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Facts
The assessee faced an addition of Rs. 99,60,000 for unexplained investment in shares of SMS Techsoft (India) Limited (SMSTL). The Ld. Counsel submitted that SMSTL engaged in circular transactions, routing funds through 32 persons, including the assessee, to issue preferential shares without actual consideration, a fact corroborated by a SEBI order dated 27/07/2018.
Held
The Tribunal relied on the SEBI finding that SMSTL allotted shares without receiving actual consideration, which demonstrated that the assessee had not made any investment of its own. Citing precedents where the CIT(A) deleted similar additions in identical circumstances, the Tribunal concluded that the impugned addition was not sustainable and ordered its deletion.
Key Issues
Whether the addition for unexplained investment in shares is valid when a SEBI order confirms the company allotted shares without actual consideration, implying no real investment by the assessee.
Sections Cited
250
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Income Tax Appellate Tribunal, “ C ” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
Year : 2012-13 Alakaben Kirtibhai Shah The ITO बनाम/ G-206, Vrajbhumi Flat Ward-7(2)(1) v/s. Opp. GEB Dehgam Road Ahmedabad Naroda Ahmedabad – 382 330 "थायी लेखा सं./PAN: CPAPS 2335 R (अपीलाथ(/ Appellant) ()* यथ(/ Respondent) Assessee by : Shri Chetan Agarwal, AR Revenue by : Shri Rohit Aasudani, Sr.DR सुनवाई की तारीख/Date of Hearing : 20/01/2026 घोषणा की तारीख /Date of Pronouncement: 28/01/2026 आदेश/O R D E R Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 24/11/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2012-2013.
The issue involved, in this appeal, is relating to the addition made/confirmed by the lower authorities of Rs.99,60,000/- on account of Alakaben Kirtibhai Shah vs. ITO Asst. Year : 2012-13 unexplained investment made in shares of SMS Techsoft (India) Limited [for short ‘SMSTL’] by the assessee.
At the outset, the Ld. Counsel for the assessee has submitted that this was a case, where certain circular transactions were made by SMSTL to issue preferential shares of higher amount than their actual worth. Therefore, a scheme was devised to intorduce the funds through certain persons and for which, the funds were diverted to 32 persons. The funds were routed to their accounts by SMSTL and, thereafter, it was routed again to the accounts of SMSTL. In fact, no investment was made by those 32 persons including the assessee. The matter was examined by the Securities and Exchange Board of India (SEBI). The copy of order dated 27/07/2018 of SEBI has been placed at page No.7 of the paper-book, wherein, the entire factual background and modes operandi of the SMSTL has been elaborately discussed and finding as to whether any consideration was passed on by those 32 persons, including the assessee, has been given in para-82 of the said order, wherein, the SEBI has concluded that SMSTL had allotted 3 crores shares, but without any actual consideration amount received by SMSTL. We note that the aforesaid finding of the SEBI, itself, proved that the assessee has not made any investment of its own. Therefore, it is not a case of any unexplained investment by the assessee.
The Ld. Counsel for the assessee further placed reliance on various orders in relation to other such persons, whose accounts were also used for rotation of funds, wherein, the Ld. CIT(A) in their cases, in identical facts and circumstances, has deleted the addition which was made by the AO on account of similar ground of unexplained investment. Alakaben Kirtibhai Shah vs. ITO Asst. Year : 2012-13
The DR, before us, could not rebut the aforesaid factual aspects on the file. In view of this, the impugned addition is not sustainable and the same is ordered to be deleted.