ACIT221, MUMBAI vs. CHANDRA ASOO NIHALANI, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 8430/Mum/2025 (Assessment Year: 2010-11) ACIT 2(2)(1) Chandra Asoo 322, Piramal Nihalani, Chambers, Lalbaug, Vs. 8 Prem Udyan Mumbai-400 052 Society, 12th Road, Khar West, Mumbai – 400 052 PAN/GIR No. ABTPN9314L (Applicant) (Respondent) Revenue by Shri R. A. Dhyani & Shri V. S. Mahajan, Ld. DRs Assessee by Shri Asoo Nihalani, Ld. AR Date of Hearing 30.04.2026 Date of Pronouncement 29.06.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: The present appeal is directed against the order dated 21.10.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the CIT(A)"] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] for Assessment

2 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani Year 2010-11, arising from the assessment order dated 26.12.2017 passed by the Income Tax Officer, Ward-22(1)(3), Mumbai [hereinafter referred to as “Assessing Officer”] under section 143(3) read with section 147 of the Act.

3 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani transactions if the broker through whom such transactions were carried out has admitted to issuing accommodation entries. 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the AO did not conduct an independent inquiry, even though the AO had relied upon detailed investigation reports, statements, and evidences collected during search and survey operations, which clearly pointed to the modus operandi of bogus long- term capital gain/loss entries. 7. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the larger scheme of accommodation entry operations, wherein the beneficiaries, including the assessee, were found to have claimed artificial profits and gains through manipulated stock transactions to evade taxes. 8. It is prayed that this appeal is filed even if the tax effect is below the monetary limit since the case falls under exception specified in para 3.1(h) of the CBDT Circular No.05/2024 dated 15.03.2024. 9. The appellant craves leave to add, alter, amend any of the grounds of appeal which may be necessary. Facts of the Case

4 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani 4. The information received by the Assessing Officer revealed that the assessee had purchased 68,000 shares of Niraj Cement Structural Ltd. through M/s Goldstar Finvest Pvt. Ltd. on 01.04.2009 for Rs. 10,58,334/- and had subsequently sold such shares through Angel Broking Ltd. during the relevant period. The Assessing Officer observed that the assessee had not disclosed the source of investment in the said shares and therefore formed a belief that income chargeable to tax had escaped assessment. 5. During the reassessment proceedings, the Assessing Officer called upon the assessee to explain the source of investment in the shares of Niraj Cement Structural Ltd. In response, the assessee submitted that payment for purchase of the shares had been made through banking channels and that the funds were sourced from sale proceeds of shares of Kiri Dyes and Alkali Metals Ltd. It was explained that the amount received from sale of Kiri Dyes and Alkali Metals Ltd. shares had been routed through the assessee's bank accounts and thereafter utilized for acquisition of shares of Niraj Cement Structural Ltd. 6. The Assessing Officer, however, was not satisfied with the explanation furnished. He observed that in the reassessment proceedings for Assessment Year 2009-10, the purchase of shares of Kiri Dyes and Alkali Metals Ltd. through M/s Alliance Intermediaries & Network Pvt. Ltd. had already been treated as non-genuine and an addition of Rs. 11,48,430/- had been made. The Assessing Officer further referred to the search and seizure

5 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani action conducted in the case of Shri Mukesh Chokshi and his group concerns and relied extensively upon the statement recorded from Shri Mukesh Chokshi under section 132(4) of the Act wherein he had allegedly admitted to providing accommodation entries through concerns such as M/s Alliance Intermediaries & Network Pvt. Ltd., M/s Goldstar Finvest Pvt. Ltd. and M/s Mahasagar Securities Pvt. Ltd. 7. The Assessing Officer recorded that Shri Mukesh Chokshi had explained the modus operandi of issuing accommodation entries through various concerns controlled by him and had admitted that such entities were engaged in providing bogus bills and accommodation entries in respect of share transactions, capital gains and losses. According to the Assessing Officer, both M/s Alliance Intermediaries & Network Pvt. Ltd. and M/s Goldstar Finvest Pvt. Ltd., through which the assessee had transacted, were concerns controlled by Shri Mukesh Chokshi and were merely accommodation entry providers. 8. The Assessing Officer also issued notice under section 133(6) to M/s Goldstar Finvest Pvt. Ltd. seeking details of transactions entered into with the assessee. In response, the said concern stated that its records had been impounded during search proceedings and therefore it was unable to furnish the required details. The Assessing Officer considered this fact as further strengthening the conclusion that the transactions were not genuine.

