BHAIRAVI THAKKAR (LEGAL HEIR OF LATE CHANDRAKANT NATHALAL THAKKAR),MUMBAI vs. INCOME TAX OFFICER, WARD 27(1), MUMBAI, MUMBAI

PER RATNA DASGPUTA, AM

The captioned appeal by the legal heir of the late assessee, Chandrakant Nathalal Thakkar, is directed against order dated 18/12/2025 passed by the Ld. Addl/JCIT(A)-6 Kolkata [in short

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CIT(A)] under section 250 of the Income-tax Act, 1961 (in short, the Act] for A.Y. 2014-15, on the following grounds -

Ground 1: Erroneous addition under section 68 and denial of exemption under section 10(38) of the Act in respect of Long-Term Capital Gains 1.1 In the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the addition of INR 51,93,500 on account of Long-Term Capital Gains (LTCG) under Section 68 of the Act and thereby denying the claim for exemption under section 10(38) on sale of shares of PS IT Infrastructure and Services Limited (formerly known as Parag Shilpa Investments Limited). 1.2 In doing so the learned CIT(A) failed to appreciate that: a) The addition made by the learned AO is based on general finding of Directorate of Investigation and various statements recorded by it without any cogent material on record and without any nexus/connection with the Appellant being established to prove the impugned transaction as bogus. b) The entire transaction of purchase and sale of shares was undertaken through a SEBI-registered broker and the shares were held and transacted in dematerialized form. c) The Appellant had duly discharged the primary onus by providing all requisite substantial documentary evidence, including contract notes, bank statements, and proof of payment of Securities Transaction Tax (STT), confirming that the transactions were carried out through normal banking channels and a recognized stock exchange. d) The Appellant was not afforded an opportunity to cross-examine the alleged entry operators whose

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statements, recorded in third-party proceedings, have been relied upon for making the impugned addition. 1.3 Thus, the learned AO and the learned CIT(A) erred in disregarding the aforesaid evidences placed on record and in sustaining the addition under Section 68 based on mere presumptions and surmises, and the same is therefore liable to be deleted. Ground 2: Erroneous addition made under section 69C of the Act on account of commission expenditure 2.1 In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of INR 3,11,610 under Section 69C of the Act on account of alleged commission expenditure, computed at 6% of the sale proceeds. 2.2 The said addition has been made purely on an ad hoc and presumptive basis, without any evidence or incriminating material on record to demonstrate that any such commission was actually paid by the Appellant and is thus, liable to be deleted. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, to enable the Hon'ble Tribunal to decide this appeal according to law. 2. At the outset, we note that the present appeal has been filed 48 days beyond the period of statutory limitation. An Affidavit has been filed online by Ms. Bhairavi Chandrakant Thakkar (legal heir of the late assessee) praying for condonation of the delay. The said Affidavit mentions that after the demise of the assessee on 18.05.2017, replies to communication from the Income tax Department were being filed through Ms. Thakkar. As stated, the impugned order of

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the Ld. CIT(A), dated 18.12.2025, was passed in the name of the late assessee and no communication, either physically or through electronic mode, was served upon the legal heir at her registered address. It is Ms. Bhairavi Thakkar’s claim that the existence of the order came to her knowledge when she received a call from the Income-tax Department on 16.03.2026 in connection with consequential recovery proceedings etc. The Affidavit mentions that thereafter she immediately consulted her Chartered Accountant, only to be told that he had inadvertently missed out the Department’s e-mail which had come on his registered e-mail ID. Necessary steps were then taken to collate the requisite material for filing appeal before this Tribunal. The present appeal thus came to be filed on 17.04.2026, after a delay of 48 days. The legal heir has submitted that this delay was neither deliberate nor attributable to any negligence – it was solely due to non- receipt of the Ld. CIT(A)’s order.

2.1 We have considered the circumstances of the delay in this case. The late assessee is being represented by his daughter who, as stated, did not receive the impugned order directly from the Department. The order was addressed at the e-mail id of her Chartered Accountant who, as mentioned, inadvertently missed the post. We observe that both Ms.

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Thakkar and her Chartered Accountant should have been more vigilant about the income tax matters of the late assessee. However, it is our primary function to advance justice, and it has been held by various Courts, including the Hon’ble Supreme Court, that the expression ‘sufficient cause’ should receive a liberal consideration. The Apex Court, in N. Balakrishnan v. Krishnamurthy (1998) 7 SCC 123, has, inter alia, held that for condoning delay, length of the delay is not important – acceptability of the explanation is the only criterion. It has also observed that a litigant does not normally stand to benefit by resorting to delay, and therefore a justice- oriented approach is required to be taken by courts. In every case of delay there can be some lapses on the part of the litigant concerned but that alone is not enough to shut the door against him. Reference may also be made to the decision of Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Katiji 167 ITR 471 (SC), where it was observed that: “When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay.” In this particular case, we do not see in the legal heir/Chartered Accountant the vigilance that was required of them. But it does not seem to us that

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their inaction stemmed from any mala fide intention. Further, the appellant does not stand to benefit by lodging appeal belatedly. In view of this, and following decisions cited above, the delay in filing appeal is hereby condoned.

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Scrip Sale Price(Rs.) Cost Price (Rs.) Gain % Parag Shilp 52,93,500/- 1,00,000/- 5193.5 For reasons discussed at length in the assessment order, he held that the transactions were not genuine business transactions but were a part of a pre-arranged mechanism for generating artificial gains which were exempt from tax. He held that the assessee’s basic modus operandi was to route his own unaccounted money in the garb of bogus long-term capital gains. In view of this. the Ld. AO added back Rs, 52,93,500/-, being the entire sale proceeds of the shares of M/s Parag Shilp, to the assessee’s total income as unexplained credits u/s 68 of the Act. He also made consequential addition u/s 69C of the Act on account of alleged commission paid @ 6%, on the premise that payment of consideration to operators was an integral part of such accommodation-entry transactions.

3.1 The assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the submissions of the assessee, upheld the additions made by the Ld. AO both u/s 68 and 69C of the Act, after reducing the purchase cost of Rs. 1,00,000/- from the sale consideration of Rs. 52,93,000/-. In support of his view, he cited, inter alia, the decision of the Hon’ble Kolkata High Court in Pr. CIT V. Swati Bajaj [2002], reported in 139 taxmann.com 352/288 Taxmann 403/446 ITR 56.

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3.2 Aggrieved by the order of the Ld. CIT(A), the assessee has preferred appeal before this Tribunal. 4. Before us, the Ld. Sr. AR, appearing on behalf of Revenue vehemently supported the orders of the lower authorities. He pointed out that enquiries by the Investigation Wing had brought out the modus operandi of these penny stock companies which arranged sham transactions on behalf of the beneficiaries, enabling them to evade taxes and launder money. He said that the assessee was unable to show how this unusual rise in the prices of the scrips of M/s Parag Shilp, enabling him to make astronomical gain of 5193% within a short period, could be based on prevalent market forces. Evidently, such share transactions were closed circuit transactions and clearly a structured one. 5. The Ld. Authorized Representative (AR) of the assessee strongly opposed the stand taken by Revenue. Two Paper Books – factual and legal - have been submitted, containing copies of documents relating mostly to purchase and sale of the impugned shares. The essence of the assessee’s submission, contained in the Paper Books, is as follows:-  The assessee had purchased 10,000 equity shares of M/s Crescent Digital Technologies Private Limited (CDT) for Rs. 1,00,000/- in July 2012 from M/s. Mumbadevi Finance and

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Investment Company Private Limited and not through any preferential allotment. This was an off-market transaction and these shares were later dematerialized. CDT was thereafter amalgamated with M/s Parag Shilp, a listed company, under a scheme of amalgamation sanctioned by an order of the Hon’ble Bombay High Court, pursuant to which the assessee was allotted 10,000 equity shares of the said listed entity, which was later renamed PS IT Infrastructure & Services Ltd. The shares were, thereafter, sold by the assessee on the Bombay Stock Exchange on 20.02.2014 and 11-13/3/2014 in two tranches of 5000 shares each @ Rs. 520 and Rs. 535 per share respectively, through the SEBI registered broker, M/s. Ventura Securities Limited, after payment of Securities Transaction Tax (STT). Relying solely upon the report of the Directorate of Investigation, Kolkata, and the statement of Shri. Jagdish Prasad Purohit and Shri. Rajkumar Kedia, the Ld. AO had wrongly treated the entire sale consideration of Rs. 52,93,500/- as unexplained cash credit under section 68 and had further made an addition Rs. 3,11,610 under section 69C, being alleged commission @ of 6% of the sale proceeds.  The assessee had discharged the onus cast on him under section 68 of the Act by furnishing the following independent

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documentation, none of which has been faulted, falsified or even controverted by the Department: a) Copy of share certificate, money receipt issued by Mumbadevi Finance & Investment Co. Pvt. Ltd. and share transfer certificate of M/s. Crescent Digital Technologies Ltd. b) Contract notes issued by the SEBI-registered broker M/s. Ventura Securities Ltd. c) Demat account statements evidencing dematerialization of the CDT shares and allotment of PSI/PS IT shares upon amalgamation. d) Bank statements reflecting receipt of the sale consideration through banking channels. e) Copy of Demat holding statement, demonstrating investment in other shares.  The assessee was not a one-off investor and had, over several years, being regularly investing in shares of multiple companies, including ITC, HDFC, Coal India, Power Grid Corporation and Manali Petrochemicals, a fact which had been acknowledged even by the Ld. CIT(A) at para 5.4.2 of his order. Thus it was that the assessee had claimed exemption under section 10(38) in other assessment years as well. On this very reasoning, the Hon’ble Delhi Bench in Shubham Garg v. ACIT (ITA No.

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7436/Del/2018 dated 31.03.2022) declined to permit the Ld. AO to pick three scrips out of a portfolio of over other accepted transactions and brand them bogus. Further, in the case of Sonam Rajesh Rateria (ITA No. 1040/Mum/2025 dated 28.04.2025), the Hon’ble Mumbai Tribunal had deliberated on this very scrip (PS IT Infrastructure & Service Ltd) and allowed the appeal of the assessee primarily relying upon the fact that the appellant had been regularly dealing in shares and securities.  The Revenue’s contention that the assessee paid unaccounted cash to an operator and received the same back in the guise of exempt LTCG is not supported by any evidence brought on record. The assessee’s income was derived exclusively from income from Other Sources and Capital Gains which are regular, verifiable sources, and flow only through banking channels. The assessee had not carried out any business or commercial activity capable of generating cash or undisclosed liquidity. Therefore, the allegation that the assessee had entered into bogus LTCG claim to convert unaccounted cash into accounted source cannot be true in the facts of the present case.

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 The amount alleged to be LTCG stands credited in the assessee’s bank statement, and not in any books of account maintained by the assessee, which is a condition precedent for invoking section 68 of the Act. In the absence of any books of account maintained by the assessee in which the impugned sum is found credited, the very foundation for making an addition under section 68 falls through.  The assessee was also not granted the request for cross- examination of the persons to statements that were relied upon. He was offered to take such cross-examination only by travelling to Kolkata, which was not possible due to medical reasons.  The assessee exited at market rates of Rs. 520/- and Rs. 535/- per share, whereas the scrip thereafter rose to a peak of about Rs. 910/- per share. Had the assessee been a coordinated beneficiary of, or a participant in, any pre-arranged price-rigging scheme, he would have exited at or near the peak of Rs. 910/- so as to maximize his gains.  The addition under section 69C of the Act @ 6% of the sales proceeds is entirely based on the presumption that the assesee has entered into bogus LTCG transactions.

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Once it is held that the assessee has not entered into any bogus transaction, the consequential addition under section 69C will automatically stand deleted.

6.1 The purchase and holding of shares in the Demat account and the subsequent sale of shares on the Bombay Stock Exchange through a SEBI-registered broker have not been disputed by the Revenue. It is also not the case of Revenue that either the name of the assessee or that of the broker, through whom the transactions were carried out, appears in the list of beneficiaries alleged to be involved in price rigging of shares of Parag Shilp/PS IT Infrastructure & Services Ltd. The results of enquiries by the Investigation Wing, abnormal price movements, and financial

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position of the relevant companies may constitute circumstances requiring further probe, but in the absence of any direct nexus connecting the incriminating material to the assessee, they cannot establish that the assessee’s documented transactions were non- genuine. 6.2 It is a cardinal principle of law that suspicion cannot take the place of evidence. In this case, the burden cast upon the assessee to establish the genuineness of the impugned transactions was duly discharged by the documentary evidences placed on record. Revenue failed to rebut the same with any cogent material.

6.3 Considering the totality of the facts and circumstances in the given case, we are of the view that the addition made u/s 68 of the Act in respect of sales proceeds of shares is not sustainable and deserves to be deleted.

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7.1 We have already held that Revenue has failed to establish that the impugned share transactions were non-genuine. Once the prime allegation regarding bogus capital gains is found to be unsubstantiated, the consequential addition on account of cannot survive merely on the basis of presumption. We, accordingly, direct deletion of addition made u/s 69C of the Act.

Order pronounced in the open Court on 07/10/2026

Sd/- Sd/- (BEENA PILLAI) (RATNA DASGPUTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 07/10/2026 Z.U., P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT

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BY ORDER, ABHINAV ANANT Digitally signed by ABHINAV ANANT GAVANDE GAVANDE Date: 2026.10.15 14:18:47 +05'30' //True Copy// (Assistant Registrar) ITAT, Mumbai