HIREN DHIRAJLAL KUBADIA,DADAR WEST vs. INCOME TAX OFFICER WARD 22(1)(6), MUMBAI, PIRAMAL CHAMBER, LALBAUG

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ITA 401/MUM/2026Status: DisposedITAT Mumbai26 May 2026AY 2013-1410 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged the onus of proving the identity, capacity, and genuineness of the transactions related to the sale of shares. Relying on previous decisions concerning the same scrip, the Tribunal set aside the additions.

What were the facts?

The assessee challenged additions made by the Assessing Officer (AO) under Section 68 and Section 69C of the Income Tax Act, 1961. These additions pertained to long-term capital gains claimed as exempt and unexplained expenditure.

What were the issues?

Whether the long-term capital gains from the sale of shares were genuine and whether the expenditure was unexplained, warranting additions under Section 68 and Section 69C.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C,Section 10(38)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E” BENCH MUMBAI

For Appellant: Shri Satyaprakash Singh
For Respondent: Shri Hemanshu Joshi, SR DR
Hearing: 07.04.2026Pronounced: 26.05.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & HON’BLE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 401/Mum/2026 (Assessment Year: 2013-14)

Hiren Dhirajlal Kubadia Vs. Income Tax Officer 601, 6th Floor Sunshine Ward 22(1) (6), Mumbai Heights 243 P L Kale Guruji Income Tax Officer Marg Dadar West Bhawani Ward 22(1)(6), Shankar S.O. Piramal Chamber, Mumbai- 400028 Lalbaug, Mumbai - 400012 PAN/GIR No. AFBPK0173J (Applicant) (Respondent) Assessee by Shri Satyaprakash Singh Revenue by Shri Hemanshu Joshi, SR DR Date of Hearing 07.04.2026 Date of Pronouncement 26.05.2026 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the assessee challenging the impugned order dated 10.11.2023 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2013-14. The following grounds are reproduced below:

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“1. The order dated 10/11/2023 bearing No.ITBA/NFAC/S/250/2023-24/1057887786[1] passed by the Hon'ble CIT[A], NFAC, Delhi, is excessive, unreasonable, arbitrary, against the provisions of Income Tax Act, 1961 and therefore liable to be quashed. 2. On facts and circumstances of the case and in law, the Honourable C.I.T.(A) has erred in confirming the addition of Rs.89,27,174/-made by the Assessing Officer under section 68 of Income Tax Act, 1961 on account of Long- Term Capital Gain claimed as exempt u/s. 10(38) of Income Tax Act, 1961 by the Appellant. 3. On facts and circumstances of the case and in law, the Honourable C.I.T.(A) has erred in confirming the addition of Rs.2,67,815/- made by the Assessing Officer under section 69C of Income Tax Act, 1961 as unexplained expenditure. 4. The appellant craves to alter, add, delete, substitute, or modify and other grounds of appeal. ”

2.

At the very outset we noticed that there is delay of approximately 717 days in filing the appeal before us. Considering the entire factual position as explained before us, and also considering that the Department has not filed any rebuttal to the factual circumstances as explained by the assessee and further keeping in view the principles laid down by Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag & ... vs Mst. Katiji & Ors 1987 AIR 1353 (SC) wherein it has been held that where substantial justice is pitted against the technicalities of non-deliberate delay then in that eventuality substantial justice is to be preferred. In our view, the principle of advancing substantial justice is of prime importance, hence, considering the explanation put forth by the

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assessee by justifiably and properly explaining the delay which occurred in filing the appeal and considering the expression “sufficient cause” liberally we are inclined to condone the delay in filing the appeal before us. Consequently, the delay is condoned and the appeal is admitted to be heard on ground of merits.

3.

Ground Nos. 1 to 4 raised by the assessee are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in confirming the additions made under Section 68 and Section 69C of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

4.

We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that the additions in this case were made by the AO under Section 68 as well as Section 69C of the Act. On further analysis and review of the records, it was observed by the AO that the long-term capital gain of Rs. 76,82,012/- shown in the return, arising from the sale of shares of “Tuni Textile,” was a pre-arranged method employed by the assessee in connivance with operators to evade tax, and consequently, additions were made, which were upheld by the Ld. CIT(A) as well.

5.

At the very outset, the Ld. AR appearing on behalf of the assessee submitted that all the transactions carried out in respect of the said Tuni Textile were genuine and that the

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assessee had already discharged its burden by proving the identity of the creditors and the capacity of the creditors to advance the money.

6.

After analyzing the documents placed on record, we find that the assessee has furnished proof of the above three ingredients, i.e., to prove identity of the creditors, the assessee placed on record the certificate of incorporation of the said company dated 06.07.1987. Further, the assessee also furnished the Corporate Identification Number (CIN), i.e., L17120MH1987PLC043996, and the registered address of the company at 63/71, Dadi Sheth Agiary Lane, 3rd Floor, Kalbadevi, Mumbai. The assessee also demonstrated, through documents, that the company in question was listed on the Bombay Stock Exchange (BSE: 531411 / ISIN: INE560D01027 / Sector: Textile Industry). Moreover, company information such as history, quarterly results, share capital, and various e-forms filed by the company are available in the public domain (www.bseindia.com), (www.mca.gov.in), and on the company’s website.

7.

Moreover, in order to prove the creditworthiness of the said company, the assessee had submitted that the said company is a listed entity wherein the equity shares are listed on the Bombay Stock Exchange. When a person buys or sells shares on the stock exchange, he/she is in no position to know the person to whom/from whom he/she buys or sells shares on

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the exchange. Therefore, when the assessee sold shares of Tuni Textiles Mills Limited on the Bombay Stock Exchange, the market price of the shares was between Rs. 145.25 and Rs. 259.74. Therefore, being satisfied with the returns it was getting on this scrip, the assessee sold them on the stock exchange. The transactions of sale of shares were through his broker.

8.

In order to prove the genuineness of the transactions, the assessee had placed on record the following documents:

i) Contract notes issued by the broker for purchase and sale, which are system-generated and which clearly mention the following details – a)Details of the broker b) DP ID c) Client ID d) Contact number along with trade date, order no., order time, trade no. e) Scrip name f) Quantity of shares purchased and sold, rate at which purchased and sold, brokerage g) Amount of STT charged, Service Tax levied

ii) Bank statement showing the payment made for purchase of shares to the broker

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iii) Bank statement showing the sale consideration received from the broker

iv) Demat statement for FY 2010–11 reflecting credit of shares bought

v) Demat statement for FY 2011–12 reflecting split of shares

vi) Demat statement for FY 2012–13 reflecting sale of shares

vii) Balance sheet for various years reflecting the shares as investments

viii) Copy of Global report and broker's ledger for the FY 2010–11 as well as FY 2012–13

ix) Form 10DB reflecting that STT was suffered on purchase of shares in FY 2010–11

x) Form 10DB reflecting that STT was suffered on sale of shares for FY 2012–13

9.

After having considered the entire documents placed on record before the Revenue Authorities and before us, we found that the assessee had discharged the onus cast upon him by proving the identity of the creditors, the capacity of the creditors to advance the money, and the genuineness of the transactions.

10.

Moreover, the Coordinate Bench of the ITAT in ITA No. 1955/Mum/2022 (AY: 2013–14) and ITA No. 2141/Mum/2022

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(AY: 2013–14) had already held Tuni Textile to be a genuine company. Further, even in the case of the assessee’s HUF in ITA No. 3084/Mum/2023, titled Hiren D. Kubadia HUF vs. ITO, decided on 09.12.2024, the additions made in respect of shares sold of the same scrip, i.e., Tuni Textile Limited, were deleted by holding as under:

8.

We heard the parties and perused the record. We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income Tax Department, Kolkata in order to arrive at the conclusion that the long term capital gains reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation Wing, Kolkata is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of prices. The Ld. AR also submitted that the regulator of stock market SEBI has not conducted any enquiry against the assessee.

9.

We notice that the assessee has furnished reply to the notice issued by the AO and the AO could not find any adverse features from the said reply. Further, the AO also could not disprove the share transactions by bringing any material on record. We also notice that the assessee has -

(a) purchased and sold these shares by paying consideration through banking channels and through stock exchange platform;

(b) the shares were received and issued through the Demat account of the assessee.

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We notice that the assessee is a regular investor in shares. Further, the AO has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group which involved in the manipulation of prices of shares. We notice that the shares were purchase in an earlier year and the said purchase has not been suspected by the AO. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee.

10.

We noticed earlier that the AO did not establish any link between the assessee and the reports of investigation wing. At this stage, we may refer to the decision rendered by the Hon'ble Supreme Court in the case of Adamine Construction P Ltd (99 taxman 45), wherein, while dismissing the appeal of Revenue, the Hon'ble Supreme Court has referred to the following observations made by Hon'ble Delhi High Court:-

"What is evident is that the AO went by only the report received and did not make the necessary further enquiries such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO."

Further, the facts available in the present case are that the shares were purchased and sold through the stock exchange platform. In the case of PCIT vs. Indravadan Jain HUF (ITA No.454 of 2018 dated 12th July, 2023), the Hon'ble Bombay High Court held as under:-

"....The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkatta Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained

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for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkatta Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instruction slips and also received payment from Kolkatta Stock Exchage. The cheque received was deposited in respondent's bank account. In view thereof, the CIT(A) found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The Tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The IT'AT therefore, in our view, rightly concluded that there was no merit in the appeal"

11.

The facts available in the instant case are similar to the above said case. Accordingly, following above said decision, we hold that, in the facts and circumstances of the instant case, there is no reason to suspect the genuineness of purchase and sale of shares of M/s.Tuni Textiles Ltd. Accordingly, we set aside the order passed by the Ld.CIT(A) on this issue and direct the AO to delete the addition of sale proceeds of shares made. Since the above said addition is deleted, the addition relating to alleged expenses in procuring bogus long term capital gain is also liable to be deleted. Accordingly, the estimated commission expense added by the AO is also liable to be deleted. Accordingly, we set aside the order passed by the Ld.CIT(A) and direct the AO to delete both the additions. We order accordingly.

12.

In the result, the appeal filed by the assessee is allowed.

11.

Therefore, considering the totality of the facts and circumstances discussed above, and also keeping in view the doctrine of binding precedents and judicial consistency, we

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are of the view that the additions made by the AO are liable to be deleted. Accordingly, we direct the AO to delete the impugned additions made under Sections 68 and 69C of the Act.

12.

In the result, the appeal filed by the assessee stands allowed with no order as to cost.

Order pronounced in the open court on 26.05.2026

Sd/- Sd/- (GIRISH AGRAWAL) (SANDEEP GOSAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 26/05/2026 RY, Sr. PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलार्थी / The Appellant 1. प्रत्यर्थी / The Respondent. 2. संबंधित आयकर आयुक्त / The CIT(A) 3. 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मुम्बई/ DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//

उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai

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