations like SEBI, Service Tax and etc. vii. Without purchases sales cannot taken Place. viii. STT paid statement. ix. The said shares were sold through B. M. Gandhi Securities Pvt. Ltd. The appellant has submitted contract notes, ledger, Global Reports, DEMAT Account and Bank Statement, financials in support of its claim. 9.4 The appellant has relied upon the following case laws: · Vijayrattan Balkrishan Mittal Vs. DCIT (ITA 3429/Mum/2019). · Suresh Agarwal Vs. ACIT (ITA 8703/Del/2019). · Vasantraj Birawat v ACIT (61 taxmann.com 295) (Mumbai - Trib.). · Pr. CIT Vs. BLB Cables & Conductors (P.) Ltd. [ITAT No. 78 of 2017, dated 19-06-2018](Cal.). · ITO Vs. Indravan Jain (ITA 4861/M/2014). · CIT Vs. Indravan Jain (INCOME TAX APPEAL NO. 454 OF 2018)(Bom.). · Gautam Kumar Pincha Vs. ITO [IT Appeal No.569/Kol/2017]. · ITO Vs. Arvind Kumar Jain (HUF) [IT Appeal No.4682(Mum) 2014]. · CIT Vs. Vivek Mehta (204 Taxman 177) (P&H). · Alpine Investments (ITA No. 620 of 2008) (Cal.). · CIT Vs. Mukesh Ratilal Marolia (ITXA 456 of 2007) (Bom.). · CIT Vs. Smt. Jamnadevi Agrawal (328 ITR 656) (Bom.). · CIT Vs. Shyam R Pawar (229 Taxman 256) (Bom.). · Ramprasad Agarwal (ITA No. 4843/M/2018). · Navneet Agarwal (ITA No. 2281/Kol/2017). · Pramod Kumar Lodha (ITA No. 826/JP/2014). · Manish Kumar Baid Vs. ACIT [ITA 1236/Kol/2017]. · Sunil Prakash [ITA 6494/Mum/2014]. · Arun Kumar (ITA No. 457/Del/2018). · Farzad Sheriar Jehani Vs. ITO (2065/Mum/2023).

· Shri Mukesh B Sharma Vs. ITO (ITA No. 6249/Mum/2018). · DCIT Vs. Rajnikant Prahubas Mandavia (ITA 401&402/Ahd/2019). · CIT Vs. Ashish International, (ITA No. 4299 of 2009). · PCIT Vs. Best Infrastructure (India) Pvt. Ltd. · Arceli Realty Limited (ITA 6492/Mum/2016). · ACIT Vs. Mahesh K Shah, (ITA 5194/Mum/2014). · Kishanchand Chellaram v CIT [1980] 4 Taxman 29 (SC). · H.R. Mehta Vs. ACIT [(387 ITR 561) (Bombay). The appellant further submitted that the appellant case is covered by the following judicial precedents on the similar sets of fact and scrip.

· Denial of exemption under section 10(38) of the Act with respect to LTCG of Rs. 11,17,04,273/- on sale of equity shares of PAL;

· Addition under section 69C of the Act on account of alleged commission of Rs. 30,51,128/- paid for facilitating the above transaction.

9.8 In order to prove the nature and source of the transaction of sale of shares of PS IT, the appellant has submitted following documents / evidences: - a. The appellant has submitted copy of allotment letter issued by M/s Parag Shilpa Investment Ltd, share certificate, acknowledge for dematerialization of the shares and bank statement. The appellant has submitted payment for purchase of share was made from accounts payee cheque. The copy of bank statement has also been submitted by the appellant. the shares were put into Assessee’s Demat account with Bank of India, Kalbadevi Road branch having no 10776639. b. The appellant has submitted share holding pattern of the company in which the appellant’s name is reflected as investor.

c. The appellant has also submitted that the shares were hold more than 2 years and subsequently was sold through recognized stock exchange. The appellant has submitted contract notes, Broker ledger, Global Reports, DEMAT Account and Bank Statement, financials in support of its claim. The appellant has submitted that the shares were sold through recognized stock exchange. On the sale of shares, STT and other charges were duly paid. The appellant has also submitted the contract notes and stated that the sale of equity shares was made through B.M Gandhi Securities Pvt. Ltd, on BSE platform.

