ACIT,20(1), , MUMBAI vs. INDU MAHENDRA SHAH, MUMBAI
IN THE INCOME-TAX APPELLATE TRIBUNAL “C” BENCH,
MUMBAI
BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL
MEMBER
&
SMT. RENU JAUHRI, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No. 4858/MUM/2024
(निर्धारण वर्ा / Assessment Year :2011-12)
ACIT, 20(1),
Room No. 305, 3rd Floor,
Piramal Chambers
Lalbaug, Maharashtra-
400012
v/s.
बिधम
Indu Mahendra Shah
601, Harbour Crest Bldg,
6th Floor, Mazzgaon,
Maharashtra-400010
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: ALRPS2482C
Appellant/अपीलधर्थी
..
Respondent/प्रनिवधदी
निर्ााररती की ओर से /Assessee by:
Shri Tejas Chandarana
रधजस्व की ओर से /Revenue by:
Shri Yogesh Kumar
सुिवधई की िधरीख / Date of Hearing
06.05.2025
घोर्णध की िधरीख/Date of Pronouncement
15.05.2025
आदेश / O R D E R
PER RENU JAUHRI [A.M.] :-
This appeal is filed by the revenue against the order of the Learned
Commissioner of Income-tax (Appeals), Mumbai-49 [hereinafter referred to as “CIT(A)”] dated 25.07.2024 passed u/s. 250 of the Income-tax Act, 1961
[hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2011-12. 2. The revenue has raised the following grounds of appeal:
“1. On the facts and the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs.1,20,00,000/- as unexplained cash credit
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A.Y. 2011-12
Indu Mahendra Shah made by the AO without appreciating the facts of the case and modus operandi as a detailed investigation has been carried out by the Investigation Wing of Kolkata in the scrip M/s. Comfort Intech Ltd.
2. On the facts and the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition made by the AO without appreciating the facts that in such penny scrip, trading transactions of purchase and sales are not affected for commercial purpose but to create artificial Gain/loss and complete the cycle of circular trading with a view to evade taxes.
3. On the facts and the circumstance of the case and in law the Ld. CIT(A) erred in not appreciating the fact that transaction of shares of such penny scrip are not governed by market factors prevalent at relevant time rather transactions are product of design and mutual connivance on part of assessee and operators.
4. On the facts and the circumstance of the case and in law the Ld. CIT(A) erred in not appreciating the fact of the case and modus operandi of the scrip is utilized by entry operators for providing accommodation entries under the garb of Long Term Capital Gain/Short Term Capital Gain Loss by manipulating/rigging up the share price.
5. On the facts and circumstance of the case and in law the order of the Ld.
CIT(A) suffers from perversity as it ignores the facts brought on record establishing manipulation of share prices of M/s. Comfort Intech Ltd. as part of colourable device to generate fictitious Long Term Capital Gain/ Short Term
Capital Loss with the aim to evade taxes due.
6. On the facts and circumstance of the case and in law the Learned Id. CIT(A) erred in deleting the addition of Rs.2,40,000/- being commission u/s 69C of the Act overlooking the fact that the entire transactions were stage managed with the object to facilitate the assessee to plough back its unaccounted income in the form of fictitious Long Term Capital Gain/ Short Term Capital
Loss/Gain.
7. This appeal is being filed as it is covered under the exception provided in CBDT's Circular No.5 of 2024 dated 15.03.2024. 8. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
Brief facts of the case are that the assessee filed return declaring income of Rs. 2,40,30,780/- for AY 2011-12 on 08.11.2011. The return was processed u/s 143(1) of the Act. Subsequently, based on the information received from the Investigation Wing, Mumbai, that the assessee had purchased shares in a penny stock of M/s. Comfort Intech Ltd. during the year under consideration, the case was reopened u/s 148 of the Act. The details of the purchase and sale of shares of M/s. Comfort Intech Ltd. during the year under consideration are as under:
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A.Y. 2011-12
Indu Mahendra Shah
Sr
No.
No. of shares
Details of sale of shares
Details of purchase of shares
STCL/STCG
Date
Sale price
Date
Cost price
1. 2,00,000 29.07.2010
28,84,653/- 27.07.2010
8,00,000/-
20,84,653/-
(Gain)
2. 2,00,000 05.08.2010
31,84,206/- 27.07.2010
8,00,000/-
23,84,206/-
(Gain)
3. 26,00,000 10.01.2011
55,68,095/- 27.07.2010
1,04,00,000/-
48,31,904/-
(Loss)
Ld. AO, after detailed discussions, held that the short-term capital loss arranged by the assessee is bogus as the entire sale and purchase of shares were manipulated, and therefore, added the entire sale proceeds of Rs. 1,16,36,954/- to the assessee’s income and also disallowed the short-term capital loss of Rs. 6,63,064/-. Further, commission @2% for providing arranged capital losses on the total sum of Rs. 1,20,00,000/- is also added to the assessee’s income. 5. Aggrieved with the order, the assessee preferred an appeal before Ld. CIT(A). After detailed examination of submissions of the assessee and the facts of the case, Ld. CIT(A) deleted the addition with the following observations: “6.4 I have considered the assessment order, submission of the appellant and facts available on record.
The appellant has applied for Right Shares of Comfort Intech at Rs. 4/- each after renunciation from the existing shareholder Mis. Arcadia Shares and Stock
Brokers Pvt. Ltd. Thereafter, 30 lakh shares were purchased off market on 15.07.2010
at the price of Rs. 4/- per shares. Subsequently, these shares were dematerialized on 27.07.2010. It is seen from bank statements of the appellant that she has made payments of Rs. 1.2 crores by cheque for the purchase of these share. Thus, the source of purchase is disclosed. The A.O has not doubted the source of purchase.
Subsequently 2 lakh shares were sold on 29.07.2010 and thereafter on 05.08.2010
and 10.11.2011 the remaining shares have been sold. The appellant has sold the entire shares for Rs. 1,16,36,954 Incurring short term loss of Rs. 3,63,046/-.
6.5 It is seen from computation of income that, during the year under consideration the appellant has shown total short term capital gains of Rs. 2,40,39,185/-. The appellant has purchased and sold the scrips like Gujarat Cap. MRF Ltd. and Comfort
Intech, It is evident that the main income source of the appellant is short term capital
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A.Y. 2011-12
Indu Mahendra Shah gains on account of sale of shares. It is not a case that appellant has only purchased and sold the shares of Comfort Intech.
6.6 It is a fact that the appellant has purchased the shares of Comfort Intech for Rs.
1.2 crores and source of this purchase is disclosed. Hence the addition made of Rs.
1,16,36,954/- on account of sale amount is unjustified. Further, these shares have been sold immediately within 6 months incurring loss of Rs. 3,63,046/-. The appellant has also carried out the sale and purchase transaction in other shares showing short term capital gain of Rs. 2.4 crores during the consideration. There is no allegation against the appellant that she is involved in manipulation of this scrip.
There is no documentary evidence showing any cash transactions.
The facts show that, these shares were purchased at higher price and when the price started falling down the appellant sold the share immediately. It is also not case that shares have been sold at the lowest price incurring loss to avoid payment of taxes.
The nature of transaction does not indicate that the same is done with the intention to incur loss to evade payment of Tax.
6.7 The appellant has relied on the decision of Hon'ble Mumbai ITAT in case of Hasmukh Bhai Patel (HUF). It is submitted that Hon'ble Tribunal in same scrip has allowed appeal of the assesse. On perusal of the same, it is seen that this decision is also applicable in the facts of the appellant's case.
6.8 In view of the above facts addition made by the AO of Rs. 1.2 crores is deleted.
Accordingly, appeal on this ground is ALLOWED.”
Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal. Before us, Ld. AR has submitted that the decision of Ld. CIT(A) deserves to be upheld as Ld. AO has nowhere established in the assessment order that the transactions entered into by the assessee were not genuine. The assessee had purchased the shares after making a cheque payment of Rs. 1,20,00,000/-, which has not been doubted, and subsequently, the same were disposed off vide sale transactions made in three tranches. It has further been explained that in the first two transactions, the assessee made profits while a loss was incurred in the last sales transaction. The assessee had duly furnished copies of broker’s notes, D-mat account and bank statement, etc. in order to establish that the transactions made by the assessee were genuine. Under these circumstances, Ld. AR argued that there was no justification for Ld. AO to make
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A.Y. 2011-12
Indu Mahendra Shah an addition of the entire sale proceeds and only the addition to the extent of Rs.
3,63,046/- could have been made in case Ld. AO did not accept the documentary evidence submitted by the assessee.
7. Ld. DR, on the other hand, has strongly relied on the order of Ld. AO and pointed out that the modus operandi of Comfort Intech Group has been discussed in detail in the assessment order, and therefore, Ld. AO had rightly concluded that the transactions appeared to be non-genuine, and hence, the impugned additions deserve to be upheld.
8. We have heard the rival submissions and perused the material available before us. We observe that Ld. CIT(A) has thoroughly examined the facts of the case and passed a reasoned order deleting the additions made by the Ld. AO.
We, therefore, find no reason to interfere with the decision of Ld. CIT(A).
9. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 15.05.2025. NARENDER KUMAR CHOUDHRY
RENU JAUHRI
(न्यधनयक सदस्य/JUDICIAL MEMBER)
(लेखधकधर सदस्य/ACCOUNTANT MEMBER
Place: म ुंबई/Mumbai
दिन ुंक /Date 15.05.2025
अननकेत स ुंह र जपूत/ स्टेनो
आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
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A.Y. 2011-12
Indu Mahendra Shah
प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.
सत्यानित प्रनत ////
आदेशािुसार/ BY ORDER,
सहायक िंजीकार (Asstt.