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Facts
The assessee's return of income for AY 2015-16 was processed, but later, information indicated involvement in penny stock investment. The Assessing Officer initiated reassessment proceedings under Section 147 and added Rs.15,22,776/- as unexplained sales proceeds under Section 68, treating the share transactions as bogus. The First Appellate Authority (CIT(A)) dismissed the assessee's appeal, upholding the AO's order.
Held
The Tribunal found that the assessee provided comprehensive evidence, including contract notes, demat account statements, and bank records, proving the genuineness of the share transactions, which occurred through a registered broker and were not blacklisted by SEBI. The Assessing Officer failed to provide any material evidence to substantiate the claim of bogus transactions. Consequently, the addition of Rs.15,22,776/- made under Section 68 was deleted.
Key Issues
Whether the Assessing Officer was justified in treating share transactions as bogus and making an addition under Section 68 of the Income Tax Act, despite the assessee providing supporting evidence for their authenticity.
Sections Cited
147, 144B, 143(1), 148, 143(3), 142, 68, 115BBE, 10(38)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee against the order of National Faceless Appeal Centre (NFAC) [hereinafter referred as ‘CIT(A)’] dated 07.11.2024 for the Assessment Year (A.Y.) 2015-16 in the proceedings under Section 147 read with Section 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The brief facts of the case are that the assessee had filed his return of income for the A.Y. 2015-16 on 29.09.2015 declaring income of (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 2 of 5 Rs.39,21,390/-, which was processed under Section 143(1) of the Act. Subsequently, the Assessing Officer had received an information from the Investigation wing that the assessee was a beneficiary of penny stock investment in the shares of M/s. Vandana Knitwear. Therefore, a notice under Section 148 of the Act was issued by the Assessing Officer on 31.03.2021 after recording the reasons. In the course of assessment, the assessee had made compliance before the Assessing Officer and explained the transactions made by him. However, the Assessing Officer was not satisfied with the explanation of the assessee and the entire sales proceeds of the penny stock shares of Rs.15,22,776/- was held as unexplained and added under Section 68 of the Act r.w.s.115BBE of the Act. The assessment was completed under Section 147 r.w.s. 144B of the Act on 29.03.2022 at total income of Rs.54,44,166/-.
Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
4. Now, the assessee is in second appal before the us. The following grounds have been taken in this appeal: -
1. The learned AO passed order of assessment for the assessment year, under section 143(3) read with section 147 and 148 of the Act, without proper authority or appropriate jurisdiction under provisions of section 148 of the Act. Thus the order of assessment is void and bad in law.
2. The Officer is required to make "Inquiries” under section 142 of the Act before passing order under section 143, making addition of Rs.15,22,776/- under section 68. It is evident from the records that the order of assessment is passed without inquiry.
(Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 3 of 5 The Learned AO as well as Learned CIT Appeals, has ignored all relevant facts placed on record i.e. Share Purchase and Sale Contract Notes, Demat Accounts, STT Paid Certificates, Date of Purchase and Sale, Provisions of Section 10(38) of the Act. No adverse observations are made against the evidences placed on record. Thus order suffers from an incurable defect void and needs to be struck down.
3. The Learned CIT Appeal has grossly erred in passing the order without discussing the reasons for rejection of all cogent and material evidences placed on record during the course of assessment and appeal proceedings. The order passed by CIT Appeal is cryptic, non-speaking and without reasons. Thus it is a defective order and required to be struck down.
The Learned Assessing Officer has Assessing has acted upon the so called Information as an "Evidence" against the Assessee, without corroborating the same with other information and or evidences. The AO remained in his chair with folded hands. The Learned AO rejected all the cogent and material evidences and explanations without discussions and passed the order.
5. The Learned AO has considered entire sale consideration of Rs.15,22,776/- as un-explained cash credit during the previous year 2014-15. It is an undisputed fact that the Assessee has invested Rs.6,55,015/- in shares during the previous year 2012-13. The AO wrongly considered entire sale consideration as un-explained under section 68.”
Shri Kalpesh Shah, Ld. AR of the assessee explained that all the transactions of purchases and sales of shares of M/s. Vandana Knitwear were carried through recognised Stock Exchange and there was no reason for the Assessing Officer to treat these transactions as bogus. He explained that the assessee is a regular investor in shares and the evidences in the form of contract note, payment details, copy of bank account, de-mat account etc. were brought on record to prove the authenticity of the transactions. He further submitted that the Assessing Officer had not given any reason to treat the transactions as bogus and unaccounted. There is no reference of any statement or any other material in the assessment order to hold that the transactions entered into by the (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 4 of 5 assessee were bogus. The Ld. AR explained that these share transactions were made through Edelweiss Financial Advisors Limited, a registered Broker with SEBI, BSE and NSE. Further that the scrip of M/s. Vandana Knitwear was not blacklisted by SEBI during the relevant period or even afterwards. Therefore, the addition as made by the Assessing Officer was not on based any material fact but was on presumption only.
Per contra, Shri Sudhakar Verma, the Ld. Sr. DR supported the orders of the Assessing Officer as well as the Ld. CIT(A).
We have considered the submissions of the assessee. In the return of income for the A.Y. 2015-16, the assessee had claimed LTCG of Rs.14,83,036/- as exempt under Section 10(38) of the Act. It is found that this LTCG was derived on trading of various shares such as Rubfila, GHCL, RIL, Idea, Vandana, JSW Ispat, Abbot India Limited, Reliance, Bajaj Hindustan etc. The assessee had disclosed exempt LTCG in respect of 17 scrips and the LTCG pertaining to Vandana Knitwear was Rs.8,67,671/- only. It is apparent from the facts brought on record that the assessee was a regular investor in shares and the transactions in the shares of Vandana Knitwear was not a one-off transaction. It is further found that the shares of Vandana Knitwear were purchased through a registered broker in the month of December 2012 and sold in November 2014 and no off-market transaction was involved. The purchases as well as sales of shares of Vandana Knitwear are also found duly reflected in the de-mat account statement of the assessee. Further, the purchases as well as the sales proceeds of these transactions were duly reflected in the bank account of the assessee. In view of the evidences as brought on record by the assessee in the course of assessment proceedings, (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 5 of 5 there was no reason to treat the transactions in the shares of Vandana Knitwear as bogus or unexplained. The Assessing Officer has not discussed about any material evidence which could prove that the transactions were bogus. Neither the scrip of Vandana Knitwear was blacklisted by the SEBI nor any evidence of assessee’s involvement in the price fluctuation of the shares has been brought on record. We, therefore, do not find any justification to treat the transactions of the assessee in the shares of Vandana Knitwear, which was duly explained with supporting evidences, as bogus or unaccounted. Therefore, the addition of Rs.15,22,776/- made by the Assessing Officer under Section 68 of the Act in respect of bogus share transactions in respect of scrip of Vandana Knitwear, is deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on this 3rd September, 2025.