Income Tax Appellate Tribunal - Mumbai
Sumitra Surendra Gadodia,Mumbai vs Ito 31(3)(4), Bandra, Mumbai on 4 December, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC" BENCH, MUMBAI
BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER)
AND
MS. PADMATHY S. (ACCOUNTANT MEMBER)
I.T.A. No. 4519/Mum/2025
Assessment Year: 2014-15
Sumitra Surendra Gadodia Vs. ITO, 31(3)(4)
903 & 904, O2 Rustomjee O Zone
Near MTNL Officer
Goregaon, West Mumbai
Mumbai - 400062
[PAN: AAEPG3643F]
(Appellant) (Respondent)
Assessee by Shri Ajay Singh & Shri Akshay Pawar, ARs
Revenue by Shri Nagnath Pasale, Sr. DR
Date of Hearing 01.10.2025
Date of Pronouncement 04.12.2025
ORDER
Per Smt. Beena Billai, JM:
Present appeal filed by the assessee arises out of order dated 18/06/2025 passed by NFAC, Delhi [hereinafter "the Ld. CIT(A)"] for assessment year 2014-15 on the following grounds:-
"Addition of Rs. 88,67,154/-
1. The learned CIT(A) erred in upholding the assessment order disallowing the LTCG of Rs. 81,72,626/- and treating the same as non-genuine and taxing the entire sale consideration of Rs. 88,67,154/- in regard to scrip KDJ Holidayscapes and Resort Limited, without appreciating that the shares were purchased and sold through the demat account on stock exchange platform exceeds 12 months and consideration for purchase and sales were through banking channel, all the primary evidence like contract notes, bank statement highlighting payments and receipt, demat statement, ledger of broker etc. were provided further there is no adverse report or action taken by SEBI against the assessee or his broker in regards to the said transaction.2
I.T.A. No. 4519/Mum/2025
2. The learned CIT(A) erred in upholding the Assessment order treating the LTCG as non-genuine on basis of general information without bringing on record any material/ evidence/ orders/ reports showing assessee involvement in the alleged transaction of accommodation entry/price rigging etc.
3. The learned CIT(A) has erred in law and on facts in upholding the alleged additions and failed to consider and deal with the contentions raised by the assessee nor dealt with the judgements cited in the submissions and passing the order without providing cross examination, nor confronting statement of Mr. Sanjay Vora, hereby, violating the principles of natural justice.
Addition u/s 68 of Rs. 40,031 :
4. The Ld. CIT(A) erred in confirming the addition u/s 68 of Rs. 40,03l towards sale of shares of SRK Industries by calculating difference between sale proceeds vs. amount disclosed under IDS Scheme 2016 viz.
Rs. 32,37,031/- minus Rs. 31,97,000/- ignoring the provisions of IDS Scheme.
5. The Assessee craves leave to add, alter modify or delete one or more ground before or at the time of hearing of Appeal."
2. Brief fact of the case are as under:-
The assessee is an individual and filed her return of income for the year under consideration declaring total income of Rs. 8,80,390/-. The case was selected for scrutiny and statutory notices u/s 143(2) and 142(1) of the Act were issued to the assessee alongwith questionnaire. In response to the statutory notices, authorised representative of the assessee appeared before the Ld.CIT(A) and filed the requisite details as called for.
2.1. The Ld.AO observed that assessee carries on business of saree retail and has shown income from business u/s 44AD of the Act.
The Ld.AO observed that during the year under consideration assessee also shown income from other sources and claimed long term capital gain on shares as exempt u/s 10(38) of the Act 3 I.T.A. No. 4519/Mum/2025 amounting to Rs. 81,72,625/-. Following are the details of the capital gains that were available with the Ld.AO as per ITS/AIR statement that was also provided to the assessee:-
Scrip Name & Code: KDJ Holidayscapes Resorts Limited (Scrip code - 530701) Buy Sale Date of Code qty Rate Amount qty Rate Amount Gain Purchase / (appx) (appx) Sale 23/12/2011 530701 20000 32.72 654497 28/10/2013 20000 441.36 8827123 8172626 to 09/12/2013 Total 20000 654497 20000 8827123 8172626 2.2. The Ld.AO further noted that the assessee had also claimed long term capital gain as exempt on sale of shares of M/s. SRK Industries Ltd., amounting to Rs. 31,97,000/-. The Ld. AO also noted that, assessee vide letter dated 14/12/2016, availed benefit of IDS Scheme and declared the funds available with her amounting to Rs.31,97,000/- during assessment year 2013-14.
2.2.1. The assessee thus had admitted that the funds received on sale of shares of SRK Industries were not real long-term capital gain. The Ld.AO thus, treated the difference of Rs.40,031/- between the sale consideration and IDS declaration as unexplained cash credit u/s 68 of the Act in the hands of the assessee. In respect of KDJ Holidayscapes Resorts Limited, the assessee claimed capital gains of Rs.81,72,626/- to be exempt u/s 10(26), the Ld.AO.
2.3. Based upon the Investigation Wing's report the Ld.AO observed that there is no co-relation in the price rise of KDJ 4 I.T.A. No. 4519/Mum/2025 Holidayscapes Resorts Limited. The Ld.AO dealt with various facts of transactions, allotment of shares, payment of premium one allotment of shares, price trend on stock exchange, the report of Kolkata Investigation Wing and the statement of the persons. The Ld.AO based on these documents, doubted the earnings of long-
term capital gain on sale of shares of KDJ Holidayscapes Resorts Limited as not to be satisfactory. The Ld.AO observed that there could be money trail and came to a unilateral conclusion that the transaction is not genuine. The Ld.AO, thus, made an addition of Rs. 88,27,123/- being the gross amount received by the assessee upon sale of shares of KDJ Holidayscapes Resorts Limited.
Aggrieved by the order of Ld.AO, the assessee preferred appeal before Ld.CIT(A).
3. The Ld.CIT(A) upheld the disallowance made by Ld.AO in respect of KDJ Holidayscapes Resorts Limited. The Ld.CIT(A) also analyzed the price movement and the commercial rationale in respect of this company and came to the conclusion that the transaction has been correctly identified to be a part of systematic scheme for converting unaccounted money into exempt capital gains. The Ld.CIT(A), thus, held that the transactions in KDJ Holidayscapes Resorts Limited shares was bogus and designed primarily to evade tax.
Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.
5I.T.A. No. 4519/Mum/2025
4. At the outset, the Ld.AR submitted that assessee vide letter dated 25/07/2016, furnished following details in respect of the purchase of shares in KDJ Holidayscapes Resorts Limited:-
Details of Long- Term Capital Gain.
Contract Notes for Purchase along with Bank Statement. Contract Notes for Sales of shares along with Bank statement for sales. Broker KDJ and SRK Ledger Account.
Form 10DB Global Report KDJ Holidays.
Demat Account KDJ Holidays.
SRK Industries Global Report.
4.1. In respect of SRK Industries, the Ld.AR submitted that, the assessee submitted declaration under IDS dated 20/09/2016 declaring Rs.31,97,000/- against which tax was paid. The assessee also filed copies in Form 10DB, Demat account in respect of SRK Industries. Based on this, assessee was issued Form 2 in which 25% of the tax paid by the assessee has been acknowledged.
4.2. The Ld.AR submitted that in respect of KDJ Holidayscapes Resorts Limited, the assessee purchased 20,000 equity shares of Rs.10/- each on 23/12/2011 through recognised stock exchange broker Joindre Capital Services Ltd., for a sum of Rs.6,54,450/-. He submitted that the purchase transaction was executed on the Bombay Stock Exchange by payment of security transaction tax of Rs.815/- along with brokerage and cess thereon. The Ld.AR relied on the details of the purchase of these shares made through banking channels drawn on Saraswat Cooperative Bank Ltd., vide 6 I.T.A. No. 4519/Mum/2025 cheque dated 24/12/2011. He submitted that all the details are available at pages 9-28 of the paperbook filed before this Tribunal.
