Loading judgment…
Facts
The Assessing Officer (AO) received information that the assessee, Manish Kumar Mehta, had procured bogus Long Term Capital Gain (LTCG) of Rs. 4,83,507/- by selling KONACOM shares through a shell company. An investigation found that these were penny stocks used for accommodation entries, and the AO added the amount under section 69B of the Income Tax Act, 1961, initiating penalty proceedings.
Held
The CIT(Appeals) granted relief to the assessee, finding it a case of mistaken identity. The contract note and broker's statements showed transactions for 'Manish Kumar Mohta, HUF' (Kolkata address) using the assessee's PAN, but the assessee (Manish Kumar Mehta, Durg) denied these transactions and his bank statements showed no corresponding credit. The Tribunal upheld the CIT(A)'s findings, concluding that the assessee was not the beneficiary of the impugned transactions.
Key Issues
Whether the addition for bogus LTCG was justified when the assessee claimed mistaken identity, asserting that the transactions belonged to a different entity ('Manish Kumar Mohta, HUF') despite sharing the same PAN.
Sections Cited
69B, 271(1)(c), 133(6), 142(1), 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM
The captioned appeal preferred by the revenue emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 26.03.2025 for the assessment year 2012-13 as per the grounds of appeal on record.
1. 2. The relevant facts as per the assessment order are extracted as follows: “3. In brief, the facts of the case are that as per information placed on record, the assessee d procured bogus LTCG/STCG by fund transfer through Shell company M/s Matribhumi Commerce Pvt. Ltd. The assessee has routed his undisclosed income through this shell company and has not disclosed the investments made by him. Accordingly, the assessee sold 4000 shares of KONACOM through Sunil Kumar Kayan, a share broker on 30.06.2011 for a total consideration of Rs.4,83,507/- and acquired Rs.4,83,507/- as long term capital gain on sale of such shares. 4. As far as genuineness of acquisition and sale of subjects shares, are concerned, the Directorate of Income Tax (Investigation), Unit 2(1) Kolkata had carried out extensive investigations in the issue of providing bogus long term or short term ' capital gain accommodation entries to the desired beneficiaries and as a result of such investigation, it has been categorically established that the shares of M/s Multiplus Resources Ltd were in facts penny stocks which were used for accommodation entries by the alleged stock brokers and entry operators by rigging for illegal price - hiking through syridicate trading. It was observed that large amounts were credited/deposited mainly in the cash and bank accounts of the concerns i.e. Riddhi Siddhi Enterprises, S.D Trading Co, Gupta Enterprises, Jaiswal Trading , Rohan Singh which was subsequently transferred mainly to the bank account of M/s DLS Export Pvt Ltd, Chitraksh Vintrade Pvt Ltd, Sukalyana Infrastowers Pvt Ltd, Peacock Vintrade Pvt Ltd. On perusal of MCA website it is seen that M/s DLS Export Pvt Ltd, Chitraksh Vintrade Pvt Ltd, Sukalyana Infrastowers Pvt Ltd,,Peacock Vintrade Pvt Ltd have been striked off. Further statement on oa..1-Lwere recorded wherein the brokers have categorically admitted that funds received frohis.,M/s Coral Tradecom Pvt Ltd, Hitendra Commercial Pvt Ltd,IMurlidhar Comrnerci4,Pvi Ltd,'Matribhumi Commerce Pvt Ltd, Yasoda Marketing Pvt Ltd was used to provide bogus long term capital:gain/ short term capital loss to various persons. The above entities/companies and intermediate companies, it is learned that most of these entities are either non-filer or filed their ITR showing meager income. Apparently these companies were running on papers only and their bank accounts were used for layering of funds. Accordingly Cash Trail, identifying several has been prepared and the name of assessee was found among the list of the beneficiaries.
5. In the statement given by Ashok Kr. Kayan and Sunil Kr. Kayan, they explained the modus operandi of bogus LTCG/STCL provided through Penny stocks as "There was syndicate working in penny stock. At first level, client with unaccounted cash approach to the entry operators for getting LTCG. The entry operator0 turn approach a set of broker who are in their network. The brokers work in co- ordination with each other so that trades are time synchronized and the scrips remains with cartel of broker and entry operator only. The share prices are rigged_so_that a penny stocks gets a high value over a period of one year. Once, the scrips are retain beyond a period of one year in the client accounts they are sold to some jammakharchi company which are operated by the same set of entry operator so that the client get LTCG. Further, since the jammakharchi client has purchased the scrips at higher rate, the rates are lowered over a period of time so that they get capital losses which they can claim in their return of income. Hence, while the individual clients incurs long term capital gain, the jammakharchi company clients earns short term capital loss and there is tax evasion at both the level. The only intention was to bring unaccounted wealth to book without paying taxes or evade paying taxes. It was only meant to- give a lucrative name to the company so that more beneficiaries can be attracted to the scheme.
As per information placed on record, notice u/s.133(6) was issued to BSE, Stock Broker, HDFC and to Calcutta Stock Exchange on various dates calling for information concerning the assessee for Year under consideration. Vide notice u/s.142(1) dated 26.08.2019 along transaction related to shares trading along with detailed questionnaire the assessee was asked to explain that there is suspicious 6.1 In compliance to the above the assessee denied to have made any share trading during the year under consideration. In response to letter issued u/s.133(6) of the Act, Shri Sunil Kay an stock broker at In Stock Exchange furnished the share trading detail of the assessee. He also furnished Contract Note dated 30.06.2011 in the name of the present assessee Shri Manish Kumar Mohta (HUF). Further, in the ledger and statement of accounts of the broker it is clearly given that, cheque of Rs506.58/- has been issued to the assessee on 05.07.2011. The copies are produced as under:
7. Keeping in view of the above facts and circumstances of the case, it is ascertained that an amount of Rs.4,83,507/- credited is considered as unexplained sources of investment under section 69B of the Income Tax Act, 1961 and added to the total income of the assessee. Penalty proceedings u/s 271(1)(c) of the Income Tax Act is initiated separately for concealment of income.”
The Ld. CIT(Appeals)/NFAC has provided relief to the assessee by observing as follows: “7.1.1. During the appellate proceedings while going through the submission filed along with appeal memo the appellant has contended that the contract note was between the Sunil kumar Kayan & Co. and the Manish kumar mohta (HUF), 6, vivekanan Road, Kolkatta. However, in the case of the appellant the name of HUF is Manish kumar Mehta HUF, Address: 62, mahavir colony, Durg. (C.G). Therefore, the appellant has denied to enter into any contract as mentioned above. Further, the appellant has submitted that as per bank statement of M/s Sunil Kumar Kayan & Co. which reflects the entry dated 06.07.2011 a fund remittance of Rs.483506.58/- to Manish Kumar Mohta not Manish Kumar Mehta HUF. Also, no such transaction was found in our bank statement in support of his claim the appellant has submitted a copy of bank statement. Further, the appellant has submitted that as per the bank statement of M/s Sunil Kumar Kayan & co and the contract note, the transaction belongs to someone Manish Kumar Mohta (HUF) r/o 6, vivekanand road, Kolkatta. Also, the AO has not conducted any inquiry from the HDFC Bank. The only similarity between the appellant and someone Manish Kumar Mohta(HUF) is PAN seeded in the contract note. 7.1.2. I this case it is seen that the main focus of AO is to bring the appellant under taxation on the basis of details received from M/s Sunil Kumar Kayan & Co. against the notice issued u/s 133(6). However, as per details received from M/s Sunil Kumar Kayan & Co. it is seen that the transaction belongs to someone Manish Kumar Mohta (HUF). However, the PAN reported was same. As per assessment records, notice u/s 133(6) was issued to BSE, Stock Broker, HDFC and to Calcutta Stock Exchange calling for information concerning the appellant for year under consideration. However, the appellant denied to have any share trading during the year under consideration. Further, the appellant has filed its return of Income for the year under consideration on 28.03.2013 declaring total income of Rs.305510/-. The appellant has not disclosed trading of any shares or receipt of Rs.483507/- as gathered from the information above, in his original return of income. Later on in response to the notice u/s 148, the appellant has again e- filed his return of income on 27.04.2019 declaring total income at Rs.305510/-. In support of his claim the appellant has also submitted copy of bank account and ledger details as under:
In view of above discussion and details provided by the appellant it is seen that in this case the only basis of addition is the details submitted by M/s Sunil Kumar Kayan & Co. The details available with this office it is seen that the appellant is not a beneficiary of any gain from sales of shares amounting to Rs.483507/- as no credit entry was available. The appellant has also denied-to enter in any trade with M/s Sunil Kumar Kayan & Co. during the assessment proceedings before AO. Ground no.1 is allowed. AO is directed to reduce the income of appellant by Rs.483507/-. 7.2. In the result, appeal of the appellant is allowed.
I have carefully considered the submissions of the parties herein and documents placed on record. This is a case of taxation based on mistaken identity. The contract note of M/s. Sunil Kumar Kayan & Co. depicts the name of Manish Kumar Mohta, HUF with address 6, Vivekananda Road, Kolkata-700 001, however, PAN mentioned there is of the present assessee whose name is Manish Kumar Mehta, Durg. The entire taxability has been placed in the hands of the assessee due to quoting of wrong PAN by M/s. Sunil Kumar Kayan & Co., the broker issuing the said contract note which is extracted as follows:
Therefore, the mistake has emanated from the contract note itself issued from the office of the broker i.e. M/s. Sunil Kumar Kayan & Co. wherein PAN was wrongly mentioned regarding the present assessee wherein the transaction pertains to Manish Kumar Mohta HUF. The assessee had even submitted his bank statement where there is no credit entry in favour of the assessee regarding the sale of shares amounting to Rs.4,83,507/- which has been rightly held by the Ld. CIT(Appeals)/NFAC after due verification of the said document that the assessee is not beneficiary of any gain from sale of shares regarding the aforesaid amount. Furthermore, it has been determined by the Ld. CIT(Appeals)/NFAC through further verification that in the bank statement of the said broker i.e. M/s. Sunil Kumar Kayan & Co., credit entry shows in the name of Manish Kumar Mohta HUF and not Manish Kumar Mehta and therefore question does not arise itself regarding any benefit derived by the assessee. In fact, it was submitted by the Ld. Counsel that the assessee is working as a broker with regard to edible oils and as per his regular functioning, he is only procuring orders on behalf of various retailers and sending the names of such retailers to the parent company manufacturing edible oils and in lieu of such recommendation of the retailers, the assessee is receiving commission income. These facts have not been disputed by the Department. In fact, the assessee has never engaged in any trading of shares or scrips etc. The evidence of the source of his income is clearly visible from the return of income filed and in such scenario, it is an admitted fact that when the assessee is not trading in any shares or scrips and that there is no benefit accrued to the assessee as has been examined by the Department and held by the Ld. CIT(Appeals)/NFAC and when it is found that such trading was done by Manish Kumar Mohta HUF and not by the assessee before me, in such circumstances, I do not find any infirmity with the findings of the Ld. CIT(Appeals)/NFAC in providing relief to the assessee which is hereby upheld.
6. As per the above terms grounds of appeal raised by the revenue are dismissed.
In the result, appeal of the revenue is dismissed.
Order pronounced in open court on 07th day of August, 2025.