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Facts
The assessee's case was reopened under section 147 based on information about trading in penny stocks. The assessee had not filed a return for AY 2012-13 but later filed one declaring income of Rs. 1,48,140. The Assessing Officer (AO) added Rs. 42,60,406/- as unexplained investment for purchasing shares of Mind Vision Capital Ltd.
Held
The CIT(A) confirmed the addition made by the AO, holding that the assessee failed to disclose a complete trail of share transactions and that the evidence was not satisfactory. However, the Tribunal found that the assessee had furnished complete details of investment sources, including bank statements and purchase bills through well-known brokers.
Key Issues
Whether the addition made by the AO and confirmed by the CIT(A) on account of unexplained investment in shares is justified when the assessee has provided evidence of the source of investment.
Sections Cited
147, 69, 131, 148
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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of ld.
CIT(A)/ADDL/JCIT(A), Agra dated 30.09.2025 for Assessment Year (A.Y.)
2012-13.The assessee has raised the following grounds of appeal:
“1. The ld. CIT(A) has erred in confirming the order of the AO and adding a sum of Rs. 42,60,406/- paid towards service tax on rent.
The ld. CIT(A) erred in not appreciating the details and submissions submitted by the assessee and treated the details submitted as incomplete along with the appeal memo and confirmed the additions made by the AO in the impugned assessment order.”
Brief facts of the case are that assessee is individual. As per contents of assessment order no return of income for A.Y. 2012-13 was filed by assessee.
The case of assessee was reopened under section 147 on the basis of information that certain search and seizure action was conducted by Investigation Wing wherein certain incrimination material about providing (A.Y. 2012-13) Rajendra P. Shah bogus long term capital gain or short term capital gain or business income was discovered. On the basis of such information, it was discovered that assessee has also traded in penny stock scrip of Mind Vision Capital Ltd. during F.Y. 2011-12. The assessing officer after recording the reasons about escapement of income issued notice under section 148 to the assessee. (Date of notice under section 148 is not mentioned in the order). In response to such show cause notice, the assessee filed return of income declaring total income of Rs. 1,48,140/-. The assessing officer (AO) in para 3 of assessment order recorded about information about penny stock company and beneficiary thereof. As per information, the assessee is beneficiary of such penny scrip of Mind Vision Capital Ltd. The AO also recorded that statement of assessee was recorded under section 131 on 19.11.2019. The assessing officer referred certain question asked to him and answer thereof. In response to question no. 19, the assessee stated that he has purchased share of Mind Vision Capital Ltd. from Kotak Securities and Religare Securities Ltd. @ Rs. 9.85 per share. He was advised by broker Religare Securities. In response to question no. 24, the assessee explained that he has not sold share of Mind Vision Capital and that he has not claimed in long term or short term capital gain during the year. In para 5 of assessment order, the AO recorded that assessee purchased 294225 share of Mind Vision Capital Ltd. for a consideration of Rs. 42,60,402/-. The assessee was issued show cause notice as to why such investment should not be treated as unexplained. The ld. AO recorded that no response was made by assessee. The AO recorded that assessment was getting time barred. The AO made addition of purchase
Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). In the statement of fact, the assessee explained that he has purchased share of Mind Vision Capital Ltd. out of explained source. The shares were held in D-mat. No capital gain or capital loss was claimed by assessee nor claimed carry forward loss. There is no application of section 69.
An investment of assessee is explained. In the first show cause notice dated 07.12.2019, the AO proposed for disallowance of short term capital loss of Rs.
18,52,609/- on sale of scrip of Mind Vision Capital Ltd. and in second show cause notice was issued on 14.12.2019 to explain as to why the investment of Rs. 42,60,406/- should not be added as unexplained investment, fixing the date of hearing on 17.12.2019. No sufficient time was given to the assessee.
The assessee has explained the source of investment.
The ld. CIT(A) after considering the submission of assessee and the contents of assessment order, in 7.2 of his order recorded that assessee failed to disclose complete trail of impugned share transaction. D-mat and bank statement has been placed on record but no cogent details were furnished by assessee about subsequent treatment of shares. In absence of such transaction disclosure, the explanation cannot be regarded as satisfactory.
The transaction remains clouded with suspicious evidence. The evidence produced by assessee cannot be accepted at face value. The investment report in similar cases have highlighted that documents were created to cover up transaction in penny stock. The ld. CIT(A) ultimately and in para 8 of his (A.Y. 2012-13) Rajendra P. Shah order held that in absence of complete disclosure and transaction history about final outcome of the share which were tainted by pattern notice in investigation report. The assessee has not satisfactorily discharged the onus under section 69 and upheld the addition made by assessing officer. Further, aggrieved the assessee has filed present appeal before Tribunal.