6 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani 9. The Assessing Officer further observed that the assessee had sold shares of Kiri Dyes and Alkali Metals Ltd. during the year for Rs. 87,51,677/- and had claimed exemption in respect of the resultant long-term capital gain. Since the original purchase of such shares had already been treated as bogus in Assessment Year 2009-10, the Assessing Officer concluded that the sale proceeds arising from such shares could not be regarded as genuine. Accordingly, after reducing the amount already added in Assessment Year 2009-10, he treated Rs. 76,03,247/- as unexplained cash credit under section 68 of the Act. 10. The Assessing Officer further held that since the source of investment in shares of Niraj Cement Structural Ltd. was stated to be the proceeds arising from the sale of Kiri Dyes and Alkali Metals Ltd. shares, which according to him were themselves non- genuine transactions, the investment of Rs. 10,58,334/- in Niraj Cement Structural Ltd. was also liable to be treated as unexplained. The Assessing Officer accordingly made additions aggregating to Rs. 86,61,581/- comprising Rs. 76,03,247/- and Rs. 10,58,334/- under section 68 of the Act and assessed the total income at Rs. 94,90,931/-. 11. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee challenged both the validity of the reopening and the additions made on merits. It was contended that the assessment had been reopened beyond four years merely on the basis of information received from the Investigation Wing and that there

7 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It was submitted that the purchase of shares of Niraj Cement Structural Ltd. had been made through account-payee cheques and was supported by purchase invoices, ledger accounts and banking records. The assessee further contended that notice issued under section 133(6) had been duly complied with by the broker, thereby establishing the existence of the counterparty. 12. The assessee also submitted before the learned CIT(A) that the Assessing Officer had proceeded solely on the basis of the statement of Shri Mukesh Chokshi without furnishing copies of the statements relied upon or granting any opportunity of cross- examination. It was argued that all documentary evidences supporting the purchase and sale transactions had been furnished and none of such evidences had been disproved by the Assessing Officer. The assessee relied upon various judicial precedents including the decision of the Mumbai Bench of the Tribunal in the case of Mayur M. Shah (HUF) and other decisions involving transactions routed through concerns connected with Shri Mukesh Chokshi. 13. The learned CIT(A) examined the material on record and noted that the Assessing Officer had primarily relied upon the statement of Shri Mukesh Chokshi and the Investigation Wing report. The learned CIT(A) observed that the Assessing Officer had not conducted any independent inquiry to establish that the shares of Kiri Dyes and Alkali Metals Ltd. or Niraj Cement

8 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani Structural Ltd. were penny stocks or that the assessee had participated in any accommodation entry arrangement. It was further observed that no direct evidence had been brought on record against the assessee and that the Assessing Officer had proceeded merely on the basis of general information received from the Investigation Wing. 14. The learned CIT(A) further observed that the jurisdictional Mumbai Bench of the Tribunal in the case of Mayur M. Shah (HUF) vs. ITO, while dealing with transactions carried out through M/s Goldstar Finvest Ltd., had held such transactions to be genuine and that the said decision had been affirmed by the Hon'ble Jurisdictional High Court. The learned CIT(A) also noted that in the assessee's own case for Assessment Year 2009-10, on the same issue, relief had been granted by the appellate authority vide order dated 03.06.2025. 15. On the aforesaid reasoning, the learned CIT(A) concluded that the additions made by the Assessing Officer were not sustainable in law and on facts. The learned CIT(A), therefore, deleted the addition of Rs. 86,61,581/- and allowed the appeal of the assessee. 16. During the course of hearing, the learned Departmental Representative (DR) vehemently supported the assessment order and assailed the findings recorded by the learned CIT(A). It was submitted that the learned CIT(A) had erred both on facts and in

9 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani law in deleting the addition of Rs. 86,61,581/- made by the Assessing Officer under section 68 of the Act. 17. The learned DR submitted that the reassessment proceedings were initiated on the basis of specific and tangible information received from the Investigation Wing, Mumbai, consequent to search and seizure action conducted in the case of Shri Mukesh Chokshi and his group concerns. It was contended that during the course of search proceedings, Shri Mukesh Chokshi had categorically admitted on oath that concerns such as M/s Alliance Intermediaries & Network Pvt. Ltd., M/s Goldstar FinvestPvt. Ltd. and M/s Mahasagar Securities Pvt. Ltd. were engaged in providing accommodation entries and issuing bogus contract notes and bills to beneficiaries desirous of introducing unaccounted money in the guise of share transactions and capital gains. According to the learned DR, the Assessing Officer was justified in relying upon such material gathered during search proceedings. 18. The learned DR invited our attention to the findings recorded by the Assessing Officer that the purchase of shares of Kiri Dyes and Alkali Metals Ltd. had already been held to be non- genuine in the reassessment proceedings for Assessment Year 2009-10 and an addition of Rs. 11,48,430/- had been made in respect thereof. It was submitted that the assessee had utilised the sale proceeds arising from such tainted transactions for making investment in shares of Niraj Cement Structural Ltd. through another Mukesh Chokshi concern, namely M/s Goldstar

10 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani Finvest Pvt. Ltd. According to the learned DR, the Assessing Officer had rightly concluded that the entire chain of transactions constituted accommodation entries lacking commercial substance. 19. Referring to the findings recorded in the assessment order, the learned DR submitted that even the enquiry conducted under section 133(6) did not inspire confidence. It was pointed out that M/s Goldstar Finvest Pvt. Ltd. failed to furnish any meaningful details regarding the transactions and merely stated that its records had been impounded by the Department during search proceedings. This, according to the learned DR, further corroborated the conclusion that the transactions were not genuine. 20. The learned DR also contended that the learned CIT(A) incorrectly proceeded on the footing that the Assessing Officer was required to establish that the shares involved were penny stocks. According to the learned DR, the issue in the present case was not merely whether the shares constituted penny stocks, but whether the transactions themselves were genuine. It was submitted that the evidence collected by the Investigation Wing clearly demonstrated that the concerns through which the transactions were routed were shell entities engaged in providing accommodation entries and, therefore, the apparent documentation relied upon by the assessee could not be accepted at face value.

11 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani 21. In view of the aforesaid submissions, the learned DR prayed that the order passed by the learned CIT(A) deleting the addition of Rs. 86,61,581/- be set aside and the assessment order be restored. 22. Per contra, the learned Authorised Representative (AR) strongly supported the order passed by the learned CIT(A) and submitted that the appellate authority has correctly appreciated both the facts of the case as well as the legal position governing the issue. 23. The learned AR submitted that the entire foundation of the assessment order rests upon the general statement of Shri Mukesh Chokshi and the report of the Investigation Wing without bringing any direct material on record to establish that the assessee had actually entered into any accommodation entry arrangement. It was contended that all transactions were duly supported by documentary evidence including purchase bills, contract notes, bank statements, demat records and confirmations and that none of such evidences had been found to be false or fabricated. 24. The learned AR further submitted that the Assessing Officer himself accepted that the assessee had purchased shares through account-payee cheques and that the corresponding payments were reflected in the banking records. It was argued that no enquiry was conducted with the companies whose shares were purchased or sold, nor was any material brought on record

12 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani to demonstrate that the shares of Kiri Dyes and Alkali Metals Ltd. or Niraj Cement Structural Ltd. were manipulated or penny stock shares. 25. Inviting our attention to the findings recorded by the learned CIT(A), the learned AR submitted that the Assessing Officer merely proceeded on the basis that the broker through whom the transactions were routed was allegedly connected with Shri Mukesh Chokshi. However, no incriminating material whatsoever was found against the assessee and no evidence was brought on record to establish that the assessee had paid any cash for obtaining accommodation entries or had received any amount over and above what was reflected in the regular books and bank accounts. 26. The learned AR further pointed out that the Assessing Officer treated the purchase of shares of Kiri Dyes and Alkali Metals Ltd. as bogus in Assessment Year 2009-10 and the consequential addition was deleted by the appellate authority. The learned AR submitted that the Revenue has accepted the appellate order for Assessment Year 2009-10 and has not preferred any further appeal against the deletion of the addition relating to the alleged bogus purchase of shares. Therefore, once the very basis of the Assessing Officer's conclusion has ceased to survive in the preceding year, the consequential addition made during the year under consideration also cannot be sustained.

