SUMITRA DILIP SHAH,MUMBAI MAHARASHTRA vs. CIT (A)-ADDN-JCIT(A) (1) KOLKATTA, KOLKATTA

IN THE INCOME-TAX APPELLATE TRIBUNAL “K(SMC)”
BENCH, MUMBAI
BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER

ITANo.2431/MUM/2024

(A.Y. 2011-12)

Sumitra
Dilip
Shah,
246/6,
Pratyay
Society,
Sector
2,
Charkop,
Akandivali (West), Mumbai
- 400 067, Maharashtra v/s.
बनाम
Income
Tax
Officer
-
32(3)(4), Kautilya Bhavan,
Bandra
Kurla
Complex,
Bandra (East),
Mumbai
-
400051, Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: ANVPS9312F
Appellant/अपीलार्थी
..
Respondent/प्रतिवादी

Appellant by :
Shri Aditya Ramachandran, AR
Respondent by :
Shri Kiran Unavekar, (Sr. DR)

Date of Hearing
23.04.2025
Date of Pronouncement
22.05.2025

आदेश / O R D E R

PER PRABHASH SHANKAR [A.M.] :-

The present appeal arising from the appellate order dated
20.03.2024 is filed by the assessee against the order passed by the Learned ADDL/JCIT(A)-1, Kolkata [hereinafter referred to as “CIT(A)”]
pertaining to assessment order passed u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 15.12.2018
for the Assessment Year [A.Y.] 2011-12. P a g e | 2
A.Y. 2011-12

Sumitra Dilip Shah

Sumitra Dilip Shah market price of this entity was not supported by financial fundamentals of the company. Both purchase and sale of the shares were concentrated within few persons/entities. The exit providers did not have creditworthiness. They were either non-filers or had filed nominal return of income and had not paid any tax. It was found that the assessee, was one of the beneficiaries who had traded in the said scrip during F.Y.2010- 11. Total value of the trade was Rs.
14,41,710/-. As per the return of income she had traded in shares and securities and shown income under the head Capital Gain. Considering these facts, it was observed by the ld.AO that the assessee had taken accommodation entries by trading in above mentioned scrip which was pre-arranged transaction and had escaped assessment. Consequently, the case was reopened u/s. 148 of the Act and there being no compliance from the assessee during assessment proceedings, the AO made addition of Rs.14,41,710/-, being sales transactions as unexplained income which was taxed unexplained money u/s 69A of the Act.
4. In the subsequent appellate proceedings before the ld.CIT(A), the assessee stated that she was a senior citizen doing the business of share trading during the year. It was submitted that in response to the letter dated 06.11.2018 issued by the AO, she submitted scrip wise
Global Report, Copy of ledger account with the broker, Copy of Demat

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A.Y. 2011-12

Sumitra Dilip Shah account in respect of the above scrip with explanation that she is a small trader and doing trading on the basis of the value, volume and rate movement and had nothing do with the financial or the performance of the company. Moreover, when she traded the above scrip the said scrip was not penny stock and above all, she had made profit of Rs. 13,691/- in the said scrip by executing the transaction on the recognized stock exchange after paying applicable transaction charges and applicable taxes and stated that total value of the transaction in the alleged scrip’s was Rs. 2,23,792/- and not Rs. 14,41,710/-and strongly objected to the reopening proceeding which being based on the wrong information was liable to be quashed. Further, it was submitted that the AO had not even seen her return also as the entire order is speaking about the long term capital gain whereas the assessee had not shown any capital gain. She purchased the share when the share price was Rs 20.49 and sold the same when the share price was Rs.21.82/-. However, the ld.AO has given various tabular financial parameters of the said company to prove that she had purchased the scrip at low value and existed the scrip when price was very high which was not the case. It seems that the AO has not at all applied the mind. Further, all the transactions were done through broker M/s Shah and Sanghvi share and stock brokers who is the registered share broker on the BSE and NSE and they have executed the P a g e | 5
A.Y. 2011-12

Sumitra Dilip Shah trade on the trading platform of the BSE and NSE. Also, she provided all the copies of the bill ledger account of share brokers and bank account which fully explained and proved the transaction. Hence, there was no point in treating the profit as unexplained cash credit u/s 68 which was absolutely wrong and unlawful.
5. In so far as the contention regarding validity of reassessment proceedings is concerned, the ld.CIT(A) dismissed the same holding that the AO issued notice u/s 148 of the Act after recording reasons based upon material available on record. In this case, original assessment was merely passed u/s 143(1) of the Act and there was enough materials with the AO as provided by the Investigation wing to take recourse to section 148 of the Act. We do not find any infirmity in the order of the first appellate authority in dismissing the ground of appeal on the issue of reopening. Therefore, the ground no. 1 preferred by the assessee on validity of reassessment proceeding is dismissed.
6. On merits, the ld.CIT(A) has narrated the observations and findings of the AO as also the contents of the Investigation wing report.
Following were the findings and the reasons given by the AO,
“a. Mode of acquisition of the shares: The appellant had traded of Rs.14,41,710/- in the scrip of M/s. Swarnsarita Gems Ltd. (Formerly known as Shyam Star Gems Ltd.)

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Sumitra Dilip Shah b. Sale of shares and unusual rise in the price: Further, the appellant had sold those shares at the price of Rs. 14,41,710/-.
c. Findings of Investigation wing: The findings of the Directorate of Investigation of Mumbai and discussed had proved that associated brokers, entry operators and the appellant had worked out an arrangement in which the shares were acquired by the appellant, the share prices were rigged and then with the help of entry operators by routing the cash, shares were sold at high price to arrive at tax free capital gains.
d. Analysis of transactions: Facts revealed that such trading transactions of purchase and sale of shares were not been effected, for commercial purpose but to create artificial gains, with a view to evade taxes.
e. Transactions of shares were not governed by market factors prevalent at relevant time in such trade, but same were product of design and mutual connivance on part of appellant and the operators.
f. The appellant resorted to a preconceived scheme to procure long- term capital gains by way of price difference in share transactions not supported by market factors.
g. Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bona fide and, hence, impugned long term capital gain was not allowable. h. Failure of Appellant to discharge his onus: The appellant had not been able to prove his investment in the shares as he had turned up to the any notices.
i. Financial analysis of the penny stock companies: The net worth of the penny stock company was negligible. Even though the net worth of the company and the business activity of the company was negligible the share prices had been artificially rigged to unusual high.
j. Cash trail in the accounts of the entry providers: The investigations in the fund flow analyzed in the accounts of the entry providers had established that the cash had been routed from various accounts to provide accommodations to appellant.
k. Arranged transactions: The transactions entered by the appellant involve the series of preconceived steps, the performance of each of which was depending on the others being carried out. The true nature of such share transactions lacked commercial contents, being artificially structured transactions, entered into with the sole intent, to evade taxes.”

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Sumitra Dilip Shah

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Sumitra Dilip Shah taxes. Also total value of the transaction in the alleged scrip’s was Rs.
2,23,792/- and not Rs. 14,41,710/-. Further, it seemed that the AO has not seen the return also only as the entire order is speaking about the long term capital gain whereas assessee had not shown any capital gain.
The AO had narrated various observations vide para 9,10,11,12, which has no correlation with the case of the assessee. Per contra, the ld.DR has relied on orders of authorities below.
8. We have carefully considered all the relevant facts of the case. It appears to us that both the lower authorities have heavily relied on a generalized report of the Investigation wing and failed to take note of the evidences submitted by the assessee in support of the contention that she was a small trader having made the transactions on platform of BSE made through registered broker and also through banking channels.
Shares were credited to her demat account. Nothing has been brought on record by the AO to specifically demonstrate that the assessee in any manner colluded with price manipulators for money laundering purposes. It appears to us that she is a genuine small time trader having nothing to do with any price manipulation. The ld.AO has not taken due consideration of her submission made dated 6.11.2018 and 21.11.2018 in which it was categorically stated that total sale value in the said scrip was only Rs 2,23,762/-and the purchase value Rs 2,10,101/-and the P a g e | 9
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Sumitra Dilip Shah assessee made a profit of Rs 13,691/- only on such transaction. The alleged transaction worth Rs 14,41,710/- was denied by the assessee.
Neither the AO nor the ld.CIT(A) have taken cognizance of these facts at all in their respective orders.
8.1 We find that the investigation report prepared by Investigation
Wing, Kolkata is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report, without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people, who were involved in the alleged rigging of prices. We also notice that - a) the assessee has purchased these shares by paying consideration through banking channels.
b) the shares have been purchased on online platform of stock exchange.
c) the shares have been later dematerialised and kept in the Demat account.
d) the assessee has sold the shares through stock exchange platform e) the assessee has received the sale consideration through banking channels.

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Sumitra Dilip Shah

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Sumitra Dilip Shah

Place: म ुंबई/Mumbai
ददनाुंक /Date 22.05.2025
Lubhna Shaikh / Steno

आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त / CIT
4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT,
Mumbai
5. गार्ड फाईल / Guard file.

सत्यावपि प्रवि ////
आदेशानुसार/ BY ORDER,

उि/सहायक िंजीकार (Dy./Asstt.