RAJ PARULEKAR,MUMBAI vs. ITO WARD 22(3)(6), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “J-SMC” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER

ITA No. 458/Mum/2026 Assessment Year : 2012-13 Raj Parulekar, ITO, Ward-22(3)(6), 301, Sidhayog Building, Piramal Chambers, Old Prabhadevi Road, vs. Mumbai-400012. Near VIP House, Mumbai-400025. PAN : BJGPP7442D (Appellant) (Respondent) For Assessee : Shri Samir Shah For Revenue : Shri Aditya Rai, Sr.DR Date of Hearing : 04-03-2026 Date of Pronouncement : 30-04-2026 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the assessee against the order of the Learned ADDL/JCIT(A)-1, Visakhapatnam [„Ld.CIT(A)‟], dated 22-12-2025, pertaining to Assessment Year (AY) 2012-13.

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entry in the form of Long Term Capital Gain while claiming tax exemption u/s. 10(38) of the Act and it was seen from the details provided by the Investigation Wing that the assessee has purchased shares of the said company to the tune of Rs. 15,650/- and has sold the shares during the year for Rs. 2,02,047/-. In response to the notices, the assessee filed its return of income reiterating the loss as declared in the original return of income and thereafter, notices u/s. 143(2) and 142(1) of the Act were issued and during the course of assessment proceedings, a show cause was also issued to the assessee stating that there was a sharp increase in the price of scrip during financial year 2010-11 which is not supported by financial fundamentals of the said company and the assessee was asked to show cause as to why the said transaction of Rs. 2,02,047/- should not be treated as „non genuine‟ and brought to tax u/s. 68 of the Act. In response to the show cause, the assessee filed its submissions which were considered, but not found acceptable to the AO. As per the AO, the assessee sold 8,500 shares of M/s. SVC Resources Limited at Rs. 2,12,674/- financial year 2010-11 at a price which was manipulated by hawala operators without link to actual performance and financials of the company and it is, therefore, clear that the assessee sold the shares when they were at their peak price. Thereafter, the AO held that the assessee has obtained the accommodation entries taken by various beneficiaries for introducing their unaccounted cash into their Books of Account without paying the due taxes and the transactions are mostly in lieu of cash that the assessee would have paid an amount of Rs. 2,12,674/- to the hawala operators, which represent the value of cash which has been managed in the form of bogus transaction of shares representing the un-explained investment made by the assessee. Alternatively, the AO held that it can also be concluded that the sum of Rs. 2,12,674/- represent income from other sources and not the income in the nature of capital gains and finally

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he held that looked at both the sides, the basic fact remains that the sum of Rs. 2,12,674/- is taxable income of the assessee and not in the nature of capital gains. Further an amount of Rs. 10,100/- was estimated as commission paid by the assessee from un-explained sources for obtaining the said accommodation entry and the sum was brought to tax u/s. 69C of the Act and the order was passed u/s. 143(3) r.w.s. 147 of the Act 27-12- 2018.

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Pvt. Ltd., and payments were made through proper banking channels, adjusted against the credit balance available in the ledger account of broker and income statement was also duly submitted during the course of assessment proceedings. Further, the shares were sold through Anugrah Stock & Broking Pvt. Ltd., as per the prevalent market price on the Bombay Stock Exchange. It was submitted that both the purchases and sales were at the prevalent market price of the Bombay Stock Exchange and copy of the account of Anugrah Stock & Broking Pvt. Ltd., for the financial year 2010-11 and 2011-12 and demat account of the assessee, wherein the purchases and sales were duly reflected were submitted. It was accordingly submitted that the transactions so undertaken by the assessee are genuine and not in the nature of accommodation entry. It was further submitted that the shares were purchased at a price of Rs.16.44 per shares and were sold at Rs. 25/- per share and there is no much variance between the purchase price and sale price if you take into consideration the bonus shares. Thus, there is no substantial loss incurred or gain earned by the assessee by entering the above transaction. It was submitted that the assessee has only earned a sum of Rs. 98,307/- which has been duly offered to tax as business income. It was submitted that without appreciating the same, the AO has brought to tax the entire sale consideration without giving deduction of cost of acquisition of 8,500 shares. It was submitted that the assessee is neither a broker nor any way connected to M/s. SVC Resources Limited. He is an ordinary investor and acted on the information going around in the market. Such investment is very common in day-to-day trading activity and earning meagre profit of Rs. 98,307/- cannot be held against the assessee as being involved in any of the part of the scam so alleged by the AO. It was further submitted that the addition is made purely on the basis of the information from Investigation Wing. However, no documentary evidences have been