d. The contract notes show the quantity, rate, time stamp, value, taxes and charges viz. STT, brokerage, SEBI and exchange turnover charges, service tax and stamp duty incurred on all the transactions done on BSE platform (oldest stock exchange recognized by the market regulator, SEBI). The documents have been accepted by the AO.

e. The appellant has submitted no adverse findings and incriminating material were found against the broker B.M Gandhi Securities Pvt. Ltd. The assessee submitted a copy of the ledger of M/s B.M Gandhi Securities Pvt. Ltd.

f. The appellant has submitted a copy of the bank statement exhibiting the receipt of sale proceeds from the broker B.M Gandhi Securities Pvt. Ltd. g. The assessee submitted a copy of the demat account of the appellant showing shares debited / transferred to broker.

h. The appellant has also submitted the sale consideration is received by appellant from the M/s B.M. Gandhi Securities Pvt. Ltd., a registered broker

i. The sale has been done at prevailing price quoted on the BSE. j. The shares are sold by appellant’s broker on BSE platform and not off-market. k. All transactions covered in DEMAT Account. Said Investment sold by DEMAT and duly supported with contract notes. l. The appellant has submitted that the transactions is covered under various regulations like SEBI, Service Tax and etc. The appellant has further submitted that in the case of PS IT, the SEBI has passed final order on 05.06.2020, wherein, the name of the assessee and SEBI registered broker was not mentioned as a defaulter or persons involved in artificial price rigging of shares. m. The appellant has further submitted that his share broker is registered and well-known share broker. However, the AO could not verify the genuine transactions of the assessee by issuing notice u/s 133(6) to M/s B.M. Gandhi Securities Pvt Ltd. n. The appellant has submitted that all these details has submitted before the AO during the course of assessment proceedings. o. Further, the appellant has submitted that the case of the appellant has further scrutinized under section 153C for the AY 2015-16 to 2021-22. The case for the AY 2017-18 was also scrutinized u/s 143(3) of the Act. The appellant was holding remaining 7,37,000 shares of PS IT as stock in trade as on 31.03.2015. The shares were subsequently sold in AY 2016-17 & 2017-18 through the broker i.e. L.K.P Securities Ltd., further, the AO in the subsequent year accepted the LTCG on the sale of PS IT for AY 2016-17 & 2017-18 and no adverse inference was drawn by the AO for the similar scrip. Thus, the AO in the subsequent year, accepted that the appellant has made genuine transactions through recognized stock exchange. p. The appellant has submitted that Mr. Anuj Agarwal and Mr. Sushil Kumar Agarwal have nowhere mentioned the name of the appellant in their statement. Moreover, the opportunity of cross examination was also not provided with the alleged accommodation entry provider nor any notice or summons were issued to them by AO. The appellant has also denied to having any connection with both Mr. Anuj Agarwal and Mr. Sushil Kumar Agarwal.

q. The appellant has submitted that the AO has failed to make any investigation with PS IT by issuing notice u/s 133(6) or summons u/s 131 of the Act. Neither the alleged shell entities were confronted with appellant. Therefore, it is a violation of primary and fundamental requirement of natural justice. r. The appellant has submitted that all the relevant documents in order to prove the nature and source of the transaction thereby discharging his onus.

s. The appellant has submitted that during the course of assessment, the statement of the assessee was recorded by the Ld.AO to verify the genuineness of the share transactions. In the said statement, the assessee has given details relating to the share transactions undertaken by him.

9.9 On perusal of the above documents, it established that the purchase was affected through proper banking channel and has duly been verified by the AO in the assessment. Further the sale was affected on stock exchange platform through a registered broker of repute. The delivery of shares remained undisputed. The holding in demat remained undisputed and receipt of funds, payment of STT etc. all remained undisputed and stands proved. 9.10 From the gamut of facts brought out above, it appears that the AO is predominantly influenced by the penny stock related issue for treating the said transactions as sham. I find that the AO has not pointed out any deficiency in the documents or inherent weakness in the explanation or doubted genuineness of the transaction for want of any evidence. Further, for an amount to be treated as cash credit, there should be absence of identity, genuineness of transaction and creditworthiness of the payer/creditor. Here in this case, the shares were sold through a reputed broker on BSE on screen basis. It is a software driven sale on line. Broker will put up the shares for sale and the computer will match the buyer. Sale proceeds were received in an approved way as per guidelines set by the SEBI in the bank account through normal banking channels thus the identity, source of fund and genuineness of transaction stands established beyond reasonable doubt leaving no scope for making any addition as unexplained investments. it is a settled legal position that a claim which is supported by proper evidences cannot be denied by an assessing authority unless contrary evidences establishing otherwise is brought on record and unless it is proved that the evidences filed by the assessee are false or fabricated or bogus to take an otherwise view. Such exercise has not been done by the AO.

9.10 Section 10(38) provides that exemption to long term capital gain earned on listed securities on which STT has been paid. The assessee has furnished explanation to prove that all the conditions of section 10(38) of the Act are complied. The AO has nowhere in the assessment order pointed out non-fulfillment or non-compliance of any conditions of section 10(38) of the Act to justify denial of exemption.

9.11 Further, it is pertinent to mention here that there is no investigation initiated upon on the assessee by SEBI and therefore it cannot be said that the assessee was a party to the price manipulation. The addition made on account of LTCG in “PSIT” has no leg to stand on. Thus, nothing adverse was found against the assessee by the Bombay Stock Exchange (BSE), SEBI or any other regulator in respect of transaction in the scrip of Parag Shilpa Investment Ltd (PS IT). 9.12 Further, if the sale or purchase is alleged to be non-genuine, the AO must demonstrate that the entire money trail, from the purchase to the final realization of sale proceeds, was a facade used to introduce unaccounted income. It is settled principle of law that the primary onus lies on the assessee to substantiate the genuineness of the transaction by furnishing documentary evidence. If the fundamental aspects are satisfied, the burden then shifts to the AO to bring on record specific material evidence proving that the transactions were merely a colorable device aimed at tax evasion. The mere fact that a share has been subject to price manipulation does not automatically lead to addition under section 68 of the act or/and addition made as unexplained investment unless it is conclusively demonstrated that the assessee was part of the scheme, and the transactions were structured to generate artificial gains or losses. In the present case, nothing of that sort could be observed or proved.

9.13 The Assessing Officer has applied the concept of human probabilities and held the above said scrips to be a penny stock without bringing on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the persons who has involved in manipulation/rigging of share prices.

9.14 The presumption or suspicion, however, strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that the assessee had brought back his unaccounted income in the form of LTCG. Reliance is also placed on decision of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. vs ACIT [2017] 164 ITD 1 (Mumbai Tribunal) (SB) The Tribunal observed as under:

“……. Ultimately the entire case of Revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of ‘preponderance of probability’ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favorable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out, then nothing can be implicated against the assessee.”

8.26 Since it is established that: · Purchase of the shares were through banking channel and has specifically examined by the AO during assessment proceedings and nothing adverse was found;

· The shares were held in the demat account for more than a year;

· The sale of shares was affected on Bombay Stock Exchange Platform;

· On such sale, Securities Transaction Tax (STT) was paid;

· The delivery of the shares was given from the demat account of the appellant in the pay-in of BSE;

· The assessee has received the payment against sale of shares through banking channel from the broker and found to be in order;

· Thus, effectively all the conditions stipulated for claim of exemption stands satisfied.

· The so called modus operandi and statement of other entry operators cannot be relied upon as; (1) all such statements are general and not specific to the transaction of the assessee; (2) In none of the statement, name of the appellant was specified; (3) Neither copies of such statements were provided nor any enquiry was made by the AO from the stock brokers and alleged accommodation entry provider or SEBI; (4) The status of such statements are not known- as to whether retracted subsequently or status thereof as on date; and (5) Whether cash was given against cheque? What was the source? Nothing could be proved.

· The addition was made based merely on the basis of suspicion and on a theory bereft of any evidence;

8.26.1 On the basis of the above, it can be concluded that the appellant has satisfied all the conditions stipulated under section 10(38) of the Income Tax Act, 1961; therefore, the LTCG earned cannot be treated as unexplained cash credit under section 68 or/and unexplained investment under the Income Tax Act, 1961.

8.27 I further note that the case of the appellant is covered by the following judicial precedents:

8.28 Pr. CIT Vs. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022]; In this case, the Hon’ble jurisdictional Bombay High Court ruled as under:

"1. The following question of law is proposed:

"Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/-made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?"

