SURESH NANJI DABHI,MUMBAI vs. ITO WARD 25(3)(1), MUMBAI

ITA 7906/MUM/2025Status: DisposedITAT Mumbai13 October 2026AY 2012-1315 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition made under section 68 of the Act could not be sustained. The AO made the addition without negating any of the evidence produced by the assessee to demonstrate the genuineness of the transactions, which were conducted on a stock exchange platform through a recognized broker and banking channels. The Tribunal noted that the transactions were corroborated by documentary evidence, and the Revenue had not brought any material on record to prove the sham nature of the transactions or the assessee's participation in price rigging or with entry providers. The AO's conclusion was based on the analysis of the company's financials and information from the Investigation wing regarding alleged penny stocks, but this was unsupported by cogent material. The assessee had discharged the burden by submitting documentary evidence. The Tribunal also noted that the assessee had purchased shares at an average cost of Rs. 11.18 and sold them at Rs. 10.95, indicating a small loss, not an unusual jump in share price. Securities Transaction Tax (STT) was paid, and sale proceeds were routed through banking channels. Consequently, the addition of Rs. 1,17,80,499/- under section 68 was set aside and directed to be deleted. The consequential addition of Rs. 35,34,150/- as commission under section 69C was also directed to be deleted as it had no foundation. The Tribunal deemed it unnecessary to adjudicate other grounds relating to proceedings under section 148 as they became academic.

What were the facts?

The assessee, Mr. Suresh Nanji Dabhi, an individual deriving income from share trading, is in appeal against the order of the CIT(A) which upheld the reassessment order passed by the Income Tax Officer (AO) under sections 144 read with 147 of the Income-tax Act, 1961, for Assessment Year 2012-13. The AO had initiated reassessment proceedings based on information from the DDIT (Inv.) regarding alleged penny stock transactions in M/s. Exelon Infrastructure Ltd. The assessee had not filed a return of income for the relevant year. The AO treated the sale proceeds of Rs. 1,17,80,499/- as unexplained cash credit under section 68 and added Rs. 35,34,150/- as unexplained expenditure (3% commission) under section 69C. The CIT(A) confirmed these additions.

What were the issues?

1. Whether the reassessment order passed under section 147, based on a notice issued solely on information from the DDIT (Inv.), is without jurisdiction, invalid, illegal, void, and bad in law, as it allegedly does not fulfill the requirements of Section 147 of the Income-tax Act, 1961? 2. Whether the addition of Rs. 1,17,80,499/- as unexplained cash credit under section 68 is valid, considering the assessee's contention that the sale consideration of shares was not entirely unexplained and that the cost of acquisition should have been considered, and that the assessee did not claim any short-term capital loss as he had not filed a return of income? 3. Whether the addition of Rs. 35,34,150/- as unexplained expenditure under section 69C, being 3% of the total sale consideration as alleged commission, is valid, especially when it was made on an ad-hoc basis as a percentage of the entire sale consideration of alleged penny stock? Assessee's Contentions: - The reassessment order is invalid as it relies solely on information from the Investigation wing and does not meet the requirements of Section 147. - The addition of Rs. 1,17,80,499/- is incorrect as the assessee is a regular investor, did not claim any STCL due to non-filing of return, and the transactions were conducted on the stock exchange through a recognized broker with STT paid and consideration routed through banking channels. The purchase price was Rs. 11.18 and sale price was Rs. 10.95, indicating a small loss, not an unusual jump. - The addition of Rs. 35,34,150/- as commission is consequential and has no basis if the primary addition is deleted. - Relied on coordinate bench decisions in Shri Ketan G Mehta, Smt. Uma Iyer, and PCIT vs. Ziauddin A Siddique, Vijayrattan Mittal. Revenue's Contentions: - The revenue relied on the orders of the authorities below.

Which sections of the Income-tax Act were involved?

Section 144,Section 147,Section 148,Section 68,Section 69C

AI-generated summary — verify with the full judgment below

Before: HON’BLE JUSTICE (RETD.) C. V. BHADANG & SHRI PRABHASH SHANKAR

For Appellant: Shri Jagdish B. Shetty, AR
For Respondent: Shri Rajgopal K. Parthsarthy, Sr.DR
Hearing: 09.09.2026Pronounced: 13.10.2026

PER PRABHASH SHANKAR [A.M.] :- The instant appeal arising from the appellate order dated 15.09.2025 is preferred by the Assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 144 r.w.s. 147 of the Income-tax Act, 1961

P a g e | 2 A.Y. 2012-13 Suresh Nanji Dabhi [hereinafter referred to as “Act”] dated 04.12.2019 for the Assessment Year [A.Y.] 2012-13. 2. The grounds of appeal are

The order continues below.

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