INCOME-TAX OFFICER-16(3)(1), MUMBAI , MUMBAI vs. RAJESH KUVERJI SHAH, MUMBAI

ITA 4481/MUM/2026Status: DisposedITAT Mumbai09 October 2026AY 2012-136 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Assessee had discharged its prima facie onus by furnishing contemporaneous documentary evidence substantiating the purchase, holding, and sale of shares through the recognized Stock Exchange and receipt/payment of consideration through banking channels. The AO had acknowledged that transactions were executed online and payments were made through banking channels but rejected their genuineness based on BFL's financial condition, abnormal price movements, and general investigation findings. The Ld. Commissioner had noted that no independent verification or specific infirmity in the documentary evidence was brought forth. The Tribunal relied on the jurisdictional Bombay High Court's decisions in Ziauddin A. Siddique and Indravadan Jain (HUF), which accepted share transactions conducted through recognized Stock Exchange and banking channels where the AO had neither discredited supporting documents nor established the Assessee's involvement in price manipulation. Co-ordinate Bench decisions involving the identical scrip were also followed. The Tribunal found that the Revenue had neither identified any specific infirmity in the Assessee's documents nor brought on record cogent material connecting the Assessee's transactions with alleged price manipulation. Therefore, the Ld. Commissioner rightly deleted the disallowance of STCL. The appeal by the Revenue was dismissed.

What were the facts?

The Revenue is in appeal against the order of the Ld. Commissioner (Appeals) for Assessment Year 2012-13. The Assessee, an individual in the legal profession, had declared an income of Rs. 1,85,180/-. The Assessing Officer (AO) reopened the assessment based on information from the Investigation Wing regarding alleged manipulation in the scrip of BFL. The AO reassessed the total income at Rs. 17,34,030/-, disallowing a Short-Term Capital Loss (STCL) of Rs. 15,34,891/- arising from the sale of BFL shares, treating it as non-genuine. The AO also disallowed a deduction of Rs. 13,962/- claimed under Section 80D. The Ld. Commissioner upheld the reopening but deleted the disallowance of STCL, finding that the Assessee had provided sufficient documentary evidence and the AO had not conducted independent inquiries to discredit it or establish the Assessee's involvement in manipulation.

What were the issues?

1. Whether the Ld. Commissioner erred in deleting the disallowance of Short-Term Capital Loss (STCL) of Rs. 15,34,891/- arising from transactions in shares of Banas Finance Ltd. (BFL), thereby allowing the set-off of such loss against Short-Term Capital Gains (STCG)? (Question of law and fact, concerning Section 70 of the Income Tax Act, 1961). Assessee's Contentions: The Assessee argued that the transactions were executed through the online platform of a recognized Stock Exchange and banking channels, supported by purchase and sale invoices, contract notes, demat statements, broker's records, and bank statements. Reliance was placed on the judgments of the Hon'ble Bombay High Court in Pr. CIT v. Ziauddin A. Siddique and Pr. CIT v. Indravadan Jain (HUF), and decisions of Co-ordinate Benches in Sonal Snehal Shah v. ITO and DCIT v. Varun Vimlesh Mehta, which dealt with identical scrips and investigation material. Revenue's Contentions: The Revenue supported the assessment order, relying on the Investigation Wing's findings, SEBI report, and the judgment of the Hon'ble Calcutta High Court in Pr. CIT v. Swati Bajaj & Ors. It was contended that abnormal price movements, weak financial position of BFL, and surrounding circumstances indicated a prearranged arrangement for generating artificial capital losses. The Revenue argued that contract notes, demat records, and banking transactions alone could not establish genuineness without examination on the touchstone of human probabilities.

Which sections of the Income-tax Act were involved?

Section 250,Section 148,Section 143(3),Section 147,Section 80D,Section 68,Section 69A,Section 70

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI RATNA DASGUPTA

For Appellant: Mr. Narayan Atal, Ld. AR
Pronounced: 09.10.2026

Per : Narender Kumar Choudhry, Judicial Member

This appeal has been preferred by the REVENUE against the order dated 21.02.2026, impugned herein, passed by the Ld. ADDL/JOINT Commissioner of Income Tax (Appeals), Coimbatore (in short, “Ld. Commissioner”), u/s 250 of the Income Tax Act, 1961 (in short, “the Act”), for A.Y. 2012-13. 2. Briefly, the Assessee, an individual engaged in the legal profession, filed his return of income on 26.09.2012 declaring income of Rs.1,85,180/-. On receiving information from the Investigation Wing

The order continues below.

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