ACIT CC 7(3), MUMBAI vs. GEMSTONE INVESTMENTS LIMITED, MUMBAI

This appeal is filed by the Revenue against the order dated 31.10.2025 passed by the Ld. Commissioner of Income Tax (Appeals), Mumbai [hereinafter referred to as "Ld. CIT(A)"] for A.Y. 2018-19 arising out of the assessment proceedings framed u/s 147 of the Income Tax Act, 1961.

The Revenue has raised grounds challenging the action of the Ld. CIT(A) in deleting the addition of ₹5,93,90,940/- made by the Assessing Officer under section 69 of the Income-tax Act on account of alleged

Briefly stated, the assessee filed its return of income declaring total income of ₹62,68,770/-. The assessment was reopened on the basis of information received through the Insight Portal and BSE alleging that the assessee had traded in the shares of Stampede Capital Ltd. The Assessing Officer observed that the information reflected purchase of 27,58,000 shares aggregating to ₹5,93,90,940/- . Since the assessee denied having entered into such transactions and failed, according to the Assessing Officer, to explain the source of the alleged investment, the Assessing Officer treated the entire purchase value of ₹5,93,90,940/- as unexplained investment under section 69 of the Act.

Before the Ld. CIT(A), the assessee submitted that it is an NBFC engaged in financing activities and had not carried out any trading in the impugned scrip. It was further explained that the alleged transactions had occurred because the broker had erroneously punched the assessee's client code while executing trades in its proprietary account. The assessee produced the communication received from the broker explaining the client code error and contended that no payment was ever made by the assessee, no shares were reflected in its books of account or financial statements and no material had been brought on record by the Assessing Officer to establish that the assessee had actually invested any amount in the impugned shares.

The Ld. DR relied upon the assessment order and submitted that the information received from BSE clearly reflected purchase transactions in the assessee's trading code and therefore the Assessing Officer was justified in making the addition.

The Ld. AR submitted that the Assessing Officer proceeded merely on third-party information received from BSE without conducting any 2

We have heard the rival submissions and perused the material available on record. The sole basis of the addition is the information received from BSE indicating that transactions were executed against the assessee's client code. However, the assessee consistently denied having undertaken any such trading and explained that the transactions had occurred because of erroneous punching of the client code by the broker. The assessee also placed on record the confirmation of the broker supporting its explanation.

We find that the Assessing Officer has not brought any independent material on record to establish that the assessee had actually invested ₹5,93,90,940/- in the purchase of the impugned shares. No evidence has been brought to show movement of funds from the assessee's bank account, no contract notes evidencing actual purchase by the assessee have been confronted, nor has any material been produced to demonstrate that the shares were ever reflected as the assessee's asset or that any corresponding liability or consideration had flown from the assessee. The addition has been made merely on the basis of information generated by the exchange.

The provisions of section 69 can be invoked only where the Assessing Officer establishes that the assessee has in fact made an investment which is not recorded in the books of account and the assessee fails to satisfactorily explain the nature and source thereof. The primary burden to establish the existence of such investment lies upon the Revenue. In 3

The Ld. CIT(A), after examining the documentary evidence and the explanation furnished by the assessee, has recorded a categorical finding that the Assessing Officer failed to establish that the assessee had made the alleged investment and accordingly deleted the addition. The Revenue has not brought any material before us to controvert these factual findings or to demonstrate that the conclusions drawn by the Ld. CIT(A) are factually or legally erroneous.

In view of the foregoing discussion, we find no infirmity in the well- reasoned order of the Ld. CIT(A) deleting the addition of ₹5,93,90,940/- made under section 69 of the Act. Accordingly, the grounds raised by the Revenue are dismissed.

In the result, the appeal of the Revenue is dismissed.