13 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani 27. The learned AR submitted that the learned CIT(A) has rightly placed reliance upon the decision of the Co-ordinate Bench in the case of Mayur M. Shah (HUF) vs. ITO, ITA No.2390/Mum/2013 dated 10.07.2013. A copy of the said decision was furnished before us. Referring to the said order, the learned AR pointed out that the Co-ordinate Bench was dealing with an identical allegation based upon transactions routed through M/s Gold Star Finvest Ltd., a concern associated with Shri Mukesh Chokshi. After considering the statement of Shri Mukesh Chokshi and the entire material relied upon by the Revenue, the Co-ordinate Bench held that the transactions could not be treated as bogus merely on the basis of the statement of Shri Mukesh Chokshi, particularly when no direct material was found against the assessee. The Co-ordinate Bench further observed that in similar cases such as Ravindrakumar Toshniwal and Mukesh R. Marolia, the transactions had been accepted as genuine and the decisions had been affirmed by the Hon'ble Jurisdictional High Court. The learned AR submitted that the facts of the present case are substantially similar and therefore the learned CIT(A) was fully justified in following the said binding precedent. 28. The learned AR also submitted that the Revenue's reliance upon the statement of Shri Mukesh Chokshi is legally unsustainable as neither a copy of the complete statement nor any opportunity of cross-examination was provided to the assessee during the assessment proceedings. It was contended

14 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani that additions made solely on the basis of a third-party statement without affording an opportunity of cross-examination are contrary to the principles of natural justice. 29. The learned AR further raised a preliminary objection regarding certain grounds raised by the Revenue before the Tribunal. It was submitted that the learned CIT(A) has deleted the addition made under section 68 in the year under consideration and the subject matter of the present appeal is confined to that issue alone. According to the learned AR, certain averments contained in the grounds of appeal seek to question the alleged bogus purchase of shares in Assessment Year 2009-10, which was not the subject matter of the order appealed against before the learned CIT(A) for the present assessment year. 30. In view of the foregoing submissions, the learned AR submitted that the learned CIT(A) has correctly appreciated the facts and the applicable judicial precedents and no interference is called for in the impugned appellate order. He accordingly prayed that the appeal filed by the Revenue be dismissed. 31. We have heard the rival submissions and perused the material available on record. We have also carefully gone through the assessment order, the impugned order of the learned CIT(A), the judicial precedents relied upon by the parties and the paper book placed before us. The solitary grievance of the Revenue is against the deletion of addition of Rs. 86,61,581/- made by the Assessing Officer under section 68 of the Act comprising (i) Rs.

15 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani 76,03,247/- representing sale proceeds arising from sale of shares of Kiri Dyes and Alkali Metals Ltd. and (ii) Rs. 10,58,334/- representing investment in shares of Niraj Cement Structural Ltd. 32. The foundation of the impugned addition rests upon the statement of Shri Mukesh Chokshi and the investigation conducted in the cases of entities controlled by him, namely M/s Alliance Intermediaries & Network Pvt. Ltd., M/s Goldstar Finvest Pvt. Ltd. and M/s Mahasagar Securities Pvt. Ltd. According to the Assessing Officer, since Shri Mukesh Chokshi had admitted during search proceedings that the aforesaid entities were engaged in providing accommodation entries, every transaction routed through such concerns was liable to be treated as non- genuine. Proceeding on this premise, the Assessing Officer held that the purchase of shares of Kiri Dyes and Alkali Metals Ltd. was bogus and consequently the sale proceeds received therefrom during the year under consideration were also liable to be assessed under section 68 of the Act. The Assessing Officer further held that since the assessee had utilized the proceeds arising from such transactions for purchase of shares of Niraj Cement Structural Ltd., the investment of Rs. 10,58,334/- was also unexplained. 33. On a careful examination of the assessment order, we find that no material whatsoever has been brought on record by the Assessing Officer directly linking the assessee with any accommodation entry arrangement. The entire addition has been made on the basis of generalized observations flowing from the

16 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani statement of Shri Mukesh Chokshi and the Investigation Wing report. No enquiry has been conducted either with the companies whose shares were purchased and sold or with the stock exchange authorities. No evidence has been brought on record to establish that the consideration reflected in the contract notes and bank accounts did not actually move between the parties. Similarly, there is no allegation that the assessee paid any cash outside the books for obtaining accommodation entries. The assessment order proceeds entirely on inference rather than evidence. 34. We further note that the assessee had furnished documentary evidence in support of the impugned transactions, including purchase bills, contract notes, bank statements and details evidencing movement of funds through banking channels. The Assessing Officer has not recorded any finding that any of these documents were fabricated or false. It is also not the case of the Revenue that the shares were never credited to the assessee's account or that the sale proceeds were not actually received through banking channels. 35. An important factual aspect which cannot be ignored is that the entire addition of Rs. 76,03,247/- has its genesis in the Assessing Officer's conclusion that the purchase of shares of Kiri Dyes and Alkali Metals Ltd. in Assessment Year 2009-10 was bogus. The learned CIT(A) has recorded that in the assessee's own case for Assessment Year 2009-10, the addition made on account of alleged bogus purchase of such shares already stands

