INCOME TAX OFFICER-42(1)(5), MUMBAI, MUMBAI vs. VINOD PREMSUKH KHETAN, MUMBAI

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ITA 6807/MUM/2025Status: DisposedITAT Mumbai04 June 2026AY 2018-199 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 upheld the CIT(A)'s decision to delete the additions made by the AO. It found that the AO's additions were based on general investigation reports without direct evidence implicating the assessee, and the assessee had offered the nominal profits from these transactions as business income.

What were the facts?

The Assessing Officer (AO) made additions to the assessee's income under Sections 68 and 69C, alleging that the assessee had engaged in accommodation entries through penny stock transactions. The assessee claimed these were genuine share trading activities with nominal profits offered as business income.

What were the issues?

Whether the transactions in penny stocks constituted genuine share trading or accommodation entries, and if the additions made by the AO were justified without direct evidence.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C,Section 147,Section 144,Section 144B,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE SHRI PAWAN SINGH & HON’BLE SHRI GIRISH AGRAWAL

For Respondent: Shri Ujjwal Kumar, Sr. DR
Pronounced: 04.06.2026

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: SMC BEFORE HON’BLE SHRI PAWAN SINGH, JUDICIAL MEMBER AND HON’BLE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA 6807/MUM/2025 निर्धारणवर्ा/Assmt. Year:2018-19) Permanent Account Number: AHNPK7226L VINOD PREMSUKH INCOME TAX OFFICER- KHETAN 42(1)(5), MUMBAI 203/5 ANJU APARTMENT, ROOM NO. 745, 7TH FLOOR, KULUPWADI BORIVALI KAUTILYA BHAVAN, BKC, Vs. EAST, MUMBAI, (EAST), MUMBAI MAHARASHTRA 400051 MAHARASHTRA 400066 (अपीलार्थीAppellant) (प्रत्यर्थीRespondent)

निर्धाऩितीद्वधिध/Assessee represented by: Shri Gaurav Bansal, CA िधजस्वaद्वधिध/Revenue represented by: Shri Ujjwal Kumar, Sr. DR

सुिवधईकीतधिीख/Date of conclusion of hearing: 09.03.2026 घोषणधकीतधिीख/Date of pronouncement: 04.06.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal is filed by the assesseeis against the order of Ld. CIT(A)/National Faceless Appeal Centre (NFAC), Delhi vide DIN: ITBA/NFAC/S/250/2025-26/1079791080(1) dated 20.08.2025 passed against the assessment order bythe Assessment Unit of the Income-tax Department u/s 147 r.w.s 144 read with section 144B of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 02.03.2024for the Assessment Year 2018-19.

2.

Assessee has raised the following grounds of appeal:

i. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 35,70,861/- made u/s 68 of I. T. Act and Rs. 1,07,125/- made u/s 69C of the Act, ignoring the fact that during the assessment proceedings it has been established by the AO that alleged transaction in the penny stock (M/s Sunstar Reality Development Ltd, Appu Marketing and Manufacturing Ltd/Ejecta Marketing Ltd. and Goenka Business and Finance Ltd.) is nothing but the accommodation entries in the garb of non-genuine Long Term Capital Gain (exempt income) and fictitious STCL. ii. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in ignoring the fact that penny stocks have been utilized as a colourable device to deprive revenue of its legitimate demand. iii. On the facts and in the circumstances of the case, the Hon'ble ITAT is requested to entertain this appeal, though, the tax effect is below the monetary limit prescribed in the CBDT Circular No.5/2024 Dt.15.03.2024 but the case falls within the exceptions laid down in clause (h) of Para 3.1 of the Board's Circular No.5/2024 Dt.15.03.2024. 3. Brief facts of the case are that assessee filed his return of income on 07.08.2018, reporting total income at Rs. 3,38,500/-. Case of the assessee was taken up for reassessment proceedings by invoking provisions of section 148A based on information flagged on Insight portal of the department. According to the ld. AO, based on the available information, assessee is one of the beneficiaries of accommodation entries by transacting into the scrips of Sunstar Reality Developers Limited (SRDL) and Ejecta Marketing Limited (EML), earlier known as Appu Marketing and Manufacturing Limited which are classified as penny stocks by the Revenue. Ld. AO alleged

that assessee has generated fictitious profits through equity trading in these scrips as these are penny stock entities allegedly used for providing accommodation entries to beneficiaries for introducing unaccounted money in the guise of capital gains or trading profits. He placed reliance on certain statements recorded during the investigation proceedings conducted by the department to draw the adverse conclusion.

3.1. Ld. AO made the addition of entire sale proceeds in respect of transaction of sale undertaken by the assessee during the year in the aforesaid two scrips by applying the provisions of section 68 read with section 115BBE. The addition made is of Rs. 35,70,861/- (Rs. 11,73,750/- + Rs. 23,97,111/-). He also made an addition under section 69C on account of commission at the rate of 3% of the sales consideration by presuming that such entries for which assessee took the benefit involved payment of commission to the entry operators and treated the same as unexplained expenditure. The amount added on this account is Rs. 1,07,125/-.

4.

In the return filed by the assessee, the income reported by him includes the following:

i. Share trading income of Rs. 2,86,200/-; ii. Brokerage income of Rs. 81,520/-; iii. Professional income of Rs. 40,649/-; iv. Interest income of Rs. 5,176/-;

4.1. According to the assessee, he is regularly engaged in share trading activity for past several years and has been reporting his income on share trading as business income. For this, he referred to details of various listed shares purchased and sold by him in the preceding three years which were also furnished before the Assessing Officer to demonstrate that his engagement in the share trading activity. The said list is extracted below for ready reference:

4.2. In the year under consideration, out of several scrips in which the assessee dealt with, ld. AO has alleged for two scrips which are penny stocks according to him and therefore, the transactions undertaken by the assessee in the two scrips are in the nature of unexplained credits, liable to tax under the provisions of the Act. The details of trading transaction undertaken by the assessee in the two alleged scrips are tabulated below:

4.3. According to the assessee, these share trading transactions were executed through registered brokers and the profit earned thereon was offered to tax under the head „business income‟. According to him, ld.

AO has relied on general investigation reports and statements of certain alleged entry operators even though there is nothing on record to demonstrate that such statements implicate the assessee in specific for which no opportunity was granted to cross-examine. Also, there is no evidence to show that assessee has paid cash for obtaining such entries. Assessee had furnished all the required documentary evidences in the course of assessment proceeding which includes broker ledger accounts, contract notes, copy of client ledger in the books of the broker, bank statements, none of which have been rejected by pointing out any deficiency or discrepancy to disapprove the transaction undertaken by assessee. These transactions have been undertaken in the normal course of business activity of the assessee for which the profit earned is a very small amount, offered to tax in the return so filed.

5.

In the first appeal before the ld. CIT(A), these submissions were reiterated. Ld. CIT(A) took cognizance of the same and gave relief to the assessee by deleting the additions so made against which revenue is in appeal before the Tribunal.Ld. CIT(A) while giving relief observed that addition has been made merely on the basis of general investigation reports relating to the alleged penny stock entities without bringing any direct evidences on record to show that assessee had introduced unaccounted money in the guise of impugned share transactions.He also took note of the fact that assessee had earned only a nominal trading profit of Rs. 1,73,000/- (Rs. 89,250/- from SRDL and Rs. 83,750/- from EML) which has been duly offered to tax as business income. Assessee held the said shares for very short period and profit earned by him is not extra ordinary.

6. Ld. Sr. DR placed reliance on the findings of ld. AO since the information flagged is part of broader investigation exercise undertaken by the department, and therefore addition made is justified.

7.

We heard both the parties and perused the material on record. We have also gone through the orders of the authorities below. We have taken note of the factual matrix and the deliberations at all stages captured in the above paragraphs. This is not a case of assessee claiming exemption under section 10(38). Assessee is engaged in share trading activity which is evidently demonstrated from large number of scrips in which he has dealt with, in preceding year as tabulated above. Assessee has offered to tax, the income earned by him on the trading activity of the two scrips, amongst various others, as business profits. Ld. CIT(A) has examined all the facts and records to come to a conclusion that the trading transaction undertaken by the assessee do not warrant any addition as made by the ld. AO.In the conspectus of the above stated factual matrix and the findings arrived at by the ld. CIT, we uphold the findings so arrived at, granting relief to the assessee. Grounds raised by the Revenue are dismissed.

8.

In the result, appeal filed by the Revenue isdismissed.

Order pronounced in the open court on 04.06.2026

Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Ankit, PS Mumbai Dated: 04.06.2026 Copy to:

INCOME TAX OFFICER-42(1)(5), MUMBAI ROOM NO. 745, 7TH FLOOR, 1 KAUTILYA BHAVAN, BKC, EAST, MUMBAI, MAHARASHTRA 400051

VINOD PREMSUKH KHETAN 203/5 ANJU APARTMENT, 2 KULUPWADI BORIVALI (EAST), MUMBAI MAHARASHTRA 400066 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE

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