CHETAN MANEK,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX, RANGE 25(2), BANDRA, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.4006/MUM/2025 (Assessment Year:2014-2015) Chetan Ramji Manek, Flat No. B/1103, Poonam Baug, Nariman Road, Vile Parle (E), Mumbai-400057 [PAN:AACPM3398K] …………. Appellant Assistant Commissioner of Income Tax, Vs Range-25(2), Mumbai …………. Respondent Appearance For the Appellant/Assessee : Shri Ronak Doshi & Shri Shrey Agarwal For the Respondent/Department : Shri Virabhadra Mahajan Date Conclusion of hearing : 09.04.2026 Pronouncement of order : 05.06.2026 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the Order, dated 11/04/2025, passed by National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 22/12/2017, passed under Section 143(3)read with Section 147 of the Act [hereinafter referred to as ‘the Act’],for the Assessment Year 2014-2015.

”GROUND NO. I: REASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the re-assessment proceeding under section 147 of the Act initiated by the AO.

ITA No.4006/Mum/2025 Assessment Year 2014-2015

ITA No.4006/Mum/2025 Assessment Year 2014-2015 2. The Appellant prays that consequent to the above grounds, the AO be directed to delete interest under section234A and 234B of the Act. 3. The relevant facts in brief are that the Assessee, a resident individual, filed return of income for the Assessment Year 2014-2015 on 28/11/2014 declaring total income of INR.26,61,080/-. The Assessing Officer received information that the Assessee had transacted in the penny stock script and had earned exempt capital gains from the same. As per the information provided in the ITD System, Assessee had sold shares and First Financial Services Ltd. for an aggregate consideration of INR.2,91,85,652/- during the relevant previous year and had claimed Long Term Capital Gains exemption under Section 10(38) of the Act. The Assessing Officer was of the view that the transactions in the penny stock script were undertaken with the intention to reduce the tax liability and therefore, reassessment proceedings under Section 147 of the Act were initiated by issuing of notice, dated 14/09/2016, under Section 148 of the Act. In response to the aforesaid notice, the Assessee filed reply on 09/02/2017 and requested for reasons recorded for reopening assessment. The Assessing Officer furnished the same to the Assessee. The Assessee did not file any objections and participated in the reassessment proceedings. The Assessing Officer asked the Assessee to furnish the details of purchase/trade transactions in the penny stock script of First Financial Services Ltd. In response the Assessee explained that the Assessee had applied of 75,000 equity shares of First Financial Services Ltd. having face value of INR.10/- each at a premium rate of INR.10/- by way of preferential allotment. The Assessee paid purchase consideration of INR.15,00,000/- on 12/03/2012 through an account payee cheque drawn from his savings bank account maintained with Indian Bank. In support of the Assessee filed copy of relevant Bank Statement, Letter of Allotment, dated 15/03/2012, issued by First Financial Services Ltd alongwith details of source of investment. The shares allotted to the Assessee by way of preferential allotment were credited to the DEMAT Account of the Assessee maintained by the Assessee with Participant (i.e. Samurai

ITA No.4006/Mum/2025 Assessment Year 2014-2015 Depository Securities Pvt. Ltd.) on 13/06/2012. In support of the Assessee also filed Holding Statement for the period commencing from 01/04/2009 and ending on 31/12/2014 to demonstrate that the Assessee had an active DEMAT Account and was a regular investor in securities. The aforesaid shares allotted to the Assessee were held for the lock-in-period of one year as per Securities and Exchange Board of India (SEBI) Regulations which ended on 29/04/2013. The Assessee held the shares in DEMAT Account for a period of more than one years and sold them on the floor of Bombay Stock Exchange (BSE), through SEBI registered broker (i.e. Samurai Securities Pvt. Ltd. and GSB Capital Markets Ltd.) on various dates in the month of June, July, August and September of 2013. In support of the Assessee filed contract notes/bills of sale of shares issued by the brokers for sale of shares, and affected through DEMAT Account. The Assessee received sale consideration into his bank account. It is the case of the Assessee that the shares sold were held for more than one year, the Assessee was entitled to claim benefit of exemption under Section 10(38) of the Act. It was contended on behalf of the Assessee that the purchase and sale transactions were genuine. The Assessee has been regularly investing since 2007. The decision to acquire shares of First Financial Services Ltd. was determined by available information and market expectations. The Assessee also placed before the Assessing Officer Order, dated 06/09/2017, passed by SEBI revoking interim order passed against preferential allotees (including the Assessee) to support the contention that the Assessee was not involved in price manipulation. However, the Assessing Officer was not convinced with the details/documents furnished by the Assessee. The Assessing Officer noted that the Assessee had made an investment in company which was investigated by the Investigation Wing of the Income Tax Department as well as by SEBI. As per the Report of the Investigation Wing the First Financial Services Ltd. was one of the 84 companies used by the entry operators for providing bogus Long Term Capital Gains entries to the beneficiaries. The Assessing Officer also recorded

ITA No.4006/Mum/2025 Assessment Year 2014-2015 the statement of the Assessee under Section 131 of the Act on 05/12/2017 wherein the Assesse stated that the Assessee had no idea of the financial of the company and had not done any analysis of financials. Since there were reports of Investigation Wing and SEBI, the onus on the Assessee to prove the genuineness of the transaction resulting in exempt capital gains. According to the Assessing Officer the Assessee had failed to discharge the aforesaid onus and therefore, the Assessing Officer proceeded to make addition of INR.2,19,84,612/- under Section 68 of the Act treating sale consideration received by the Assessee from sale of shares of First Financial Services Ltd. as Unexplained Cash Credit. Further, invoking the provisions of Section 69C of the Act the Assessing Officer also made addition of INR.10,99,230/- (being 5% of the aforesaid amount of INR.2,19,84,612/-) as unexplained expenditure incurred by the Assessee for obtaining bogus accommodation entry of LTCG. Thus, vide Assessment Order, dated 22/12/2017, passed under Section 143(3) read with Section 147 of the Act the Assessing Officer assessed the income of the Assessee as INR.2,57,44,920/-, as against returned income of INR.26,61,080/-.

ITA No.4006/Mum/2025 Assessment Year 2014-2015 Financial Services Ltd. It was also contended that the additions made by the Assessing Officer cannot be sustained since the Assessing Officer failed to provide copy of the statement/documentary evidences (including Investigation Report) on which reliance was placed by the Assessing Officer while framing assessment on the Assessee. It was contended that the additions made by the Assessing Officer were based on the statement recorded by third party without carrying out any independent inquiry. Further, no corroborative documents evidence was brought on record by the Assessing Officer to show any infirmity in the documents/details furnished by the Assessee to establish genuineness of the transaction. The Assessee also contended that opportunity of cross-examination was not granted to the Assessee and the documentary evidence furnished by the Assessee clearly showed that the transaction was genuine. The aforesaid submissions did not find any favour with the Learned CIT(A) and the appeal preferred by the Assessee was dismissed vide Order, dated 11/04/2025, impugned by way of the present appeal on the grounds reproduced in paragraph 2 above. The grounds raised by the Assessee are taken up hereinafter in seriatim.

Ground No. 1 5. Ground No. 1 raised by the Assessee is dismissed as not pressed in view of the statement made during the course of hearing by the Learned Authorised Representative for the Assessee under instructions.

Ground No. 2 6. Ground No. 2 raised by the Assessee is directed against the addition of INR.2,19,84,612/- made by under Section 68 of the Act which was confirmed by the Learned CIT(A).

6.1. We have heard the rival submission and have perused the material on record on this issue. The Assessing Officer and the CIT(A) have doubted the genuineness of purchase/sale transactions undertaken by

ITA No.4006/Mum/2025 Assessment Year 2014-2015 the Assessee in the shares of First Financial Services Limited. On perusal of the Assessment Order we find that the Assessing Officer has relied upon the report of the Investigation Wing and SEBI. During the course of hearing the Authorised Representative for the Assessee had placed on record the decision of Mumbai Bench of the Tribunal in the case of the brother of the Assessee passed in DCIT-19(1), Mumbai Vs Bharat Ramji Bhai Manek [ITA No. 4339/Mum/2025, Assessment Year 2014-2015, Order Dated 10/02/2026]. On perusal of the same we find that in identical facts and circumstances addition of INR.2,19,84,437/- made under Section 68 of the Act by the Assessing Officer bringing to sale consideration received on sale of share of First Financial Services Limited as unexplained cash credit was deleted by the First Appellate Authority. The Tribunal dismissed the Appeal preferred by the Revenue holding as under:

“10. We have carefully considered the rival submissions, perused the material available on record, and examined the judicial precedents relied upon by both sides. It is an undisputed fact that the assessee purchased the shares of FFSL through banking channels, the shares were duly credited to his demat account, and the subsequent sale transactions were carried out through a recognized stock exchange via registered brokers. The corresponding sale proceeds were received through banking channels, and all primary documentary evidences such as contract notes, demat statements, bank statements, and broker ledger accounts were duly furnished by the assessee and have not been disproved or discredited by the Ld. AO. We further note that although SEBI had initially passed interim orders alleging price manipulation in the said scrip, upon completion of a detailed investigation, SEBI categorically held that the assessee was not involved in any price-rigging activity and revoked the earlier directions insofar as the assessee was concerned. The revenue has failed to bring on record any specific, direct, or cogent material to establish the assessee’s involvement in the alleged accommodation entry scheme or to demonstrate a live nexus between the assessee and the so-called entry operators. Mere reliance on general investigation reports, statements of third parties, or abnormal price movement of the scrip, without any direct evidence linking the assessee to manipulation, cannot by itself justify the addition. The Ld. CIT(A) has passed a reasoned and well-considered order after examining the entire factual matrix, documentary evidence, and the outcome of SEBI proceedings. The findings recorded by the Ld. CIT(A) have also been consistently upheld by various coordinate benches of the

ITA No.4006/Mum/2025 Assessment Year 2014-2015 Tribunal and by the Hon’ble Calcutta High Court in cases involving the very same scrip, wherein it has been held that in the absence of concrete evidence establishing the assessee’s participation in price manipulation, the exemption claimed on long-term capital gains cannot be denied merely on suspicion or on the basis of surrounding circumstances. In view of the above facts and circumstances, and respectfully following the binding judicial precedents and order of the coordinate bench in Manish Devendra Kumar Shah (supra) we find no infirmity in the order passed by the Ld. CIT(A) in deleting the addition of Rs.2,19,84,437/-. Accordingly, all the grounds raised by the revenue are dismissed. 11. In the result, the appeal of the revenue bearing ITA No. 4339/Mum/2025 is dismissed” 6.2. The Revenue has failed to bring on record and material to distinguish the above decision of the Tribunal either in facts or in law. The Adjudication Order No. Order/GR/BM/2022-23/19920-20003, dated 30/09/2022, passed by the Adjudicating Officer, SEBI in the case of First Financial Services Limited does not contain any reference to the Assessee. On the Other hand, the Order, dated 06/09/2017, on which reliance has been placed on behalf of the Assessee clearly states that Ad-Interim Ex-Parte Order, dated 19/12/2014 and 11/08/2015, we passed restraining First Financial Services, its promoters and preferential allottees (including the Assessee in the present case) from accessing the securities market and buying/selling/dealing in securities. Subsequently, on completion of investigation an Investigation Report was prepared. In the said report no findings were reported in respect of 91 entities/parties (including the Assessee in the present case) and therefore, the aforesaid interim order was revoked. The aforesaid Order, dated 06/09/2017, was placed by the Assessee before the Assessing Officer during the assessment proceedings. Therefore, the onus was on the Revenue to establish that the Assessee was involved in price manipulation. As regards, the report of the investigation wing is concerned, the same did not list the brokers engaged by the Assessee for undertaking the transaction. In addition we note that from the income tax returns and computation of income filed by the Assessee it is clear that the Assessee had been regularly investing since 2007.

