RONAK ASHVIN SANGHAVI,MUMBAI vs. INCOME TAX OFFICER WARD 19(3)(1), PIRAMAL CHAMBER , MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

CIT(A)/(ADDL/JCIT(A), Thiruvanantpuram) dated 17.12.2025 for Assessment

Year (AY) 2013-14. The assessee has raised following grounds of appeal:

“1. The order dated 17/12/2025 bearing No. ITBA/NFAC/S/250/2025- 26/1083790642[1] by the CIT[A], National Faceless Appeal Centre, Delhi is arbitrary, against natural justice, unlawful, against the provisions of Income Tax Act, 1961 and therefore liable to be quashed.

A.Y. 2013-14 on 22.07.2013 declaring income of Rs. 14,90,440/-. Initially, the

assessment was completed under section 143(1). Subsequently, the case was

reopened on the basis of information that as per information in ITD data system

based on investigations carried out by Kolkata Investigation Wing, which

revealed that a number of persons availed bogus Long Term Capital Gain, on

payment of commission through penny stock company. The assessee is one of

the persons who is beneficiary of such entry of Long-Term Capital Gain (LTCG).

The assessee has shown Long Term Capital Gain on sale of script of GFL Finance

India. On the basis of such information the case of assessee was reopened under

section 147. Notice under section 148 dated 15.09.2016 was served on the

assessee. During re-assessment the assessing officer (AO) on perusal of

computation of income noted that the assessee has shown LTCG of Rs.

12,25,549/- on sale of shares of GFL Finance India. The assessee purchased

13818 shares on 07.12.2011 at Rs. 2,14,732/- and sold these shares from

23.01.2013 to 28.01.2013 on total sale value of Rs. 14,43,569/-. The shares

were purchased at a very low price and sold at a high price. The AO in para-17 of his order recorded that statement of assessee was recorded on 19.12.2017.

The AO during assessment by referring modus operandi of penny stock scrip

issued show cause notice to the assessee as to why sale consideration received

on sale of such share should not be treated as unexplained cash credit under

section 68. The AO recorded that assessee filed reply and it was examined. The

assessee also requested for cross-examination of parties on whose statement his

case was reopened. The request of assessee was rejected on the ground that

parties who was made statement is located in Kolkata. The AO treated the

entire sale consideration of Rs. 14,43,569/- as unexplained credit under section

assessment order dated 28.12.2017.

before ld. CIT(A). Before ld. CIT(A), the assessee challenged the validity of

addition under section 68 & 69C. The ld. CIT(A) confirmed the action of AO. The

ld. CIT(A) confirmed the action of AO on both the additions. The ld CIT(A) has

not recorded the specific submission of assessee. However, theprayer of

assessee to examine the genuineness of document was rejected on the ground

that assessee cannot dispute the fact that shares of the company which the

assessee had dealt were insignificant in value prior to their trading. The assessee

has not discharged initial onus. The assessee cannot be allowed to say that his

claim has to be examined based on document that is bank details and purchase documents, details of D-Mat Account. Further aggrieved, the assessee has filed

appeal before Tribunal.

the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for

the Revenue. The ld. AR of the assessee submits that assessee purchased share

of GFL Finance Ltd, on public platform that is through Bombay Stock Exchange

(BSE). recognised stock exchange. The assessee purchased share through

registered broker namely Trustline Securities Ltd., who is member of BSE and

registered with Security and Exchange Board of India (SEBI). The shares were

credited to D-Mat Account. Payments were made to account payee cheque. The

shares were sold through registered broker of BSE. Securities Transaction Tax

(STT) was paid. During assessment the assessee furnished complete details of

purchase, payment of purchase consideration, details of sale, sale consideration

was received in bank, STT was paid. The assessee discharged his primary onus

in furnishing complete details. The assessee also requested for cross-examination

of the persons on whose statement, the Investigation Wing formed their opinion

about penny stock. The cross-examination was not allowed. Neither the name of

assessee nor his broker was identified by AO. No material is brought on record to

show that either the assessee or his broker was involved in price rigging of

shares of GFL Financial India. The entire transactions of assessee is genuine.

Once the assessee discharged his primary onus. The onus shifts on the revenue

to prove it otherwise. The AO made addition of 3.00% of commission payment.

There is no evidence of unexplained commission, rather the assessee has

purchased and sold the share through SEBI registered broker, who is member of

BSE. The addition is without any basis. Similar addition was deleted by Mumbai

Tribunal in Mukesh B Shah Vs ITO in ITA No. 2052/Mum/2025. The addition

under section 68 & 69C is to deleted.

authorities. The ld. Sr. DR for the Revenue submits that assessee is beneficiary of

penny stock. The assessee is not regular investor. The assessee indulged in sold

transaction. The AO was having sufficient material before him for making

addition of unexplained credit which was based on the information with AO. The

appeal of the assessee may be dismissed.

through the orders of lower authorities carefully. We have also deliberated on

various documentary evidence filed by the assessee which included 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 also deliberated on

the case law relied ld. AR of the assessee. 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 GFL Financial India as unexplained taxable

income under section 68. The AO also added 3.00% 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.The assessee also requested for cross

examination of persons, on the basis of whom the AO inferred adverse view. 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. 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.

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

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. In a recent decision 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. Therefore, 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.

14,43,569/-. 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.

Order was pronounced in the open Court on 04/06/2026.

/- S/- /- Sd/- Sd/- MAKARAND VASANT MAHADEOKAR PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 04/06/2026 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file.

By Order

Assistant Registrar / DDO ITAT, Mumbai