8.30 The Hon’ble Bombay High Court in the case of CIT Vs. Smt. Jamnadevi Agrawal (328 ITR 656) has held that where the assessee has provided sufficient documentary evidence confirming the purchase and sale of the transaction as well as its conformity with prevailing market prices, the transactions of sale earning long term capital gain cannot be treated to be as a sham.

8.31 In the case of Rehana Anwar Shaikh Vs. Assessing Authority Delhi (ITA No. 1606/Mum/2022), the Mumbai Tribunal upheld similar view. The relevant extract of the judgment reads as under: - “10. We heard the parties and perused the record. We notice that the assessing officer has placed reliance on the report given by the Investigation wing of the Income tax department, Kolkata and SEBI’s interim report for arriving at the conclusion that the long-term capital gains reported by the assessee is bogus in nature. With regard to the SEBI report, the Ld. A.R brought to our notice the final report of SEBI, wherein it has been held that it did not find any adverse evidence/adverse findings in respect of violation of provisions of SEBI Regulations. With regard to the investigation report of Investigation wing, we notice that the AO has relied upon the said generalized report with regard to the modus operandi adopted in manipulation of prices and generation of bogus capital gains. It is not the case of the AO that the transactions entered by the assessee were found to be a part of manipulated transactions.

8.32 In the case of PCIT Vs. Smt. Renu Agarwal (153 taxmann.com 578), In this case, the AO disallowed exemption claimed by assessee under section 10(38) and made additions, alleging involvement in penny stock which were being misused for providing bogus accommodation of LTCG, however, there was lack of adverse comments from stock exchange and officials of company involved in these transactions and no material relating to assessee was found in investigation wing report, additions made by AO had rightly been deleted. SLP against the said decision has been dismissed (153 taxmann.com 579). Thus, the case of the assessee is squarely covered with the above ruling as no SEBI Investigation carried out against the appellant and its Broker & no adverse finding was found against the assessee.

8.33 The Hon’ble Mumbai Tribunal in the case of Vikram N. Chandan Vs. ITO (ITA 70/Mum/2024) wherein the AO had similarly treated the LTCG on sale of Parag Shilpa Investment Ltd. (PS IT Infrastructure and Services Ltd.) as bogus however, the Hon’ble Tribunal deleted the addition as under: “6. We note that transactions for purchase was undertaken in an off- line mode which is an acceptable mode and that of the sale of the aforesaid shares were undertaken on the stock exchange platform through the SEBI registered broker 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 placed on record. While making the addition, there are no discrepancies pointed out by the Assessing Officer in the documents and the details furnished by the assessee. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor did anything substantive bring on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, Ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case. 1. On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the company. According to him, sharp jump in the share prices of the aforesaid scrip is not justified. He has relied upon the search and survey operations conducted by the investigation wing of the Department at various locations in respect of alleged penny stock which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the Id. Assessing Officer of implicating the assessee is un-supported by any cogent material on record. The finding arrived at by the ld. Assessing Officer is thus purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already extracted above, forming part of the paper book. 1.1. For our above observations and findings, we place reliance on the decision in the case of CIT vs. Jamnadevi Agrawal [2012] 20 taxmann.com 529 (Bom), wherein it was held that transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. We also draw our force from the decision of Hon'ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Hon'ble Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 1.2. Reliance placed by the Id. Assessing Officer on the report of investigation wing without further corroboration based on cogent material does not justify the conclusion that the impugned transaction is bogus, sham and part of racket of accommodation entries. It does not prove that the assessee has carried out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of share prices. In absence of any such material, enquiry and examination, the addition made pertaining to receipt of sale consideration of the impugned transaction cannot be sustained. In our considered view, ld. Assessing Officer has not established that the assessee was involved in price rigging. 2. We note that Id. Assessing Officer has observed about the so- called purchasers of shares sold by the assessee who have not been identified even though notices were issued u/s. 133(6) of the Act. In this context, it is worth noting that impugned share sale transactions undertaken by the assessee are on the online digital trading platform of stock exchange of BSE which is a regulated market under the aggies of a regulator viz. SEBI. There is nothing on record from the market regulator SEBI for the relevant period which establishes the 'tainted' status of the scrip involved in the present case, so as to hold the share sale transactions as bogus/accommodation entry as alleged by the ld. AO. It is important to note that 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. Further, sale proceeds are received through the stock market process into the pre- identified bank account of the seller i.e., the assessee which cannot be tainted as 'unexplained or unaccounted or undisclosed' money for the addition made u/s. 68 by the ld. Assessing Officer. 2.1. Section 68 of the Act essentially requires the assessee to explain the nature and source of the sum credited in his books of account tothe satisfaction of the ld. Assessing Officer. Time and again, Hon'ble Courts have held the requirement of establishing the identity and creditworthiness of the party and genuineness of the transaction to meet the said requirements of section 68. In the present set of facts, as already stated above, operations and modus operandi of the regulated stock markets (BSE) 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. Meeting this requirement is an act of impossibility of performance expected from the assessee for the transaction executed on SEBI regulated, digitally operated stock exchange. For the third limb of genuineness of the transaction, sale proceeds are received through the stock exchange process into the pre-identified bank account of the seller i.e., the assessee. Further, it is not a case of mere book entry where a possibility of tainting it as bogus or sham exists but it is a case where actual movement of dematerialised shares has taken place from the DMAT account of the assessee. Furthermore, the said shares are being currently traded on the stock exchange as demonstrated by the assessee from the screen shot of the website of www.bseindia.com dated 29.05.2024 at Rs. 20.42, furnished at the direction of the bench. In our considered view, assessee cannot be put to the rigors of section 68 in respect of sale proceeds received for sale of shares on the stock exchange (BSE). 3. Admittedly, it is also a fact on record that similar sale transactions of shares were undertaken by the assessee of other listed shares on the same platform of the stock exchange which have been accepted by the ld. Assessing Officer without any disallowance or addition. The same is evident from the statement of LTCG extracted above. Further, assessee continues to hold 42,000 shares of the PS IT along with shares of other companies duly reported in the balance sheet as on 31.03.2015. Shares of other companies include WESCOS, Anantraj, GIC Housing, Adani Power, Electro Steel, Edelweiss Cap and Unichem Lab. 4. From the perusal of the statement of assessee recorded by the ld. Assessing Officer during the course of assessment, part of which is reproduced in the impugned order, demonstrates that he is a long- term investor and is aware of his DMAT account, brokers through whom transactions were undertaken, shares in which he had invested and stock market operations. He produced all the relevant documentary evidences in the assessment proceedings before the ld. Assessing Officer in support of his deposition in the statement recorded. From all of this, we notice that assessee has - a. purchased the shares under accepted off-line mode by making payment through banking channel. b. dematerialized the shares purchased by credit to the DMAT account and part of it were later sold out of the holding. c. sold the shares on the platform of recognised stock exchange on the then prevailing prices. d. received the sale proceeds through stock market process in his bank account. 4.1. From the above, we note that Id. Assessing Officer has not brought on record any material to show that assessee was part of any group which was involved in the manipulation of share prices. Suspicion by the ld. Assessing Officer on the purchase and sale of shares is baseless.10.2. Ld. Assessing Officer, while drawing the adverse conclusion noted about the cash trail in the accounts of entry providers. He based his conclusion on the finding of investigations done by the Investigation Wing rather than bringing on record any direct and cogent material to establish existence of such a cash trail where the assessee has transacted in cash. In this respect, in the absence of any corroborative material brought on record by the authorities below, we hold against drawing such inference or presumption. 5. We also note that ld. Assessing Officer did not allow the assessee to cross examination the parties whose statements were relied upon by him for drawing the adverse conclusion. Such an approach adopted by Id. Assessing Officer is not in compliance with the provisions of section 142(3) of the Act which is a statutory mandatory procedural requirement for making a valid assessment. We note that the required compliance with section 142(3) has not been met. 6. As already noted above, ld. Assessing Officer has referred to the theory of preponderance of probability which according to us is applied to weigh the evidence of either side and draw a conclusion in favour of a party which has more favourable factor in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of fact that might go against the assessee. Once nothing has been proved against the assessee with the aid of any direct material, nothing can be implicated against the assessee on the presumption or suspicion, howsoever, strong it might appear to be true.13. For our observations and to arrive at the findings, we find force of binding nature from the decisions of Hon'ble High Court of Bombay being a jurisdictional High Court: i) Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022] held as under:- "1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/-made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was DMATed and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/-claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?" 2. We have considered the impugned order with the assistance of the 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 the 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. The 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 assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal." 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different. 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. 6. The appeal is devoid of merits and it is dismissed with no order as to costs."ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: "Where shares were purchased by assessee on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange, there was no reason to add capital gains as unexplained cash credit under section 68" iii) CIT vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bom) wherein it was held: "Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68 14. Ld. CIT(A) has without dealing with the facts and detailed documentary evidences placed on record by the assessee, dismissed the appeal by stating that issue is a covered matter by the decision in the case of Swati Bajaj (supra). In the said decision, it was held that assessee had to establish the genuineness of rise in price of shares within a short period of time that too, when general market trend was recessive. However, we note that there are several decisions of Hon'ble Jurisdictional High Court as stated supra which are in favour of the assessee. Accordingly, the same would prevail on the issue before this Tribunal. In the present case, decision of the Hon'ble Non-Jurisdictional High Court carries only a persuasive value. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon'ble Non-Jurisdictional High Court. Hon'ble Supreme Court emphasised therein that the orders of Tribunal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher appellate authorities. The Hon'ble Apex Court has observed that utmost regard must be had by the adjudicating authorities and the appellate authorities to the requirement of judicial discipline. Respectfully following the same, we deem it fit and appropriate to follow the decisions of Hon'ble Jurisdictional High Court of Bombay referred supra wherein the impugned issue is decided in favour of the assessee. Moreover, when there are conflicting decisions of various High Courts on the same issue, the Hon'ble Supreme Court in the case of Vegetable Products reported in 88 ITR 192 (SC) had held that construction that is favourable to the assessee should be adopted. Hence by following this principle, reliance placed by ld.CIT(A) on the decision of Hon'ble Calcutta High Court in Swati Bajaj (supra) does not hold its fort. Further in the present case, we find that assessee has duly established the nature and source of credit representing sale proceeds of shares of PS IT. 15. Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as discussion and observations made herein above, we delete the addition made u/s 68 towards proceeds of sale of listed shares of PS IT which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the assessee in this respect are allowed.