I have heard the submissions of ld. Authorised Representative (ld. AR) of the assessee and the ld. Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that during assessment as well as before ld. CIT(A), the assessee furnished complete details of source of investment. The assessee purchased 280000 shares of Mind Vision Capital Ltd. Such shares were purchased through well-known brokers namely Kotak Securities and Religare Securities Ltd. The assessee used to purchase share only through such well-known brokers. The assessee has purchased such share for a consideration of Rs. 41,11,342/-. Out of which Rs. 22,68,000/- was paid from same bank account and remaining sum of Rs. 18,43,342/- was paid after selling shares in stock worth Rs. 36,52,208/-. Such stock of shares was sold in respect of shares of Tutis Technology, Hindalco and JSW Steel.
The assessee has purchased shares from explained source through well- known brokers. The assessee sold 29200 shares of Mind Vision Capital Ltd. for a sum of Rs. 9,52,446/- where he incurred losses of Rs. 50,245/-. The assessing officer has not recorded correct facts in assessment order. The AO simply relied on the alleged information in his possession, without giving any finding on evidences furnished by assessee. The ld. AR of the assessee submits that complete source of investment was furnished before AO as well (A.Y. 2012-13) Rajendra P. Shah as before ld. CIT(A). The lower authority disregarded the submissions and the evidences furnished by assessee. The lower authority made addition solely on the basis of suspicion despite the fact that complete evidence of sources of investment was furnished. The assessee furnished complete evidence that payments of acquisition of shares were made through banking channel.
Suspicion however strong may be cannot substitute evidence.The ld. AR of the assessee submits that he has furnished complete details of transaction.
There was no allegation against the brokers of assessee about price rigging about such shares.
On the other hand, the ld. Sr. DR for the Revenue submits that there is categorical finding of lower authorities that assessee has not furnished complete details of investment. The share purchased by assessee is penny scrip, thus he fully support the order of lower authorities.
In short rejoinder, the ld. AR of the assessee submits that he has placed on record acknowledgement of ITBA portal wherein it is clearly reflected about submission of bank statement which was filed on 08.11.2019. The assessee also furnished detail of transaction of share through Religare Securities, such acknowledgement is a part of page no. 1 to 3 of paper book. Further, vide submission dated 08.02.2021, before ld. CIT(A), the assessee furnished written submission, statement of fact, script wise detail, details of scrip purchased through Religare as well as Kotak Securities, acknowledgement of which is filed at page no. 4 of paper book. The assessee furnished details written submission before ld. CIT(A) in explaining all such fact as has been (A.Y. 2012-13) Rajendra P. Shah argued before this bench. All such fact and evidences are completely overlooked by lower authorities.
I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. I find that case of assessee was reopened on the basis of information that assessee traded in penny scrip of Mind Vision Capital Ltd. The assessing officer also recorded statement of assessee on 19.11.2019. I find that in response to various questions, the assessee explained that he has purchased shares through Kotak Securities and Religare Securities Ltd. Such investments were made on the advice of Kotak Securities and Religare. The assessee also explained that he has not claimed in short term or long term capital gain. The AO ultimately made addition on account of unexplained investment for purchase of share by taking view that complete details were not furnished. I find that before ld.
CIT(A), the assessee filed written submission explaining the source of investment in his written submission dated 06.02.2021. In the written submission, along with written submission, the assessee furnished purchase bills of Kotak Securities as well as Religare Securities. The assessee also furnished his financial/ bank statement. The assessee in his submission explained that certain shares of Mind Vision Capital Ltd. were sold and the assessee incurred losses. The assessee specifically explained the source of purchases through banking channel. The assessee explained that he has paid Rs. 22,68,000/- through his Savings Bank Account and Rs. 18,43,342/- on selling his old stock of shares of Tutis Technology, Hindalco and JSW Steel.
The ld. CIT(A) has not given any finding on such submission except holding (A.Y. 2012-13) Rajendra P. Shah that assessee has not furnished complete disclosure. I find that ld CT(A) accepted the fact that D-mat and bank statement was furnished before him, but no cogent details were furnished by assessee about subsequent treatment of shares. Subsequent treatment was not in dispute before him.
Once, ld CIT(A) accepted that D-mat and bank statement was furnished, he was required to give his finding on such bank statement, if the investment is through banking channel or not. If he has doubt about source of source further inquiry should have been made from assessee. I find that lower authorities made addition under section 69 that is on account of unexplained investment. Once, the assessee discharged his onus in furnishing bank statement and that shares were purchased through a well-known broker, the AO or ld. CIT(A) instead of bringing any adverse evidence simply relied upon the information available with them.
Before me, the assessee has various dates of acquisition of shares through Kotak Securities as well as Religare Securities along with the payments details and transaction statement along with D-mat statement and contract note of purchase of shares. The assessee has also furnished source of investment. All such evidences were furnished before lower authorities. As recorded above, once the assessee has discharged his primary onus, the lower authorities were required either to bring adverse material or to give specific finding on such evidences furnished by assessee. I find that there is no allegation in the entire assessment that assessee or his brokers were involved in make unaccounted or unexplained investment or have any direct or indirect role.
Thus, I do not find any justification for making addition under section 69
In the result, the appeal of assessee is allowed.
Order pronounced in the open Court on 13/02/2026. -S Sd/-- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 13/02/2026 Biswajit