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produced or available on record to justify that the assessee has malafide intention for entering into purchase and sale transaction in the shares of M/s. SVC Resources Limited to either claim business loss or Long Term Capital Loss or take advantage of Long Term Capital Gain. It was submitted that the Courts and Tribunals have held from time to time that for any addition on account of penny stock, the AO has to brought on record material which justify the assessee has really acted with malafide intention. Simply relying on Investigation wing report, which is general in nature, adverse action cannot be taken against the assessee. It was further submitted that while calculating tax liability, the AO has invoked provisions of section 115BBE of the Act. However, the said provisions become effective from AY. 2013-14 and not from AY. 2012-13 and, therefore, the action of the AO in calculating the tax liability u/s. 115BBE of the Act is apparently wrong and cannot be sustained. It was further submitted that the AO has also erred in making the addition towards the commission paid for providing accommodation entry as there is no material on record that the assessee has obtained any accommodation entry or has paid any commission for obtaining such entry. In light of the same, it was submitted that the addition so made and confirmed by the Ld.CIT(A) may be deleted. It was further submitted that matter pertaining to similar scrip was examined by the Co-ordinate Bench of the Tribunal in the case of Rasila Lalitkumar Cholera vs. ITO (ITA No. 7544/Mum/2025, dt. 13-02-2026), wherein the Co-ordinate Bench of the Tribunal has deleted the addition and the ratio laid down in the said decision squarely applies in the instant case and therefore, necessary relief be provided to the assessee.

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flagged by the Investigation Wing in its report and basis that the re- assessment proceedings were initiated in the case of the assessee u/s. 148 of the Act. Thereafter, the AO has carried the analysis of the unusual price movement in the scrip during the financial year 2010-11 and basis weak fundamentals, which are not supported by the financials of M/s. SVC Resources Limited, the AO, after issuing a show cause, has made the subject addition and which has been rightly confirmed by the ld CIT(A).

“I have perused the submissions advanced by both sides in the light of the material placed on record before the Tribunal. 5. Admittedly, assessee purchased shares of SVC Resources Ltd., during the year under consideration and claimed exemption u/s 10(38) of the Act on the gains arising from the said transactions. The Ld. AO relied on the investigation report wherein the shares of the said company were held to be penny stock. Based on such information, the assessment was reopened. It is noted that the reason for making the addition in the hands of the Assessee was that the price of the scrip was jacked up within a short span of time and that the financial performance and fundamentals of the company did not support such an increase in share price. The Ld. AO, in the assessment order, elaborately referred to the modus operandi adopted by penny stock companies for converting unaccounted cash. However, the Ld. AO failed to record any specific finding incriminating the Assessee so as to establish involvement in rigging the prices of the shares. On the contrary, the Assessee established, by way of documentary evidence, the genuineness of the transactions, which has not been controverted by the authorities below. It is further noted that no specific defect or deficiency has been pointed out by the Ld. AO in respect of the evidence furnished by the Assessee. 5.1. It is a settled position of law that suspicion, however strong, cannot take the place of proof. Mere inclusion of a scrip in an investigation report as a penny stock, in the absence of any material demonstrating the Assessee's involvement in price manipulation or accommodation entry arrangements, is insufficient to justify an addition. The burden cast upon the Assessee to establish the genuineness of the transaction stands duly

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discharged by the documentary evidences placed on record, and the Revenue has failed to rebut the same with any cogent material. 5.2. In view of the foregoing facts and circumstances, I am of the opinion that, the additions made by the Ld. AO u/s 69A and 69C of the Act are not sustainable in the eyes of law. The authorities below have proceeded on generalized assumptions without bringing any specific adverse material against the Assessee. Accordingly, the additions so made are directed to be deleted and grounds raised by assessee are allowed.”

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of his regular trading activities and profit thereon has been offered to tax as part of his business income. The majority of purchases have been done in earlier financial year and the sales have been effected during the year. Therefore, how it could be a case of unexplained investment or for that matter, income in the nature of capital gains or income from other sources where at first place, the assessee has not claimed as capital gains, forgot about the exemption u/s 10(38) of the Act. Further, where the sale consideration has already been reflected as part of business receipts, how the same can be brought to tax again in the hands of the assessee is something which we are unable to appreciate and understand as the same is against the settled principle of double taxation and the same thus reflect lack of application of mind on part of the AO which has even escaped the attention of the ld CIT(A).

Order pronounced in the open court on 30-04-2026

Sd/- Sd/- [MS. KAVITHA RAJAGOPAL] [VIKRAM SINGH YADAV] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 30-04-2026 TNMM

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Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai