MS. NEETI BHANDARI ,MUMBAI vs. INCOME TAX OFFICER WARD 53(2)(4), MUMBAI

This appeal is directed against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, dated 25.02.2025 for A.Y. 2014-15 arising from the assessment order passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961.

Brief facts of the case are that the assessee filed return of income declaring total income of Rs.7,81,970/-. Subsequently, assessment was reopened on the basis of information received from Investigation Wing, Kolkata alleging that the assessee was beneficiary of accommodation entries in the form of bogus long term capital gain through penny stock scrips namely Sunrise Asian and Kailash Auto. The Assessing Officer observed that assessee had shown exempt long term capital gain of Rs.77,55,330/- on sale of shares of the aforesaid companies and after relying upon investigation report, SEBI findings and general modus operandi relating to penny stock transactions, treated the sale proceeds as unexplained cash credit u/s 68 of the Act and further estimated commission expenditure @3% amounting to Rs.2,32,659/- u/s 69C of the Act. The assessment order and findings of the Assessing Officer are placed on record.

The Ld. CIT(A) upheld the action of the Assessing Officer mainly relying upon the findings of Investigation Wing and the decision of the coordinate bench in the case of Zeeshan Azizmohmed Shaikh in ITA No.1108/Mum/2018 relating to scrip of Kailash Auto. Aggrieved, the assessee is in appeal before us.

The Ld. AR further submitted that neither the Assessing Officer nor the Ld. CIT(A) has brought any material on record to controvert the documentary evidences furnished by the assessee. It was argued that no statement of any person implicating the assessee was confronted to the assessee and no opportunity of cross examination was granted. The additions have been made merely on the basis of general investigation report and suspicion. The Ld. AR relied upon the decision of the coordinate bench in the case of Jayshree Haresh Shah in ITA No.4206/Mum/2025 dated 05.03.2026 in respect of transaction in the scrip of Sunrise Asian and decision in the case of Rajesh Sarda in ITA No.44/Nag/2022 dated 24.02.2026 relating to Kailash Auto, wherein on similar facts additions were deleted.

Per contra, the Ld. Departmental Representative strongly relied upon the orders of the lower authorities. The Ld. DR submitted that both the scrips namely Sunrise Asian and Kailash Auto were identified as penny stock companies by Investigation Wing and SEBI. The price movement of these scrips was completely divorced from financial fundamentals and therefore the authorities below were justified in 3

We have heard the rival submissions and perused the material available on record. We have also gone through the assessment order, appellate order and documentary evidences referred during the course of hearing. The Assessing Officer has mainly proceeded on the basis of investigation report of Kolkata Investigation Wing, SEBI findings and general modus operandi relating to penny stock transactions. There is no dispute that both the scrips namely Sunrise Asian and Kailash Auto were subject matter of investigation by various agencies and abnormal price movement was noticed therein. However, the addition in the hands of the assessee has to be examined on the basis ofevidences brought on record against the assessee.

In the present case, the assessee has furnished documentary evidences in support of purchase and sale transactions. In respect of Sunrise Asian, the assessee furnished share certificate, demat statements, debit notes and cheque evidencing payment through banking channel. Similarly, in respect of Kailash Auto, cheque details, bank statements and demat statements evidencing purchase and sale transactions were furnished. The sale transactions were admittedly routed through recognised stock exchange and consideration was received through banking channel.

We find that the Assessing Officer has not brought any direct material on record to establish that the assessee had paid any unaccounted cash for obtaining accommodation entries. No evidence has been brought on record to show cash trail emanating from the

We also note that the coordinate bench in the case of Jayshree Haresh Shah (supra) in respect of Sunrise Asian and in the case of Rajesh Sarda (supra) in respect of Kailash Auto has deleted similar additions after considering documentary evidences relating to purchase and sale of shares through banking channel and demat account.

It is settled proposition of law that suspicion however strong cannot take place of evidence. Once the assessee has furnished primary evidences relating to purchase and sale of shares, demat account and banking transactions, the burden shifts upon the Revenue to dislodge the same with cogent material. In the present case, except relying upon general investigation report and abnormal rise in price of scrips, no independent enquiry has been conducted by the Assessing Officer to establish that the transactions undertaken by the assessee were sham or fictitious.

In our considered view, merely because the scrips were allegedly manipulated and investigated by SEBI or Investigation Wing, the claim of the assessee cannot be rejected in absence of cogent material demonstrating involvement of the assessee in price rigging or accommodation entry mechanism. The documentary evidences furnished by the assessee have not been found to be false or fabricated.

Since the addition u/s 68 has been deleted, the consequential addition of Rs.2,32,659/- made u/s 69C towards alleged commission expenditure also does not survive and the same is directed to be deleted.

As regards the legal ground challenging reopening, since the appeal of the assessee has been allowed on merits, the said ground is rendered academic and therefore the same is not adjudicated.

In the result, the appeal of the assessee is allowed.