17 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani deleted by the appellate authority vide order dated 03.06.2025. Significantly, during the course of hearing before us, the learned AR specifically submitted that no appeal has been preferred by the Revenue against the said appellate order. The learned Departmental Representative could not controvert the aforesaid factual assertion. Therefore, the very foundation on which the Assessing Officer proceeded to treat the sale proceeds of Rs. 76,03,247/- as unexplained no longer survives. 36. Once the purchase of shares in the preceding year has been accepted by the appellate authority and such order has attained finality, the consequential inference drawn by the Assessing Officer in the year under consideration loses its legal basis. The addition of Rs. 76,03,247/- cannot survive independently when the premise upon which it is founded has already been negated in appellate proceedings. The same logic equally applies to the addition of Rs. 10,58,334/-, because according to the Assessing Officer himself, the source of investment in shares of Niraj Cement Structural Ltd. was the amount realized on sale of shares of Kiri Dyes and Alkali Metals Ltd. If the earlier transaction itself is accepted, the consequential addition necessarily fails. 37. We further find that the learned CIT(A) has placed reliance upon the decision of the Co-ordinate Bench in the case of Mayur M. Shah (HUF) vs. ITO (supra). In that case also, the Revenue sought to treat the long-term capital gain as non-genuine solely on the basis that the transactions were routed through M/s Gold Star Finvest Ltd., a concern associated with Shri Mukesh

18 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani Chokshi. The Co-ordinate Bench examined the statement of Shri Mukesh Chokshi and the material relied upon by the Revenue and ultimately held as under:

"I found that in case of Shri Ravindrakumar Toshniwal (supra) and in case of Mukesh R. Marolia ... the shares were purchased through M/s Gold Star Finvest Ltd. and after considering the statement of Mr. Chokshi, the Benches held that the transactions done by the assessee were genuine and nothing was found against these assessees. The decisions of the Tribunal have been confirmed by the Hon'ble jurisdictional High Court in both of these cases... Taking into consideration all these aspects and taking into consideration the various decisions of the Tribunal, which have been confirmed by the Hon'ble jurisdictional High Court, I hold that the transaction for purchase and sale of shares in the present case also cannot be held as bogus as no material was found against the assessee directly." (para 9) 38. The aforesaid ratio is directly applicable to the facts of the present case. Here also, the Revenue seeks to sustain the addition primarily on the basis of the statement of Shri Mukesh Chokshi and the alleged accommodation entry activities of concerns controlled by him. However, just as in Mayur M. Shah (HUF), no direct material has been brought on record against the present assessee. The Revenue has not demonstrated that the transactions reflected in the documentary evidence furnished by the assessee were fictitious or sham. Therefore, the factual matrix before us is substantially comparable to the facts considered by the coordinate Bench in Mayur M. Shah (HUF).

19 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani become conclusive evidence against an assessee without corroboration. It is a settled proposition that suspicion, however strong, cannot take the place of proof. The assessment order does not reveal any material establishing that the assessee was a beneficiary of accommodation entries or that the impugned transactions were merely make-believe arrangements. 40. We further note that no cross-objection has been filed by the assessee. Therefore, we are not called upon to adjudicate the validity of reopening under section 147 or any other issue adverse to the assessee. The scope of the present proceedings is confined to the grounds raised by the Revenue challenging the deletion of addition of Rs. 86,61,581/- by the learned CIT(A). Having examined those grounds on merits, we find no infirmity in the conclusions reached by the learned CIT(A). 41. In view of the foregoing discussion, considering that (i) the addition is founded solely upon generalised allegations arising from the statement of Shri Mukesh Chokshi, (ii) no direct incriminating material has been brought on record against the assessee, (iii) the documentary evidences produced by the assessee remain unrebutted, (iv) the addition relating to the purchase transaction in Assessment Year 2009-10 already stands deleted and has attained finality, and (v) the issue is squarely covered by the decision of the coordinate Bench in Mayur M. Shah (HUF) and other decisions affirmed by the Hon'ble Jurisdictional High Court, we find no reason to interfere with the

20 ITA No. 8430/Mum/2025 Chandra Asoo Nihalani order of the learned CIT(A).Accordingly, all the grounds raised by the Revenue are dismissed.

Order pronounced on 29/06/2026 as per Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/- (KAVITHA RAJAGOPAL) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 29/06/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai