MILIND JASWANTRAI VORA,MUMBAI vs. THE INCOME TAX OFFICER, WARD 33(2)(3), MUMBAI, MUMBAI

Per Arun Khodpia, AM:

The captioned appeal is preferred by the assessee, against the order of

Commissioner of Income Tax Appeals Addl/JCIT(A)-1, Visakhapatnam [“the Ld.

CIT(A)] vide order dated 12.02.2026, for the assessment year 2013-14, arises

from assessment order u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (“the

Act”) dated 20.12.2019, passed by Income Tax Officer Ward-33(2)(4), Mumbai.

The grounds of appeal raised by the assessee are as under:

“GROUND NO. 1: GENERAL 1.1 The order passed by the Ld. CIT(A)/ADDL/JCIT(A)-1, Visakhapatnam dated 12.02.2026 under Section 250 of the Act is bad in law, erroneous on facts, and contrary to the settled legal position. 1.2 The Ld. CIT(A) erred in confirming the assessment order dated 20.12.2019 passed u/s 143(3) r.w.s. 147 without proper appreciation of evidence and applicable judicial precedents. GROUND NO. 2: VALIDITY OF REOPENING u/s 147/148 2.1 The Ld. CIT(A) erred in not adjudicating the validity of the reopening which was based solely on information received from the Investigation Wing. Ahmedabad, without any independent application of mind by the AO. 2.2 The notice u/s 148 dated 27.03.2019 was issued on "borrowed satisfaction" from the Investigation Wing report regarding Safal Herbs Ltd., without the AO examining the appellant's trading records, broker ledger, demat account, or bank statements. 2.3 The foundational reason for reopening - that the appellant was a beneficiary of bogus LTCG / accommodation entries is factually incorrect, as the appellant never claimed any LTCG or exempt income. The entire share trading income was declared as business income. The very basis of reopening having collapsed, the reassessment is without jurisdiction. Reliance: Shri Dinesh Kumar Sharma vs. ITO (ITAT Jaipur) - Reopening on Investigation Wing inputs without independent verification held unsustainable. GROUND NO. 3: ADDITION OF Rs. 2,55,662/- u/s 68-ERRONEOUS 3.1 The Ld. CIT(A) erred in confirming the addition of Rs. 2,55,662/- made u/s 68 by treating the trade value as "unexplained cash credit" without appreciating that: (a) The appellant is a regular stock trader executing 4,334 trades involving 55,19,065 shares during FY 2012-13 with total turnover exceeding Rs. 121 crores, all declared as business income; 2

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora (b) Safal Herbs constituted only 2 trades out of 4,334 (0.045% of volume) with net profit of Rs. 2,307.75 already offered to tax; (c) Rs. 2,55,662/-represents gross trade value (purchase price + sale price) - adding this as "cash credit" amounts to taxing turnover, not income; (d) All transactions were through recognized stock exchange (BSE), SEBI-registered broker (M/s Bonanza Portfolio Ltd.), in demat form, through banking channels; (e) Complete documentary evidence (broker ledger, global report, day-wise trade details, demat records, bank statements) was furnished establishing the nature, identity, and creditworthiness of transactions. GROUND NO. 4: NON-APPLICATION OF MIND/DENIAL OF NATURAL JUSTICE 4.1 The addition was based solely on third-party statements and general investigation narrative from the search on Shri Sanjay Shah and Shri Jignesh Shah, without: (a) any independent enquiry by the AO; (b) examining the broker or calling for stock exchange records; (c) bringing any contrary material on record; and (d) providing cross-examination opportunity of the persons whose statements were relied upon against the appellant. Reliance: Andaman Timber Industries vs. CCE [2015] 281 CTR 241 (SC)-Not allowing cross- examination of witnesses whose statements form the basis of the order vitiates the proceedings. GROUND NO. 5: NON-SPEAKING ORDER/VIOLATION OF SECTION 250(6) 5.1 The Ld. CIT(A)'s order is a non-speaking order in violation of Section 250(6) of the Act, as it fails to: (a) address the appellant's specific submission that he is a regular stock trader, not an investor; (b) examine or discuss the day-wise trade details showing only 2 trades in Safal Herbs out of 4,334; (c) appreciate that the net profit of Rs. 2,307.75 was already offered to tax as business income; (d) deal with any of the case laws cited by the appellant including ITO vs. Aditya Agrawal (ITAT Jabalpur), Sejal Jignesh Shah vs. ITO, Sonal Snehal Shah vs. ITO, and Shri Dinesh Kumar Sharma vs. ITO; (e) consider the fundamental legal error of adding gross trade value (Rs. 2,55,662/-) instead of net profit (Rs. 2,307.75). Reliance: Kranti Associates (P) Ltd. vs. Masood Ahmed Khan [2010] 9 SCC 496 (SC); CIT vs. Sahara India (Firm) [2008] 300 ITR 403 (SC). GROUND NO. 6: MISAPPLICATION OF SWATI BAJAJ

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora 6.1 The Ld. CIT(A) erred in relying on PCIT vs. Swati Bajaj [2022] 446 ITR 56 (Cal) which is clearly distinguishable because: a) Swati Bajaj involved investors claiming exempt LTCG on penny stocks purchased off-market, whereas the present appellant is a regular trader who offered all income as business income, (b) Swati Bajaj has been distinguished by the ITAT Mumbai in Sejal Jignesh Shah vs. ITO (20.01.2025), clarifying that the ratio applies only where there are off-market purchases, broker confessions, or direct evidence of manipulation. GROUND NO. 7: DIRECTLY APPLICABLE ITAT PRECEDENTS-SAFAL HERBS SPECIFIC 7.1 The ITAT Jabalpur Bench (Vice President Shri Kul Bharat) in ITO vs. Aditya Agrawal (ITA No. 200/JAB/2024, dated 30.09.2025)-a case involving the identical scrip Safal Herbs Ltd., the same Investigation Wing report from Ahmedabad, and the same entry operators Shri Sanjay Shah and Shri Jignesh Shah dismissed Revenue's appeal and upheld deletion of the s.68 addition. The Tribunal held that the AO based findings solely on Investigation Wing report without making independent enquiry, and that the assessee had discharged onus u/s 68. The present appellant's case is on even stronger footing as: (a) Aditya Agrawal involved LTCG claim whereas the present appellant offered all income as business income; and (b) the present appellant's Safal Herbs trades were only 0.045% of total trading volume. 7.2 The ITAT Mumbai "C" Bench in Mihir Selvadia vs. ACIT (January 2026) - on facts closely parallel to the present case held that profits from sale of shares of an alleged penny stock, which were duly offered to tax as business income (and not claimed as exempt LTCG), cannot be treated as bogus u/s 68 merely on the basis of general investigation reports and human probability theory, in the absence of any cogent adverse material. 7.3 Similarly, the ITAT Mumbai in Dilip Bhanverlal Dangi (HUF) vs. ITO (13.02.2026, ITA No. 6008/Mum/2025) held that mere inclusion of a scrip in a 'penny stock' list, without material evidence of the assessee's involvement in price manipulation, is insufficient to justify addition u/s 68 when all transactions are through BSE, demat account, registered broker, and banking channels. 7.4 The present appellant's case is even stronger than all the above precedents: (a) the appellant is a regular trader (not investor) with 4,334 trades; (b) never claimed LTCG or exempt income; (c) Safal Herbs was only 0.045% of total volume; (d) net profit of Rs. 2,307.75 was already declared as business income. GROUND NO. 8: SUPPORTIVE ITAT MUMBAI DECISIONS 8.1 Reliance is also placed on: (a) Sejal Jignesh Shah vs. ITO (ITAT Mumbai, 20.01.2025) Documentary evidence of purchase/demat/sale/banking trail discharges the assessee's burden u/s 68; without independent enquiry by AO, addition cannot survive; (b) Sonal Snehal Shah vs. ITO (ITAT Mumbai, ITA No. 1653/Mum/2024) - Once nature and source of transaction are proved through documentary evidence, AO must rebut by independent enquiry. GROUND NO. 9: CONSEQUENTIAL RELIEF ON PENALTY 9.1 The penalty proceedings u/s 271(1)(c) initiated consequentially to the addition u/s 68 deserve to be dropped upon deletion of the substantive addition.

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora GROUND NO. 10: SAVING CLAUSE 10.1 The appellant craves leave to add to, amend, alter, modify, substitute, and/or withdraw any of the above grounds of appeal at or before the final hearing of the appeal, with the permission of the Hon'ble Tribunal.” 2. The brief facts of the case are that the assessee had e-filed, his return of

income on 04.09.2013, declaring total income at Rs. 3,26,620/-. Subsequently,

the case of assessee was re-opened u/s. 147. Accordingly, notice u/s. 148 was

issued on 27th March, 2019. The reason for re-opening was that certain

information from was received from the DDIT investigation, Ahmedabad

regarding accommodation entries and commission by transacting in a particular

script namely “Safal Herbs Limited” and the assessee herein was the beneficiary

of such accommodation entries to the tune of Rs. 2,55,662/-. Such transactions

were operated by Shri Sanjay Shah and Shri Jignesh Shah, who are in the

engaged in the activities of accommodation entries. The Ld. AO, accordingly,

show caused the assessee qua the aforesaid transactions to explain, as to why

the same should not be added to his income u/s. 68. The assessee at the

threshold, had denied such transactions. But, as per AO, did not make any

efforts to contravene the findings recorded by the investigation wing, whereas

the said dealer/seller had already admitted before the authorities of

investigation wing, about their modus operandi of providing accommodation

entries on commission basis. The addition therefore was made u/s 68 of the Act.

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora 3. Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A),

wherein the assessee contended that the assessee is a professional stock dealer

and trader associated with M/s Bonanza Portfolio Private Limited, a SEBI

registered broker. It is further clarified that during the F.Y. 2012-13, the assessee

had executed 4334 trades across 104 trading deals involving Rs. 55,19,065/-

shares with a total turnover of Rs. 242.96 Crores. The income of assessee was

declared as business income. No long-term capital gains were claimed u/s.

10(38) of the Act, even the Ld. AO himself has recorded this fact that the

activities of assessee are in the nature of a stock trader. It was further clarified

that the transaction in the dispute in alleged script, “Safal Herbs Limited”, was a

very small transaction, the assessee had bought 2500 shares on 18.10.2012 and

sold on 19.10.2012 with a profit of Rs. 2,318/-. Further, the assessee has bought

‘1’ share on 19.10.2012 and have sold the same on 31.10.2012, with a loss of Rs.

11/- only. So, the holding of assessee of aforesaid tented script was only for 1

day consisting of 2500 shares and 12 days for one share, which do not give rise

to a LTCG. Since, the assessee is in the business of trading of stocks and has

traded in 4334 trades across the year, the transaction disputed is a small

transaction, having ratio of 0.045% of the total volume of the assessee and

0.011% of the total turnover of the assessee. Such transaction in absence of any

allegation qua assessee’s involvement in the accommodation entry trade, has

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora no substance to call for an addition u/s. 68 of the Act. Further, since the

transactions are duly recorded in the books of the assessee, the addition u/s. 68

was uncalled for. The Ld. CIT(A) decided the issue with the observations that

there can be no meters to judge the truth, the same has to be culminated out of

the surrounding circumstances and have to be inferred, there may not be

clinching evidences but if at various places, if the circumstances are doubtful the

natural corollary suggests that such transaction was only paper transaction and

cannot accord acceptability of such make belief transactions. The Ld. CIT(A)

thereafter accepted the intent and findings of the Ld. AO and has upheld the

addition u/s. 68.

assessee has preferred the present appeal before us.

and has submitted that the transactions of the assessee in the alleged share was

a small portion in proportionate to total turnover of the assessee, where the

assessee has undertaken only 0.045% of the total volume in the alleged script.

It is also submitted that the assessee has gained a profit of Rs. 2,318/- and a loss

of Rs. 11/- only from the said transactions. Since the transactions are squared

up within one day and twelve days, the same cannot establish the satisfaction

of any motive to bring any cash credit in the books of assessee, within the scope

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora of section 68 of the Act. Further, the reasons recorded by the Ld. AO, that

assessee has claimed long term capital gain exemption u/s. 10(38) of the Act was

a mis-reading of the facts, as the assessee has never claimed any long-term

capital gain, whereas, the profit and loss of the assessee was always taken as

business income of the assessee. Accordingly, there was no motive of the

assessee to create a cash credit in the books of the assessee. It is also submitted

that the assessee was not provided with any cross-examination, whereas, the

assessee has specifically demanded for cross-examination before the Ld. CIT(A).

It was a clear violation of principle of natural justice in terms of law emerging

from the order of Hon’ble Supreme Court in the case of Andaman Timber

Industries Vs. CCE 2015 281 CTR 241 (SC). It is also argued by the Ld. AR that re-

opening itself was bad in law, the re-opening was done for the reason that

assessee has claimed some bogus long term capital gain, whereas, the

assessee’s transactions are in the nature of business and always offered to tax

under the head “business and profits”. The Ld. AR also referred to certain

contradictions in assessment order, wherein, the Ld. AO has made the order u/s.

143(3) r.w.s. 147, however, in the last para of the assessment, he mentioned

that assessed was done u/s. 144 r.w.s. 147 of the Act. With aforesaid

submissions, it was the prayer that additions made u/s. 68 in the present case

cannot sustain.

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora 6. The Ld. Senior DR representing the revenue on the other hand strongly

supported the orders of revenue authorities. It is submitted that the information

was from investigation wing and the transaction of accommodation entries are

admitted by the entry operators. Therefore, he requested to upheld the

impugned orders.

available in the record and case was relied upon by the parties. Admittedly in

present case, on the merits of undisputed facts itself, we find that the assessee

is a trader of a stock, who had executed 4334 trades during the year and have a

turnover of Rs. 242.96 Crores (both sides combined). Such facts are never denied

by both the authorities below. Further, the disputed transaction on account of

which addition u/s. 68 was made, the assessee has completed the said

transaction within one day and twelve days and accordingly, the funds invested

by assessee are bring back in his books of accounts through proper banking

channel within the aforesaid period. Further, the assessee had earned a meager

profit of Rs. 2,318/- and loss of Rs. 11/- only from aforesaid transactions. These

transactions are a very minimal part of the total turnover of the assessee, which

is computed at 0.045% of the total volume of the assessee’s business. From such

factual details, which are not disputed, we find that the motive behind the cash

credits to bought it in the books of accounts is absent in the present case.

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora Therefore, the provision of section 68 invoked in the present case are mis-

conceived. Further, once the transaction is squared-up, the assessee cannot be

benefitted by such entries in any way. In view of such facts and circumstances,

we do not see any reason for which an addition u/s. 68 of the Act would be

required. We, thus, find no substance in the decision of Ld. AO, as well as Ld.

CIT(A) to make the addition u/s. 68 or to sustain the same. We, therefore, are of

the considered opinion that the addition u/s. 68 in the present case does not

hold the ground to remain tenable. We, therefore, set aside the order of Ld.

CIT(A) and direct the Ld. AO to delete the same.

r.w.s. 147 of the Act dated 20.12.2019, the substantive addition has been

vacated. Therefore, the other contentions raised by the assessee in present

appeal are rendered as academic, so no adjudication.

Order pronounced in the open court on 30-06-2026.

Sd/- Sd/- (SAKTIJIT DEY) (ARUN KHODPIA) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated : 30-06-2026. Soumili Das, PS 10

ITA No. 2593/Mum/2026; Milind Jaswantrai Vora

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai