RAMESH K SHRISHRIMAL ,MUMBAI vs. ITO WARD 23(3)(6), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of ld. CIT(A)/NFAC dated 24.09.2025 for Assessment Year (AY) 2015-16. The assessee has raised following grounds of appeal: I. First Ground of Appeal: 1) The Commissioner of Income Tax (Appeals) erred in confirming addition of Rs. 1,38,16,563/- as unexplained investment. 2) He failed to take into consideration that the appellant had provided all the relevant documents to prove that the transaction entered into by the appellant was genuine. 3) He has further failed to appreciate that: a. The assessment done by the assessing officer was merely based on assumptions and presumptions. b. The assessing officer during the course of assessment proceedings did not provide copies of the documents and evidence of the investigating wing of Kolkata

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025 and statement of Anuj Agarwal and other documents and evidences on which he has relied and come to the conclusion that the transaction of sale and purchase of shares was bogus. 4. The appellant prays that the addition of Rs. 1,38,16,563/- be deleted. II Second Ground of Appeal: 1. The Commissioner of Income Tax (Appeals) erred in confirming addition of Rs. 2,61,208/- u/s 69C as unexplained expenses. 2. He failed to appreciate that the appellant has not incurred any such expenses. 3. The appellant prays that the addition of Rs. 2,61,208/- be deleted. 2. Brief facts of the case are that assessee is individual filed his return of income for A.Y. 2015-16 on 29.09.2015 declaring income of Rs. 10,11,220/-. Case was selected for scrutiny. During the assessment, the Assessing Officer (AO) noted that assessee has claimed long term capital gain on sale of share of Lifeline Drugs and Pharma Ltd. The AO prepared the summary of cost of acquisition of sale price in para 3 of his order. The AO further recorded that during assessment, the statement of assessee was recorded. The assessee in his statement stated that he purchased such share through private placement. The AO in para 5 of assessment order recorded that as per report of Investigation Wing of Kolkata, the scrip of Lifeline Drugs and Pharma Ltd. is a penny scrip and in connivance of his Promoter, Broker, Entry Operator and Exit Provider accommodation entry was provided to various beneficiary as a long term capital gain and short term capital loss. The assessee purchased share of Lifeline Drugs and Pharma Ltd. @ Rs. 143 per share on 28.08.2013. The assessee purchased 15,000 shares for a

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025 consideration of Rs. 21,45,000/- and within 1-2 years, the shares were sold a consideration of Rs. 1.38 crore which is several times higher than the purchase price. The AO referring the modus operandi of entry provider of recording the report of Investigation Wing and referring the statement of assessee treated the entire sale consideration of share as unexplained income from other sources. The AO also added 2.00% of commission on the total sale consideration thereby made further addition of Rs. 2,61,208/-. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed his written submission to counter the finding of AO. The assessee in his submission submitted that AO relied on the statement of Anuj Agarwal of Consortium Capital Pvt. Ltd. He does not know, said Anuj Agarwal. The assessee has purchased share through preferential allotment from company. The payments for purchase of share were paid through cheque. The shares were dematerialised in Demat account. The assessee furnished copy of Dmat account. The assessee sold share through stock exchange through SEBI registered broker. The assessee paid Security Transaction Tax (STT) on such sale consideration. The sale consideration was received directly in his account. Such sale consideration cannot be treated as unexplained cash credit under section 68. To support his submission, the ld. AR relied upon the following the case law:  PCIT vs Parasben Kasturchand Kochar (2021) 130 taxmann.com 177 (SC)  CCIT vs Nilesh Jain HUF (2024) 163 taxmann.com 229 (MP)  PCIT vs Affluence Commodities (P) Ltd. (2024) 161 taxmann.com 476 (Gujarat)

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025  PCIT vs Smt. Krishna Devi (2021) 126 taxmann.com 80 (Delhi)  Ramprasad Agarwal vs ITO (2018) 100 taxmann.com 172 (Mumbai-Trib) 4. The assessee also stated that he has produced all relevant evidences including allotment of share payment of consideration by cheque and Demat Account and the details of sale consideration. The assessee discharged his primary onus. The AO has not brought any material on record to show that assessee has taken bogus entry. To support his contention, the assessee relied on the decision of Supreme Court in PCIT vs Renu Agarwal (2023) 153 taxmann.com 579 (SC) wherein it was held that exemption under section 10(38) cannot be disallowed as 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 the investigation report. 5. The ld. CIT(A) after considering the submission of assessee and the assessment order upheld the action of AO. The ld. CIT(A) held that on applying the test of human probability which is difficult to establish beyond doubt the non-genuine of sale value of Rs. 1.38 crore. On the objection of assessee that there is no direct evidence brought by AO during the assessment, the ld. CIT(A) held that it is very rare and difficult to get direct information or evidence with regard to prior meeting of minds of the person involved in the manipulative activity of price rigging and insight trading. Further, aggrieved the assessee has filed present appeal before Tribunal. 6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. The ld. AR of the assessee

