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Facts
The assessee's case was reopened under Section 147, and an addition of Rs. 14,49,085/- was made as unexplained credit related to trading in shares of Safal Herbs Limited. This followed a search under Section 132 on Jignesh Shah, an accommodation entry provider, whose network was linked to bogus transactions. The assessee had purchased 50 shares but sold 4350 shares of Safal Herbs Ltd., declaring a loss of Rs. 2,58,285/-.
Held
The Tribunal upheld the additions made by the Assessing Officer, affirming the Ld. CIT(A)'s decision to dismiss the appeal. It found that the assessee's claim of genuine share transactions lacked evidence, noting the significant mismatch between the number of shares purchased and sold, and the failure to demonstrate that the omission of income was unintentional or the purchase genuine.
Key Issues
Whether the additions for unexplained credit arising from share trading were justified given the alleged non-genuineness of transactions and the link to an accommodation entry operator, and whether the CIT(A) erred in not allowing the claimed business loss.
Sections Cited
147, 132
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
Date of hearing : 03-07-2025 Date of pronouncement : 26-08-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 25-02- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2013-14.
The grounds of appeal are as under:- “1.1 That the Ld CIT(Appeals) has erred in upholding the additions made by assessing officer for Rs 14,49,085 being allegedly unexplained credit on account of trading in shares of Safal Herbs Limited. 1.2 That the Ld CIT(Appeals) has erred in holding that transactions carried out by appellant in the shares of Safal Herbs Limited are not genuine though the shares are sold in open market. STT is paid, shares are transferred from demat account and sale consideration is received through banking channel.
Roshniben Sumanlal Kapadia, A.Y. 2013-14 1.3 That the Id CT(A) has erred in upholding the addition of Rs 14,49,085/- in the income of the appellant though the appellant has shown sales price of above shares in turnover of the appellant. Therefore, no further addition can be made. 1.4 That the Id. CIT(A) has erred in not allowing business loss as per return of income of Rs 2,58,285/- which is after set off of turnover of Rs 14,49,085/-. The correct business loss should be quantified at Rs. 18,09,520/- which should be set off against addition. 1.5 The appellant craves leave to add, alter or amend any of the grounds of appeal before final hearing of the appeal.”
3. As per the information received that the company Safal Herbs Ltd. earlier known Parikh Herbals Ltd. is a being stock scrip and the assessee has purchased 50 shares for Rs. 23,452/- and sold 4350 shares for Rs. 15,80,247/- by indulging into synchronized trading and manipulation of price. As per the observation of the Assessing Officer, a search u/s. 132 was launched on 11-09-2018 in the case of Jignesh Shah, an accommodation entry provider of Ahmedabad. The search resulted into seizure of unaccounted cash of Rs. 19.3 crores related to accommodation entries and commission earned thereon from residential premises of Jignesh Shah along with incriminating digital as well as documentary evidences. It was found that the Jigensh Shah is managing and controlling multiple companies and concerns which are not carrying out any genuine business activity. These concerns are involved into activity of providing accommodation entries of various kinds such as unsecured loans, share premium, bogus gains, contrived losses etc. On verification of the information, the assessee has bought quantity of shares 50 of the scrip Safal Herbs Ltd. known as Parikh Herbals Ltd at Rs. 23,452/- and sold the quantity of shares of 4350 at Rs. 15,80,247/- thereby declaring loss of Rs. (-)2,58,285/-. Thus, the income of Rs. Roshniben Sumanlal Kapadia, A.Y. 2013-14 15,80,247/- was escaped assessment. The case of the assessee reopened u/s. 147 of the Act by obtaining necessary approval by jurisdictional Assessing Officer. Statutory notice were issued and after taking cognizance of the assessee’s reply, the Assessing Officer made addition of Rs. 14,49,085/- of the Act treating the said amount as unexplained cash credit.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The ld. A.R. submitted that the transaction carried out by the assessee in the shares of Safal Herbs Ltd. are genuine transactions though the shares were sold in open market, the securities transaction tax was paid, the shares were transferred from demat account and sale consideration was received through banking channel. The ld. A.R. submitted that the assessee at no point of time was involved in the case of accommodation entry operator Jignesh Shah and there was connection established by the Assessing Officer to that extent. The ld. A.R. further submitted that in alternate that whether the said amount should have been reduced from the turnover and the assessee should have allowed this amount while declaring loss to the extent of turnover.
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has earned long term capital gain by selling 4350 Roshniben Sumanlal Kapadia, A.Y. 2013-14 shares of Safal Herbs Ltd. though the assessee has purchased only 50 shares on 08-04-2011 and sold the said shares on 11- 06-2012. Thus, the assessee has earned short term capital gain. From the perusal of the submissions made before the Assessing Officer dated 18-02-2022, 07-08-2021 and 10-03-2022, it is clear that the assessee sold share on 29-06-2012 and 13-07- 2012 and the assessee has not shown any long term capital gain in the return of income. But this was a mistake on part of the assessee and therefore the sale of shares is shown in trading account thereby offered as income by the assessee. The ld. A.R.’s contention during the year, the total purchase of shares is Rs. 28,95,677/- and sales of share is Rs. 40,65,486/- in various companies. The purchase price of shares of Safal Herbs Ltd. is only Rs. 23,452/- which is less than 1% of total purchase price but the assessee has not shown this income. This plea of the Ld. AR does not sustain as the assessee has not demonstrated before the Assessing Officer as well as before the CIT(A) that his mistake was not intentional or the purchase was genuine. Therefore, this ground of assessee will not sustain, hence dismissed. Since the main ground is dismissed, the alternative ground that The turnover of the assessee is reflecting the loss in the present assessment year, also do not have any base as the Assessing Officer has taken into account all the aspects about the capital gain in assessee’s income and thereafter, assessed the total income of the assessee. Therefore the alternate plea whether the loss was taken into account or not needs no verification. Therefore, this alternative plea is rejected. Thus, the appeal of the assessee is dismissed.
Order pronounced in the open court on 26-08-2025