ITA No.4006/Mum/2025 Assessment Year 2014-2015 Even during the relevant previous year, the Assessee has disclosed short term capital loss as well as exempt long term capital gains. The holding statement and contract notes support the contention of the Assessee that the Assessee has been investing regularly. The Assessee had also explained the reason for subscribing for preferential allotment. In the submission filed before the Assessing Officer and the CIT(A), the Assessee had contended that this was the second round of preferential allotment. In the first round, the shares were allotted at value of INR.21 per share. The Assessee had information that the promoters of listed company had shown interest in the company by subscribing shares in the first round of preferential allotment. None of the aforesaid contentions have been denied by the Assessing Officer and the CIT(A). A perusal of the impugned order shows that the Learned CIT(A) has placed reliance upon a number of judicial precedents pertaining to loan/advance transactions or transactions involving subscription of shares at a very high premium which have no application to the facts of the present case.

6.3. In view of the above, we find no reason to depart from the view taken by the Co-ordinate Bench of the Tribunal in the case of the brother of the Assessee in identical facts and circumstances. Our view also draws support from the following decision of the Co-ordinate Benches of the Tribunal cited by the Authorised Representative for the Assessee:

(a) ITO Vs Bharti Bharat Manek [ITA No.2279/Mum/2024, Dated 06/02/2025]

(b) Hasmukhbhai B Patel (HUF) vs ITO [ITA No. 699,700,701,702 and 703/Mum/2023, Assessment Years 2011-2012 to 2015-2016, Common Order dated 28/08/2023]

6.4. Accordingly, we delete the addition of INR.2,19,84,612/- made by the Assessing Officer under Section 68 of the Act. Thus, Ground No. 2

ITA No.4006/Mum/2025 Assessment Year 2014-2015 raised by the Assessee is allowed.

Ground No. 3 7. Ground No. 3 raised by the Assessee is directed against the addition of unexplained expenditure of INR.10,99,230/- (being 5% of the aforesaid amount of INR.2,19,84,612/-) made by the Assessing Officer under Section 69C of the Act alleging that the Assessee has obtaining bogus accommodation entry INR.2,19,84,612/-. Since we have not accepted the contention of the Revenue that the Assessee has obtained bogus accommodation entry, the aforesaid addition made under Section 69C of the Act cannot be sustained and is, therefore, deleted. Thus, Ground No. 3 raised by the Assessee is allowed.

Ground No. 4 8. Ground No. 4 raised by the Assessee pertaining to computation of interest under Section 234A/B of the Act is disposed off as being consequential in nature.

Order pronounced on 05.06.2026.

Sd/- Sd/- (Vikram Singh Yadav) (Rahul Chaudhary) Accountant Member Judicial Member म ुंबई Mumbai; दिन ुंकDated : 05.06.2026

ITA No.4006/Mum/2025 Assessment Year 2014-2015

आिेशकीप्रदिदिदिअग्रेदिि/Copy of the Order forwarded to : 1. अिीि र्थी/ The Appellant 2. प्रत्यर्थी/ The Respondent. 3. आयकरआय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT दिभ गीयप्रदिदनदध ,आयकरअिीिीयअदधकरण ,म ुंबई/ DR, ITAT, 5. Mumbai ग र्डफ ईि / Guard file. 6.

आिेश न स र/ BY ORDER, सत्य दििप्रदि //True Copy//

उि/सह यकिुंजीक र /(Dy./Asstt.Registrar) आयकरअिीिीयअदधकरण, म ुंबई / ITAT, Mumbai