SHRI GANPAT PUKHRAJ JAIN ,MUMBAI vs. INCOME TAX OFFICE 19(1)(1), MUMBAI

PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER: This appeal is filed by the Assessee against the order of Ld. NFAC, Delhi, dated 14-Oct-2025 for the Assessment Year 2015-16. The Assessee has raised the following grounds of appeal:

1.a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition of 1,10,37,950/- (correct 1,09,94,35/-) made by the AO to the income of the Appellant u/s.68 representing sale proceeds of the shares of PS IT Infrastructure & Services Ltd. after rejecting the claim of the Appellant in respect of Long term capital gains being exempt u/s.10(38) treating the same as non-genuine on the basis of information in possession of the Investigation Wing, Kolkata that certain operators and intermediaries had provided accommodation entries of bogus Long term capital gains using certain penny stock companies and thereby further erred in confirming the tax levied by the AO at special rate u/s.115BBE on such income.

b) The Id. CIT(A) failed to appreciate that:-

(i) the Appellant has earned Long term capital gains of 1,07,94,375/-on sale of shares of PS IT Infrastructure & Services Ltd. and the same is supported by independent and admissible evidences;

(ii) the shares were sold in the open free market of Bombay Stock Exchange on BOLT;

(ii) the payments for purchase of shares and receipts for sale of shares are through banking channels;

(iv) the delivery of shares are taken and given from the Demat account of the Appellant; and

(v) the ld. AO did not provide copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been suspected to provided accommodation entries to the Appellant.

c) In reaching to the conclusion and confirming such addition the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced b irrelevant considerations and factors.

2.a) On the fact and in the circumstances of the case and in law, the Id. CIT(A) erred in upholding the view of the AO that the transactions related to sale of shares of PS IT Infrastructure & Services Ltd. are accommodation entries arranged on commission basis and thereby further erred in confirming the addition of 3,31,138/- made by the AO to the income of the Appellant on account of alleged unexplained commission expenses u/s.69C being 3% of the sale proceeds of the shares treating the same as accommodation entries and thereby further erred in confirming the tax levied by the AO at special rate u/s. 115BBE on such income.

b) The ld. CIT(A) failed to appreciate that the transactions of shares of PS IT Infrastructure & Services Ltd. are genuine and supported by sufficient materials c) In reaching to the conclusion and confirming such addition, the ld. CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors.

The Appellant craves leave to add, alter, amend or delete any or all of the above grounds of appeal.

“2. In this case, the Assessee had declared its total income of Rs.23,91,110/- by filing its return of income on 31.03.2017, which was subsequently reopened u/s 147 of the Act after recording reasons for reopening on 17.03.2017 mainly on the ground that the Assessee has taken bogus Long Term Capital Gains (LTCG) and consequently notice u/s 148 of the Act dated 28.03.2017 was issued. The Assessee in response to the same filed its return of income on 31.03.2017. Thereafter other statutory notices were issued in response to which the Assessee filed the relevant details and documents.

3.1 The AO therefore in order to verify the transactions carried out by the Assessee show caused the Assessee to provide the relevant documents and further recorded the statement of the Assessee. Thereafter the AO by considering "the reply of the Assessee and the mode of acquisition of shares, sale of shares, unusual rise in prices, findings of the investigation wing, analysis of transactions, ignorance of the Assessee about shares and penny stock companies, financial analysis of penny stock companies and order of SEBI/BSE dated 24.08.2017 whereby as a surveillance measures trading in the securities of M/s. Zodiac Ventures Ltd. was suspended w.e.f. 27.08.2015", ultimately disallowed the claim of the Assessee u/s 10(38) of the Act and consequently made the addition of Mr. Kishore Bachubhai Mujat Rs.92,08,771/- u/s 68 of the Act and Rs.2,67,363/- being commission as determined by the AO @ 5% of the total consideration received which comes to Rs.4,60,439/- - Rs.1,93,075/- (purchased price of the alleged shares) and added the same to the total income of the Assessee u/s 69 of the Act.