The Hon’ble ITAT has held that the appellant has submitted all the details before the AO. During the course of assessment, the statement of the assessee was recorded, the assessee has given the details relating to share transaction undertaken by him. The ITAT has held the entire documents was placed on record before the AO. The AO failed to pointed out any discrepancies in the documents furnished by the assessee. The conclusion by the AO is unsupported by any cogent material on record. The Hon’ble ITAT has held that transactions undertaken by the assessee through BSE. The AO has not brought on record any material to show that assessee was part of any group which was involved in manipulation of share prices. There is no material which can establish the linkage of cash trail with the assessee. I have seen the issues and findings are similar with the case of appellant on the similar scrip. Thus, the case of appellant is covered by Jurisdictional ITAT ruling on the identical sets of facts and for the same scrip (PS IT).

8.35 Similarly, the Hon’ble Mumbai Tribunal in the case of Pradipkumar Harakchand Doshi Vs. ITO-19(2)(5) (ITA No. 2229/MUM/2023) where Assessing Officer made addition in respect of bogus LTCG earned on the same scrip (PS IT) received by assessee, wherein it was held that “since assessee had submitted evidence to prove identity, source and nature of said transaction and Assessing Officer had not pointed out any deficiency in said documents, addition could not be sustained”. The Hon’ble ITAT has observed as under:

"Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 1,03,33,925/-made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?". We have considered the impugned order with the assistance of the 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 the 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. The 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 assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different.

10.1. The assessee was allotted 200000 shares of Greencrest Financial Services Ltd (formerly known as Marigold Glass Inds. Ltd.) on 12/02/2013 having a face value of Rs.10/- and premium of Rs.2/- per share and consideration paid thereon was Rs 24,00,000/-. Subsequently, the shares having face value of Rs. 10/-were split into 10 share having face value of Re. 1/-. Post split, the total shares credited into demat account were 2000000 shares. During the year under consideration, the assessee has sold 765000 shares after holding for a period of 18 months and balance share holding still remains unsold as on 31/03/2022. Similarly, theassessee purchased 10000 shares of Crescent Digital Technologies Pvt Ltd. of face value of Rs. 10 for a consideration of Rs.1,00,000/-on 28/06/2012 in off-market. Crescent Digital Technologies Pvt Ltd. subsequently amalgamated with Parag Shilpa Investment Ltd in accordance with a scheme of amalgamation and Parag Shilpa was subsequently renamed "PS IT Infrastructure & Services Ltd." or PS IT in short. These shares were sold during the F.Y.2014-15 after holding for a period of 2 years. For both the shares, the payments for purchase of shares were made by the assessee by account payee cheques out of sources duly disclosed in the books of accounts.

10.2. The Id. AO in the assessment framed u/s 143(3) r.w.s 153A of the Act in the same manner by making the same observations as was done in A.Y. 2014-15 in the case of the assessee herein by treating the sale proceeds of shares of Rs 5,32,06,356/- as unexplained cash credit u/s 68 of the Act and an estimated commission expenditure of Rs 31,92,381/- (53206356 *6%) as unexplained u/s 69C of the Act at the rate of 6% of sale proceeds of shares.

10.3. When the appeal was pending before the Id. CIT(A), SEBI had passed an order u/s 11(1), 11(4) and 11B(1) of SEBI Act, 1992 dated 05/06/2020 in the case of Greencrest Financial Services Ltd and PS IT Infrastructure Services Ltd, wherein certain parties were debarred for a period of 3 years from accessing the securities market and were further prohibited from buying, selling or otherwise dealing in securities, directly or indirectly, or being associated with the securities market in any manner. In the said list of persons who were debarred, the name of the assessee or its registered share broker was not reflected. Accordingly, it was pleaded before the Id. CIT(A) that even as per SEBI Investigation and its order dated 05/06/2020, the assessee cannot be stated to be involved in artificial price rigging of shares. 10.4. The Id. CIT(A) however did not heed to the contentions of the assessee and proceeded to confirm the order of the Id. AO in the same manner as was done by him in A.Y. 2014-15 in the case of the assessee herein. 11. We have heard the rival submissions and perused the materials available on record. The findings given by us hereinabove for the A.Y. 2014-15 in the case of the assessee shall apply mutatis mutandis to A.Y. 2015-16 also, save that during the A.Y. 2015-16, there was no interim order passed by SEBI on both the scrips; that there was only final order passed by SEBI dated 05/06/2020 wherein the name of the assessee or his registered share broker was not reflected as defaulters or persons involved in artificial price rigging of shares. Hence the observations and findings recorded by us for A.Y. 2014- 15 together with reliance placed on various caselaws thereon shall apply for A.Y.2015-16 also. Accordingly, the Ground Nos. 1 & 2 raised by the assessee are allowed."

The case of the appellant is squarely covered by the above rulings. The appellant has submitted that in the said case the Hon’ble ITAT has relied upon the decision of Yogesh Thakkar v. DCIT in ITA No. 1612/MUM/2021 dated 03.02.2023, wherein the Hon’ble ITAT has allowed the appeal of the appellant on identical scrip i.e. PS IT infrastructure and services ltd on the identical sets of facts.

8.37 In view of above and after considering of submission of the assessee, decisions of jurisdiction High Courts and various ITATs, it is established that the appellant has submitted all transaction documents; which proves the LTCG earned by the appellant is genuine. The AO could not point out any deficiency in such transaction documents. The basis of addition was finding of investigation wing and statement of entry providers, admitted for giving entries to various beneficiaries in the form of Long-Term Capital gain. However, the appellant claim that there is nowhere mentioned the name of appellant in the statement of entry providers nor any discussions has been made in the assessment order. The entire documents were placed on record before the AO to substantiate the transactions. The AO failed to pointed out any discrepancies in the documents furnished by the assessee. The conclusion by the AO is unsupported by any cogent material on record as the Hon’ble ITAT allowed to relief in various cases for the same scrip (PS IT) on identical sets of facts. The transactions undertaken by the assessee through BSE. The AO has not brought on record any material to show that assessee was part of any group which was involved in manipulation of share prices. There is no material which can establish the linkage of cash trail with the assessee. Further the case of the appellant is squarely covered by the various rulings of jurisdictional High Courts and various Income Tax Appellate Tribunals wherein the courts have ruled in favor of the appellant in the same scrip i.e. Parag Shilpa Investment Ltd. (PS IT Infrastructure Services Ltd.) on the basis of identical sets of facts. Further in three cases discussed above, the Hon’ble ITAT has deleted the addition wherein the same scrip was involved. Thus, the appellant has rightly claimed exemption under section 10(38) of the Income Tax Act, 1961; the same cannot be denied. 8.38 In view of discussion made above, the assessee’s appeal is allowed on the above ground no. 1 to 4 & 6 and the addition is directed to be deleted. 8.39 In the ground no. 5, the appellant has contended that the Ld. AO erred in making addition u/s 69C of the Act of Rs. 30,51,128/- for commission on LTCG earned by treating the LTCG as accommodation entries. The AO has concluded that as the assessee has entered into earning of bogus LTCG on sale of shares of Parag Shilpa Investment Ltd. (PS IT Infrastructure Services Ltd.) to convert unaccounted money, he would have paid a commission which is remained unexplained; hence, liable to be added under section 69C of the Income Tax Act, 1961.

9.2 In view of my findings in para above, it is concluded that there is no evidence to prove that the appellant has paid commission of Rs. 30,51,128/- . In the absence of such evidence, no amount can be added under section 69C of the Income Tax Act, 1961.

9.3 Even otherwise, the addition in respect of Long-Term Capital Gain (LTCG) is deleted; therefore, alleged commission on such LTCG cannot be sustained. 9.4 In view of the above, the addition of commission/accommodation charges of 3% of the LTCG under section 69C of the Act without evidence is directed to be deleted.

9.5 The assessee’s ground no. 5 is allowed.

for the subsequent years did not result in any adverse finding against the assessee in relation to the said scrip.

23. It is also pertinent to note that the assessee was subsequently subjected to proceedings under section 153C for Assessment Years 2015-16 to 2021- 22, and Assessment Year 2017-18 was also scrutinized under section 143(3) of the Act. The remaining 7,37,000 shares forming part of the closing stock were sold during Assessment Years 2016-17 and 2017-18 through M/s. LKP Securities Ltd. However, the AO accepted the returned income in those years and did not draw any adverse inference in respect of the same scrip. This also lends support to the assessee's contention that the transactions were accepted as genuine.

 Leela Tarachand Kothari v. ITO, ITA No.2453/Mum/2024 (Assessment Year 2014-15);  Amrita Abhishek Doshi v. Deputy Commissioner of Income-tax [2024] 167 taxmann.com 377 (Mumbai - Trib.), ITA No.1353/Mum/2024 (Assessment Year 2014-15);  Vikram N. Chandan v. Income-tax Officer [2024] 165 taxmann.com 340 (Mumbai - Trib.), ITA No.70/Mum/2024 (Assessment Year 2015-16);

wherein the Coordinate Benches have dealt in detail with the very same scrip.

 Chintan Harshad Kanakia v. ITO, ITA No.2822/Mum/2025 (Assessment Year 2015-16);  Aarti Singal v. DCIT, ITA Nos.217 & 218/Chd/2025;  Aniket Singal v. DCIT, ITA No.219/Chd/2025;  Sanjay Singal v. DCIT, ITA No.220/Chd/2025;  Sanjay Singal (HUF) v. DCIT, ITA No.221/Chd/2025;  Abhishek Doshi v. ACIT, ITA No.3122/Mum./2022;  ACIT v. Nandkumar Khattumal Harchandani, ITA No.410/Nag./2019;  Ashok T. Jobanputra v. ACIT, ITA No.398/Rjt/2023;  Gaurishankar Harinarayan Tapadiya v. ITO, ITA No.2093/Pun/2017;  Nishant Parekh (Legal Heir of Mina Parekh) v. ITO, ITA No.215/Rjt/2025;  Badresh Mansukhlal Dodhia v. ACIT, ITA No.5544/Mum./2018; and  Nikesh Jagdish Mehta v. Pr. CIT, ITA No.87/Rjt/2021.

Order pronounced in the open court on 07.07.2026.

Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 07.07.2026 RY-Sr PS Copy to: ACIT-CC-4(2), MUMBAI, 4TH FLOOR, 402, KAUTILIYA BHAVAN, BKC, MUMBAI-400051, 1 MUMBAI-400051, MAHARASHTRA RAJESH KUMAR RATILAL VANIGOTA, FLAT NO-1001, 10TH FLOOR, AAUM 2 RESIDENCY, 20 GILDER LANE MUMBAI MAHARASHTRA 400008, MUMBAI-400008, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE TRUE COPY

ASSISTANT REGISTRAR / SR. PRIVATE SECRETARY I.T.A.T., MUMBAI