KASHYAP M VORA (HUF),MUMBAI vs. INCOME TAX OFFICER , WARD, 19(2)(2), MUMBAI

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ITA 3394/MUM/2024Status: DisposedITAT Mumbai26 May 2025AY 2012-1313 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 additions made by the AO were devoid of merit. Both lower authorities had heavily relied on a generalized Investigation Wing report without properly considering the evidence submitted by the assessee. The assessee had demonstrated that the transactions were conducted on the BSE through a registered broker, with consideration paid and received through banking channels, and shares were dematerialized. The AO failed to bring any material on record to specifically demonstrate that the assessee colluded with price manipulators or was part of any syndicate involved in share price rigging. The Investigation report did not name the assessee, and allegations were based on surmises and conjectures. Furthermore, no money trail was established. The Tribunal noted that the documentary evidence could not be rejected without substantial contrary evidence. Consequently, the addition under Section 68 was set aside. The addition under Section 69C, being consequential, was also deleted. The Tribunal allowed grounds 2 to 6 on merits. The legal ground regarding reopening under Section 147 was kept open, as the additions were deleted on merits.

What were the facts?

The assessee, Kashyap M. Vora (HUF), filed an appeal against the order of the CIT(A) which upheld additions made by the Income Tax Officer (AO) for Assessment Year 2012-13. The AO had reopened the assessment under Section 147 read with Section 143(3) of the Income-tax Act, 1961. The reopening was based on an Investigation Wing report alleging the assessee dealt in shares of an alleged penny stock, VMS Industries Limited, as part of a syndicate involved in stock manipulation and generating bogus capital gains. The AO treated the sale consideration of Rs. 62,75,200/- from these shares as an unexplained credit under Section 68 and estimated commission of Rs. 1,25,504/- under Section 69C. The CIT(A) confirmed these additions.

What were the issues?

1. Whether the reopening of assessment under Section 147 read with Section 148 of the Income Tax Act, 1961, is bad in law? 2. Whether the addition of sale consideration of Rs. 62,75,200/- on transfer of shares of M/s VMS Industries Ltd. under Section 68 of the Act is justified? 3. Whether the addition of Rs. 1,25,504/- on account of alleged commission under Section 69C of the Act is justified? Assessee's contentions: Regarding Section 68 addition: The shares were purchased and sold through a recognized stock exchange (BSE) via a SEBI registered broker, with both transactions suffering Securities Transaction Tax (STT). The assessee provided documentary evidence like contract notes and demat statements. The AO relied on third-party statements without independent inquiry and failed to consider the assessee's evidence. The sale settlement date of April 2, 2012, falls in AY 2013-14, not AY 2012-13. Regarding Section 69C addition: The addition was an ad hoc estimation without any evidence of actual expenditure incurred for procuring accommodation entries. It was consequential to the Section 68 addition, which is contested. Revenue's contentions: The judgment does not explicitly record the revenue's contentions for each issue. However, it notes that the AO and CIT(A) relied on the Investigation Wing report and statements of third parties.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 148,Section 68,Section 69C

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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

For Appellant: Shri K. Gopal, Adv
For Respondent: Shri Hemanshu Joshi (Sr. DR)
Hearing: 15.05.2025Pronounced: 26.05.2025

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to :

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