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025 submits that assessee purchased share of preferential allotment. The price of shares was paid through banking channel. The shares were allotted to the assessee and were dematerialised. The assessee held such share for sufficient period and on sale of such share, the assessee earned long term capital gain. The sale was made through registered broker of SEBI. The assessee discharged his primary onus to substantiate the genuineness of transaction. The AO has not brought any adverse evidence specific to the assessee. No role of broker of assessee or any adverse report against the broker of assessee through whom the assessee has sold such shares was brought on record. Once the assessee discharged his onus, the onus shifts on the revenue to bring the adverse evidence on record or to prove that transaction of assessee is not genuine. The ld. AR of the assessee submits that co-ordinate of Mumbai Tribunal in DCIT vs Dishant Deepak Shah in ITA No. 4281/M/2025 dated 05.12.2025, in Smt. Ritu Jain vs ACIT (2021) 124 taxmann.com 440 (Delhi-Trib.) and in Nitesh Kumar Gandiya vs ITO (2024) 161 taxmann.com 215 (Surat-Trib) while considering the similar capital gain on sale of Lifeline Drugs accepted the transaction as genuine. 7. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue supported the order of lower authorities. The ld. Sr. DR for the Revenue submits that AO was having sufficient information and evidence in the form of report of Investigation Wing that scrip of Lifeline Drugs was penny scrip. The assessee has purchased share at a price of Rs. 134 per share. The shares were sold at a price of more than 6/7 times of purchase price which is beyond

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025 human probability. The ld. Sr. DR for the Revenue submits that such earning of huge long term capital gain is beyond human probability and not possible in absence of manipulation. The ld. Sr. DR prayed to uphold the orders of lower authorities. 8. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We have considered the rival submission of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various documentary evidence filed by the assessee which includes summery of purchases and sale of shares, copy of bank statement, copy of contract notes, copy of Demat account and statement of holding period. We find that the AO doubted the transaction of assessee on the basis of report of information in ITD system, which was based on report of Investigation Wing Kolkata. The AO made addition of sale consideration of scrips of Lifeline Drugs and Pharma Ltd. as unexplained taxable income under section 68. The AO also added 2.00% of sale transaction by taking view that the paid commissions to the entry provider. We find that before ld CIT(A), the assessee has furnished complete evidence including contract note of shares, Dmat account details, detail of bank account. However, no adverse evidence was brought against such evidence, nor the assessing officer made adverse comment on such evidences. No such cross examination was allowed. The AO or ld CIT(A) has not made any independent investigation of facts to connect the assessee or his broker with the transaction of alleged price rigging.

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025 So far as allegation of price rigging is concerned, no role or the activities of the brokers of assessee in price manipulation is brought on record. We find that there is no material is brought on record or adverse finding or report of SEBI about price manipulation by the broker of assessee. No independent investigation of facts was carried out by the lower authorities, if any transaction of assessee even remotely connected with entry provider. 9. We find that Hon'ble Gujarat High Court in the case of Himani M. Vakil (2014) 41 taxmann.com 425 (Guj) held that where assessee duly proved genuineness of sale transaction by bringing on record contract notes of sale and purchase, bank statement of broker and Demat account showing transfer in and out of shares, Assessing Officer was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. Gujarat High Court in the case of Parasben Kasturchand Kocher (2021) 130 taxmann.com 176 (Guj), also held that when assessee discharged his onus by establishing that transactions were fair and transparent and all relevant details with regard to transfer furnished to Income Tax Authority and the Tribunal have also took the notice of fact that the shares remained in the account of assessee, the assessee also furnished demat account and details of bank transaction about the sale and purchase of shares, the addition was deleted. Further, we find of Hon'ble Jurisdictional High Court in the case of PCIT Vs. Indravadan Jain, HUF in Income Tax Appeal No.454 of 2018 dated 12.07.2023 also held that when Assessing Officer nowhere alleged that transactions made by assessee with a particular broker or share broker was

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025 bogus, merely because investigation was done by SEBI against the broker or its activities, the assessee cannot be said to have entered into ingenuine transaction. Hon’ble Gujarat High Court in PCIT Vs Mamta Rajiv Kumar Agarwal (2023) 155 taxmann.com 549 (Gujarat) also held that where the assessee had sold the shares and earned LTCG and the Assessing Officer alleged that transaction was penny stock deal aim at illegitimately claiming LTCG exemption under section 10(38), since there was no allegation on record suggesting the assessee or his broker involved in rigging up the price of scrips, the addition was rightly deleted by Tribunal. We find that assessee made sale of shares through BSE and paid security transaction tax and there is no allegation against the share broker through whom assessee has made sales that they were indulging any price manipulation. 10. We also find that co-ordinate bench of Mumbai Tribunal in DCIT vs Dishant Deepak Shah in ITA No. 4281/M/2025 dated 05.12.2025 deleted similar addition on sale of scrips of Lifeline Drugs and Pharma Ltd. Thus, in view of aforesaid factual and legal discussion, we do not find any justification in treating the LTCG as unexplained cash credit in absence of any cogent evidence against the assessee specific. Hence, we direct the AO to delete the addition under section 68 of Rs. 1.38 crore. Considering the facts that we have deleted the addition under section 68, therefore, addition of unexplained expenditure under section 69C, which is otherwise consequential, is also deleted. In the result, substantial grounds of appeal raised by the assessee are allowed.

Ramesh K Shrishrimal (AY: 2015-16) ITA No. 7571/Mum/2025 11. In the result, the appeal of the assessee is allowed. Order was pronounced in the open Court on 23/06/2026.

/- S/- /- Sd/- Sd/- MAKARAND VASANT MAHADEOKAR PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 23/06/2026 Biswajit 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 / DDO ITAT, Mumbai