7.2 The Jurisdictional High Court in various cases including in the case of Pr. CIT-3 vs. Ziauddin A Siddique in Income Tax Appeal No.2012 of 2017 decided on 04.03.2022 has also dealt with the identical issue as involved in the instant case, where the AO though considered the documents submitted by the Assessee in support of its claim qua sale and purchase of shares however, not criticized the same and there was no allegation against the Assessee that he has participated in any price rigging of the scrips involved. For ready reference, the decision of the Hon'ble High Court is reproduced herein below:

"JUDGEMENT 1. The following question of law is proposed: "Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was Justified in deleting the addition of Rs.1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 19617"

7.3 Even the Hon'ble Jurisdictional High Court in the case of PCIT31, Mumbai vs. Indra Indravadan Jain HUF (ITA No.454 of 2018 decided on 12.07.2023) almost on the similar facts and circumstances as involved in this case, affirmed the deletion of the identical addition made by the AO on account of alleged bogus claim u/s 10(38) of the Act, by holding as under:

"4. The A.O. did not accept respondent's claim of long-term capital gain and added the same in respondent's income under Section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under Section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT(A) also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFI. The CITIA] came to the conclusion that respondent brought 3000 shares of RFI, on the floor of Kolkata 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 for Mr. Kishore Bachubhai Mujat more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata 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 instructions slip and also received payment from Kolkata Stock Exchange. 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 ITAT therefore, in our view, rightly concluded that there was no merit in the appeal. 5. We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises."

7.4 We further observe that the Hon'ble Apex Court in the case of Pr. CIT vs. Renu Agarwal (2023) 456 ITR 249(SC) has dismissed the SLP against the judgment passed in ITA No.44 of 2022 on 06.07.2022 by the Hon'ble Allahabad High Court, wherein the Hon'ble High Court has also dealt with the identical issue as involved in the instant case and ultimately affirmed the deletion of identical addition allegedly made on penny stock, by holding as under:

"Judgment, Heard Sri Krishna Agarawal, learned counsel for the appellant. This appeal under section 260A of the Income-tax Act, 1961 has been filed challenging the order dated January 17, 2022, passed by the Income- tax Appellate Tribunal, Lucknow Bench 'SMC' Lucknow in I. T. A No. 205 of 2020 (assessment year 2014-15). The basic question involved in the present appeal is with regard to dele tion of some amount which was added by the Assessing Officer on the allegation of penny stock. The appeal of the respondent-assessee was allowed against the assessment order. The appeal filed by the assessee was allowed by the Commissioner (Appeals) Against the appellate order the Revenue had filed the aforesaid income-tax appeal which has been dismissed by the Income-tax Appellate Tribunal. After detailed discussion, the Income-tax Appellate Tribunal has recorded the following findings of fact: "The above findings recorded by the learned Commissioner (Appeals) are quite exhaustive whereby he has discussed the basis on which the Assessing Officer had made the additions. While allowing relief to the assessee, the learned Commissioner (Appeals) has specifically held that there is no adverse comment in the form of general and specific statement by the principal officer of the stock exchange or by the company whose shares were involved in these transactions and he held that the Assessing Officer only quoted the facts pertaining to various completely unrelated persons whose statements were recorded and on the basis of unfounded presumptions. He further held that the name of the appellants were neither quoted by any of such persons nor any material relating to the assessee was found at any place where investigation was done by the Investigation Wing The learned Commissioner (Appeals) relying on various orders of the Lucknow Benches and other Benches has allowed relief to the asses- see by placing reliance on the evidence filed by the assessee before the Assessing Officer. I do not find any adversity in the order of the learned Commissioner (Appeals) specifically keeping in view the fact that the Lucknow Benches in a number of cases after relying on the judgment of the hon'ble Delhi High Court in the case of Krishna Devi had allowed relief to various assessees."

The concurrent findings of fact have been recorded by the first appellate authority and the Income- tax Appellate Tribunal Thus, no substantial question of law is involved in the present appeal. The matter is concluded by findings of fact.

For the reasons aforestated, we do not find any good reason to entertain this appeal. Consequently, it is dismissed."

7.5 On the aforesaid analyzations and respectfully following the dictum laid down by the Hon'ble High Court, we are inclined to delete the additions under consideration; hence, the same are deleted.

Order pronounced in the open court on 23.10.2024.”

7.1 Likewise in the case of Parshwanath Jewellers Private in ITA No.4647/MUM/2024 (ITAT,Mumbai) dated 25 November, 2024, similar decision was rendered involving the same scrip. Relevant parts of the order are extracted as under:

“13. We heard the rival submission and considered the documents available in the record. We note that the share scrip, M/s PS IT Infra & Services Ltd is stated as a tainted scrip by the Ld.AO relying on the investigation report of DDIT Inv 3(3) Kolkata but no such specific evidence was brought in the record. The Ld.AO only on the basis of the surmisesand conjectures, made the addition under section 68. The assessee is a regular trader of the shares and also dealt with the market. There is no evidence that assessee is involved in the price rigging with any or about the scrip mentioned by the SEBI. The nature of company is public limited and huge amount is invested by the public. The assessee himself regular trader of share and continued the same profession since long. The evidence which are submitted by the assessee is never be discarded by any of the revenue authorities. We respectfully relied on the order of Renu Agarwal (supra) and Vikram N Chandan (supra). Related to this scrip, the ITAT Mumbai Bench has already taken the view in favour of the assessee in case of Bhadresh Mansukhlal Dudhediya(supra). We respectfully relied on the order of High Court of Bombay in the case of Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022] held that the Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also ITA No.4647 & 4648 /Mum/2023 Paresh Ratansi Nissar come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares. In our considered view the ld. AO did not able to bring any evidence related to the involvement of assessee in price rigging or any cash trail related proof of rotation of assessee's own cash. Only on general view the addition can not be sustained. We set aside the impugned appeal order. The addition amount to Rs. 27,58,991/- is quashed.” 8. Considering the above discussion, the facts on record and the legal position emerging out of catena of decisions of jurisdictional High Court and direct decisions rendered by the co-ordinate benches of Mumbai ,ITAT order, we hold that the addition made by the AO u/s 68 of the Act in the year under consideration is devoid of any merit. The claim of the assessee u/s 10(38) of the Act has been made based on facts which could not be rebutted by the AO. The documentary evidences could not be rejected without bringing on record any substantial piece of evidence and just on the basis of certain individuals who also were not produced for cross examination of their stated stands. Moreover, the jurisdictional High Court decisions cited supra are on identical facts as also the co-ordinate benches of Mumbai tribunal have a binding precedence. None of them could be distinguished by the ld.CIT(A) anywhere in the appellate order. Apparently, he has in a preconceived manner dittoed the assessment order rather than by way of independent application of mind. We have no hesitation in setting aside the appellate order. The AO is therefore, directed to delete the addition made u/s 68 of the Act. 9. Since we have already decided the issue of LTCG in the foregoing paras and deleted the addition made u/s 68 of the Act, thus holding the share transactions as genuine, the above ground of the Revenue has no merit which is accordingly, dismissed. 10. In respect of ground no.1 and 3 as also the additional ground of appeal, the ld.AR in the course of hearing has categorically submitted not to press these grounds in the event of deletion of the impugned additions. Since the assessee has been granted full relief on merits of the case, the above grounds being not pressed stand dismissed. 11. In the result, the appeal is partly allowed.

Order pronounced in the open court on 23.09.2026.

Sd/- Sd/- PRABHASH SHANKAR SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 23.09.2026 RY-SrPS

Copy to: SHRI GANPAT PUKHRAJ JAIN , SHOP NO. 2, SANGHVI GALAXY 1 KHETWADI 10TH LANE KHETWADI, MUMBAI-400004, MAHARASHTRA

INCOME TAX OFFICE 19(1)(1), ROOM NO. 501, PIRAMAL CHAMBER 2 LALBAUG PAREL, MUMBAI-400012, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE