INCOME-TAX OFFICER - 12(1)(1), MUMBAI, MUMBAI vs. M/S. AADESH COMMODITIES PRIVATE LIMITED, MUMBAI

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ITA 1334/MUM/2026Status: DisposedITAT Mumbai29 June 2026AY 2014-157 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO's addition was not sustainable, considering the consistent decisions of the Tribunal in the assessee's own case for earlier and subsequent assessment years. The CIT(A) had correctly followed these precedents.

What were the facts?

The Revenue appealed against the deletion of an addition of Rs. 54,00,748/- made by the Assessing Officer (AO) on account of sale proceeds from shares of a company alleged to be a penny stock. The assessee claimed the transaction resulted in a business loss.

What were the issues?

Whether the addition made by the AO under Section 68 for alleged penny stock transactions was justified, especially when the assessee treated the sale of shares as a business transaction resulting in a loss.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

PER PAWAN SINGH JUDICIAL MEMBER:

1.

This appeal by Revenue is directed against the order of learned CIT(A) dated

26.10.2024 for assessment year (AY) 20141-15. The revenue in its appeal has

raised following grounds of appeal:

1.

"Whether on the facts and circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 54,00,748/- made in the Assessment Order without appreciating that the addition of Rs. 54,00, 748/-represents sale proceeds from sale of shares of M/s ACI Infocom Ltd, which is penny stock company indulged in providing accommodation entries in the form of long- term capital gains/short term capital gains or long-term capital loss/ short term capital loss. 2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs.54,00,748/ - made by the Assessing Officer /s. 68 of the Income Tax Act, 1961 by ignoring the judicial ruling pronounced by the Hon'ble High Court of Calcutta in the case of Pr. Commissioner of Income-tax us. Swati Bajaj (reported in (2022] 139 taxmann. com 352/288 Taxman 403/446 1TR 56 (Calcutta) dated 14.06.2022 wherein the Hon'ble High Court has held that where the assessee failed to establish genuineness of rise of price of shares within a short period of time, additions made u/s. 68 were justified?" 3. The appellant craves leave to add, amend, or alter any of the above grounds of appeal before or during the course of hearing, in the interest of justice.

2.

Rival submissions of both the parties have been heard and record perused. At

the outset of hearing, the learned Authorised Representative (ld. AR) of the

assessee submits that grounds of appeal raised by revenue is covered in

favour of the assessee and against the revenue in assesses own case for

earlier and subsequent assessment years. Copy of decisions of Tribunal in AY

2013-13 in ITA No. 3959/Mum/2023 and in AY 2015-16 in ITA No.

4035/Mum2023 are placed on record. There is no material change in the facts

of the year under consideration. The ld CIT(A) allowed relief to the assessee

by following the decisions of Tribunal in earlier and subsequent years. On

merit, the ld AR of the assessee submits that the assessee is a trader in

shares, and for the year under consideration sold part of the of shares of ACI

Infocom Ltd resulting in a loss. The proceeds of the sale of shares ACI

Infocom Ltd (loss) were shown in the profit and loss account with business

income. The assessing officer (AO) reopened the case of assessee on the

basis of general information available with him. No verification of facts was

carried out by him. The assessee furnished complete details of transactions of

shares of ACI Infocom to substantiate the transaction of shares which were

held as stock in trade and on sale of which offered business income.

3.

On the other hand, the ld Senior departmental representative of the revenue

supported the order of AO. The ld Sr DR for the revenue submits that facts of each year have to be consider separately and independently. The AO was

having sufficient material in his possession, about the penny stock company,

which were used to price rigging by entry provider with the active

manipulation of stock brokers. The assessee is beneficiary of such artificial

price rigging. without held various scrips of shares in

4.

We have considered the rival submissions of both the parties and have gone

through the orders of lower authorities carefully. We have also deliberated on

the decisions of Tribunal in assesses own case for AY 2013-14 and 2015-

16(supra). We find that during assessment the assessee claimed that they

have suffered loss of Rs. 53,98,987/- on sale of shares of ACI Infocom Ltd.

The AO disregarded the submissions of assessee and as peer his finding in

para 10.4 of his order treated business loss as bogus loss and made addition

under section 68 of Rs. 54,00,748/-. The AO while making such addition relied

on the information available with him, which was based on report of

investigation wing. The ld CIT(A) allowed relief to the assessee on the basis

of decision of Tribunal in AY 2013-14 and in AY 2015-16.

5.

On careful consideration of facts of the case in our hand, we find that on

similar set of facts, the coordinate bench of Tribunal in AY 2013-14 in ITA No

3959/Mum/2023 vide order dated 19.08.2023, on considering the rival

contentions of both the parties passed following order;

“6. We have considered the submissions of both sides and perused the material available on record. As per the assessee, it is a trader in shares, and for the year under consideration sold part of the opening stock of shares ofM/s ACI Infocom Ltd for a consideration of Rs.15,92,503, resulting in a profit of Rs.9,57,269. Further, during the year, the assessee again sold shares ofM/s ACI Infocom Ltd for a consideration of Rs.13,69,150, which resulted in a profit of Rs.7952. As per the assessee, the proceeds of the sale of shares ofM/s ACI Infocom Ltd were credited to the profit and loss account and duly offered for tax as business income. Further, during the year, the assessee sold the entire opening stock of 84,000 shares ofNYSSA Corporation Ltd for a consideration of Rs.1,03,03,918, which resulted in a profit of Rs.5,43,118. Similarly, the assessee credited the sales consideration on the sale of shares ofNYSSA Corporation Ltd to the profit and loss account and offered the same to tax as business income. Therefore, it is the plea of the assessee that from the sale of shares of NYSSA Corporation Ltd and M/s ACI Infocom Ltd, during the year under consideration, it has earned profit which was offered to tax as business income.

7.

From the perusal of the financial statement of audited financial statements of the assessee for the financial year 2012-13, forming part of the paper book from pages 4-19, we find that the assessee declared a total turnover of Rs.11,74,47,670, which comprises revenue from operations of Rs.11,69,17,854. From Note 12 of the financial statement, we find that the aforesaid revenue from operations arises from the sale of shares. Further, from Note No. 7, we find that only the investment in shares of Sunteck Reality Ltd has been declared as non-current investments by the assessee. From the copy of the return of income along with computation of income for the assessment year 2013-14, forming part of the paper book from pages 1-3, we find that the assessee has claimed exemption of long-term capital gains amounting to Rs.54,269 under section 10(38) of the Act.

8.

From the careful perusal of afore-noted details, it is discernible that the assessee did not consider shares of NYSSA Corporation Ltd and M/s ACI Infocom Ltd as its investments, and rather considered the same as its stock-in-trade, being the trader in shares. Further, the assessee has recorded in the financial statements returned for the year under consideration the profit earned from the sale of shares ofNYSSA Corporation Ltd and M/s ACI Infocom Ltd and offered the same to tax. Therefore, we find no merits in reopening of assessment in the case of the assessee for the year under consideration on the basis that the assessee has received bogus gains by trading in scrips of NYSSA Corporation Ltd and M/s ACI Infocom Ltd, which was not disclosed, and thus the income chargeable to tax has escaped assessment within the meaning of section 147 of the Act.

Therefore, the entire observation/basis of the assessment is factually incorrect, since the assessment has been reopened on the wrong facts. Thus, the impugned assessment order deserves to be quashed.

9.

As is evident from the record, the assessee has included the sale consideration of Rs. 29,61,653 from the sale of shares of M/s ACI Infocom Ltd and sale consideration of Rs.1,03,03,918 from the sale of shares of NYSSA Corporation Ltd in its profit and loss account for the year under consideration. Further, the assessee has paid the tax on the profit earned from the aforesaid transaction. However, while concluding the assessment, the AO again made an addition of Rs.1,32,65,571 under section 68 read with section 115BBE of the Act. In our considered opinion, even if the total receipt amounting toRs.1,32,65,571 is treated as unexplained cash credit, the AO is required to reduce the said amount from the income side and then proceed further to make an addition under section 68 of the Act. As noted elsewhere, the assessee filed its return of income declaring a total loss of Rs.54,269, and if total profit from sale of shares of NYSSA Corporation Ltd and M/s ACI Infocom Ltd amounting to Rs.15,08,339 (Rs.9,65,221 + Rs.5,43,118) is reduced on account of reduction of total receipts from the income side, the same will increase the loss of the assessee, which is required to be set off with the addition made under section 68 of the Act. Therefore, resulting in the entire exercise being tax-neutral. This position is supported by the CBDT’s Circular No. 11 of 2019, wherein it was clarified that up to the assessment year 2016-17, the losses can be set off from the additions made under section 68 of the Act. Even the learned CIT(A) has not disputed the same, as is evident from paragraph 6.2 of the impugned order.

10.

Considering the facts of the case from the factual as well as a legal perspective, we do not find any merit in the impugned addition made under section 68 read with section 115BBE of the Act. Accordingly, we are of the considered view that the learned CIT(A) has erred in confirming the same, and therefore, the impugned order is set aside. The AO is directed to delete the impugned addition. 11. In the result, the appeal by the assessee is allowed. 6. We further find that in AY 2015-16 in ITA No. 4035/Mum/2024, the coordinate

bench on similar set of facts, vide order dated 24.04.2024 held as under;

“10. We heard the rival submissions and considered the documents

available on the record. The assessee had made the transactions and

generated loss through the transaction of scripts ACI and Tilak. The

assessee’s holding was more than 2 years. There is no such direct

communication reflected in the order of the Ld.AO that the entire

transaction was made a sham transaction. In the observation of recorded

reasons, the Ld. AO mentioned that the transactions are undisclosed

whereas during the assessment and appellate stages before the authorities

were unable to substantiate that the entire transaction was not disclosed in

the return. In recorded reason the ld. AO specifically mentioned that the

transacted amount is not reflected in capital gain column of return filed U/s

139 of the Act. Whereas, the assessee declared the transaction as

business transaction in return, notas capital gain. Respectfully, we rely on

the order of the Hon’ble Bombay High Court in the case of Arvind Sahdeo

Gupta (supra) for quashing of assessment order for wrong observation of

the ld. AO. The Hon’ble Bombay High Court in the case of PCIT vs.

Ziauddin A Siddique (ITXA 2012of 2017) held that where (a) the

transaction of purchase and sale of shares which is alleged to be a penny

stock is done through Stock Exchange or through registered broker, the

payments have been made through banking channel, STT is paid and the

ld. Assessing officers has not criticised the documents and (b) assessee is

not involved in price rigging, the transaction is genuine. 11. And Abhay

Kumar Daga HUF vs ITO (supra). In this case the coordinate bench of

Jodhpur accepted the transaction of ACI script and allowed the long-term

capital gain. The addition is not sustainable. On the other hand, in the

sales transaction, assessee gathered loss. So, it is not a gain for the

assessee related to penny stock transaction. In our considered view, the

entire addition made by the Ld.AO is quashed. Further, the Ld.AR placed

that the CIT(A) had made the enhancement of Rs.62,03,535 under section 6 68 of the Act. The addition made by the AO is Rs.20,18,348/-. The Ld.AR only challenged the addition of CIT(A). Though the addition of the Ld.AO is duly quashed, so the enhancement by the CIT(A) has no leg to stand, so the amount of Rs.62,03,535/- is duly deleted. The Ld.DR was not able to produce any contrary orders against the submission of the Ld.AR. So, the appeal order is duly set aside. The addition made by the AO and enhancement by the Ld.CIT(A) are deleted.” 7. Considering the consistent decisions of Tribunal on similar set of facts, which

has been followed by ld CIT(A) while allowing relief to the assessee, thus, we

do not find any infirmity in the order of ld CIT(A), which we affirm. In the

result, the grounds of appeal raised by the revenue are dismissed.

8.

In the result, appeal of revenue isdismissed.

Order was pronounced in the open Court on 29/06/2026.

Sd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, Dated: 29/06/2026 Self Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai

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