4.3. The Ld.AR also admitted that KDJ Holidayscapes Resorts Limited, was initially known as Two-up Financial Limited.
Subsequently the assessee sold the entire 20,000 equity shares through recognised and reputed stockbroker on the Bombay Stock Exchange by making payment of security transaction tax of Rs.8,857/- along with service tax of Rs.2,187/-. The Ld.AR intimated that the said shares were held by the assessee in a Demat account with Saraswat Cooperative Bank Ltd. and during this period, the shares were mixed reflected in the balance-sheet for the assessment years 2012-13 and 2013-14. The Ld.AR also informed that the sale proceeds of the shares were deposited by the assessee in the savings bank account with Saraswat Cooperative Bank Ltd.
4.4. The Ld.AR, thus submitted that, all preliminary evidence in order to establish that assessee had generally invested in the shares of KDJ Holidayscapes Resorts Limited, were available with the Ld.AO which has not been rejected or found to be false. He submitted that it was the observation of the Ld.AO that KDJ Holidayscapes Resorts Limited did not have sufficient commercial stability in the market and the Ld.AO has merely relied on the statement of third parties without giving any opportunity to cross- examine to the assessee.
4.5. The Ld.AR placed reliance on various decisions of Co-ordinate Bench of this Tribunal wherein sale of shares of KDJ Holidayscapes Resorts Limited, were dealt with in case of ITO vs Shri Jimeet Vipul 7 I.T.A. No. 4519/Mum/2025 Modi (ITA No. 4297/Mum/2018 (ITAT. Mum)), wherein, this contention of the revenue that KDJ Holidayscapes Resorts Limited, has been dismissed. The Ld.AR also placed reliance on the decision of the Coordinate Bench of this Tribunal in the case of Karishma Ajay Agarwal vs. ITO in ITA No. 2586/Mum/2022 dated 02/03/2023; AY 2014-15 (Mum -Trib.) wherein similar transactions with KDJ Holidayscapes Resorts Limited was considered. Further reliance was also placed on the decision in the case of Dinesh Maheshwari vs. ACIT, Thane ITA No. 3009/Mum/2023 dated 20/05/2025.
4.6. On the contrary, the Ld.DR will placed reliance on the observations of the Ld.AO/Ld.CIT(A) and reviewed that this company does not have any creditworthiness and does not carry out any business in order to have strong financial.
We have perused the submissions advanced by both sides in light of the records placed before us.
5. Primarily in respect of the share transactions in case of SRK Industries, it is noted that, assessee opted to declare the income under IDS against the long-term capital gain on sale of shares. Admittedly the amount offered under IDS of Rs. 31,97,000/- was accepted by the revenue authorities. Under such circumstances no further addition can be made in respect of the same. Accordingly the addition of Rs.40,031/- stands deleted.
6. In respect of the share transactions in case of KDJ Holidayscapes Resorts Limited, it is noted that Co-ordinate Bench 8 I.T.A. No. 4519/Mum/2025 of this Tribunal in case of Karishma Ajay Agarwal (supra), has observed and held as under:-
"7. We find that the assessee has substantiated the facts before the lower authorities and AO has relied on the statement of the third party and has not conducted any independent investigation. Further, the assessee has given the complete details on the nature of the business activities and audited financial statements of the company and justification of increase in share price and placed reliance on the evidences referred at page 48 to 63 of paper book but AO has failed to examine the company profile and made additions on presumptions and conjectures. The Ld.AR relied on the judicial decisions of Honble High Court and Honble Tribunal in support of e submissions. We find the facts and circumstances of the present case are similar and identical and pertains to A.Y.2014-15 in respect of sale of Shares M/s KDJ Holidayscapes and resorts ltd (earlier known as M/s Gomti Finlease (India) Ltd) dealt by the Coordinate Bench of the Honble Tribunal in the case ITO Vs. Shri Jimeet Vipul Modi in ITA No. 4297/Mum/2022 and has dismissed the revenue appeal observing at Page 4 Para 4.1 of the order read as under:
4.1 During appellate proceedings, the assessee again ref uted the allegations of Ld. AO by way of elaborate written submis sions which have already been extracted in the impugned order. The Ld. C IT(A), at the outs et, noted that provisions of Sec.68 we re invoked by Ld. AO to add back the purchase price of shares. However, the payment f or purchase of shares was made through banking channels which stood corroborated by various documents submitted by the assessee. All the payment f or purchas es was made through account payee cheques which were debited in assessee's books of accounts. Thus, the transaction was a debit entry in the books of accounts and theref ore, the purchase price paid by the assessee could not be held to be unexplain ed cash credit in the books of account. This being so, the provis ions of Sec.68 would have no appl icabil ity to the f act of the case and the addition was totally on a wrong f ooting. Theref ore, the impugned additio ns were not sus tainabl e under l aw.
4.2 At the s ame time, in para- 5.3, it was observed by Ld. C IT(A) that Ld. A O had not cons idered the documents pertaining to purchas e and s ale of shares of Gomti Finl eas e ( India) Limited. Thes e documents were in the s hape of contract note, bank s tatements, brokers ledger and Demat Account s tatement of the assess ee which were duly submitte d at the time of assessment proceedings. The assessee had f ully discharged the onus to prove the transactions. The assessee had purchas ed the shares of a l is ted company through recognized s tock broker on BSE and s imilarly sol d the shares through recognized stock broker on BSE at the prevalent price. As regards ad justment / f luctuation in rate ( Rs 494/- to Rs. 99/-), the s ame was due to splitting of shares s ince the scrip had f ace value of Rs.10/- which was split on 26/12/2013 to Rs.2/- per s hare. Accordingly, the market value was reduced in that proportion. The assessee had f ully dis charged his onus to prove the transaction of purchas e of shares including source of f unds f or the purchas e.
The ass essee f urnished jus tif ication f or purchas e of shares bas ed on the market inf ormation that the said company, as per Special Res ol ution passed on 29/11/2012 and the Board of Directors meeting held on 09/03/2013, had 9 I.T.A. No. 4519/Mum/2025 decided to inves t Rs.15 Crores in the equity of KDJ H ospital Limited wherein the company had exis ting equity of 40.76%. By making additional investment, the holding would be more than 75% and accordingly, the scrip exhibited a consistent Higher-Top Higher-Bottom pattern on its charts. It has also exhibited pattern of correcting and bouncing back f rom its 14 days moving average which als o coincided with a lower-bottom in the charts. The stock was trading well above the long-term average i.e. 200 days moving average of the s tock, which indicated that the l ong term trend of the s tock was f irmly up. The s aid shares were s old as the price of any script would be market driven. Since the assess ee was an inves tor, when the prices were continuously f alling, the ass essee exited f rom the s aid script and booked los ses to s af eguard hims elf again st f uture losses. The s tatement of Shri N ikhil Jain and Shri Bidyoot Sarkar as ref erred to by Ld. AO did not contain any ref erence to the assessee. The reliance on the said s tatement without any co- rel ati on does not prove that the tran sactions were non-genuine. There was no evidence of any cas h trans action and Ld. AO f ailed to bring on record any evidence to support the conclusions that the losses were not genuine. Rather the concl us ions were based merely on surmis es and conjectures. On the other hand, the ass essee had f urnished all the documentary evidences in support of the claim. 4.3 Finally, relying upon the decis ion of Hon'ble Bobay High Court in the cas e of CIT vs . Mukesh Ratilal M arolia ( ITA 456 of 2007 dated 07/09/2011), the decis ion of Hon'ble Punjab & H aryana High Court in cas e of Pr. C IT vs. Prem Lal Gandhi ( ITA N o.95 of 2017 dated 18/01/2018) and the decision of Delhi Tribunal in Chander Pr akash vs. ITO in ( ITA No. 6880/Del/2017 dated 12/03/2018), the impugned additions as well as consequential addition of estimated commiss ion, as made by Ld.AO, was deleted. Aggrieved, the revenue is in f urther appeal bef ore us.
Our f indings & Ad judication
5. Af ter having gone th rough the f indings of Ld. CIT(A) in the impugned order, the undisputed f act that emerges ar e that the purchas e as well as sale transactions have taken place on stock exchange through s tock-broker. There is movement of shares in assess ee's demat s tatement. The transactions have taken place through banking channels and duly supported by broker's contract notes, demat statements, ledger statemen ts as well as bank statements. The ass es see is regular investor in shares. The asses see has always main tained that the transactions were genuine. As agains t this, the only advers e material in the armory of Ld. AO is the investigation f indings. However, the assessee has not been named in any of the s tatement. The assessee has denied having known Shri Nikhil Jain & Shri B idyoot Sarkar whose statements f orm the very basis of doubting the assessee's transactions. The ass essee, as rightly pointed out by Ld. C IT(A), had duly discharged the onus to es tablish the genuineness of the trans actions and the onus was on Ld. AO to disl odge them. Howev er, except f or mere allegations, there is no adverse material agains t the ass essee and the additions are based merely on conjectures and surmises. Another aspect is that the provis ions of Sec. 68, as invoked by Ld. AO, had no applicabi lity to the f act of the case. The invoking of wrong provisions would make the additions unsus tainable in the eyes of law. Theref ore, we are of the cons idered opinion that the is sue has been clinched in the right perspective by Ld.C IT( A) in the impugned order. Finding no reason to interf ere in the s ame, we dis miss the appeal. 6. In the res ul t, the appeal stands dis miss ed.
8. The Honble Tribunal in the case of Nishith Rameshchandra Shah Vs. ITO, ITA No. 1116/Mum/2022 has observed at Para 5 of the order as under:
5. Having heard the rival submiss ions and perused the materials available on record, we are of the cons idered opinion that the AO has reopened the assessee's cas e bas ed on the inf ormation received f rom the inves tigation 10 I.T.A. No. 4519/Mum/2025 wing. It is pertinent to point out that the assessment order in the present case does not have any mention about the independent inquiry that was conducted by the AO relevant to the impugned trans actio n. It is also observed that the AO has f ailed to examin e the alleged Directors of M/s. Diamant Inf ras tructure Limited as to the nature of bus iness carried out by the s aid company nor has the AO exam ined the alleged brokers involved in the impugned trans actions.
We woul d like to pl ace our reliance on the decision cited by the asses see in the cas e of DCIT Vs. Sunita K humka ITAT, (Cul.) (2016) ITRV- ITAT-C UL.-057 which held th at the trans action cannot be held to be bogus merely on the bas is of suspicion or surmise and that the AO has to s ubs tanti ate his f inding by bringing material on record to prove collus ion/connivance between the broker and the ass essee f or introducing unaccounted money. We would also like to place our relian ce on the decis ion of Hon'ble juris dictional Bombay High C ourt in the case of Commissioner of Income Tax-13 Vs. Shyam R. Pawar wherein it was hel d that where D-MAT account and contract note sho wed details of share trans action, and AO had not proved s aid trans action as bogus, capital gain earned on s aid trans action coul d not be tr eated as unaccounted income u/s 68. It is pertinent to point out that we have also cons idered the recent decis ion of Hon'ble Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Swati B ajaj on s imil ar iss ue which held that the AO s hould conduct enquiry on the impugned transaction to subs tanti ate that the claim of the assessee f or LTCG/STCL is non genuine and f urther held that the AO can rely on circums tantial evidence based on the doctrine of preponderance of probabilities in such cases where it is beyond the reach to carve out direct evidences. B ut, in the present cas e we find that the AO has made no enquiry other than relying on the report of the investigation wing and the steep increas e in the price of the shares. We are of the cons idered opinion that the AO should have done a f urther analysis and enquired into the genuineness of the alleged transaction. We place our reliance f or this propos ition on the decis ion of the Hon'ble Apex Cour t in the decision of Principal Commiss ioner of Income Tax Vs. NRA Iron and Steel Private Limited (2019) 412 ITR 161 (SC). In the pres ent case in hand the assess ment order is f lawed by lack of enquiry by the AO.
6. From the above observation and by respectf ully f ollowing the decis ion cited above, we hereby direct to delete the addition made u/s 68 of the Act.
9. The Ld. AR contentions are that the assessee name nor the company shares traded were never in the investigation of concerned authorities. The Ld. AR relied on the decision of Hon'ble High Court of Delhi in the case of Pr. CIT Vs. Karuna Garg, ITA No. 477/ 2022 has observed at page2 para3 read as under:
3. Though Revenue has mentioned in the present appeal that the issue involved is covered by the judgment of this Court in Suman Poddar v. ITO 423 ITR 480, wherein appeal of the Assess ee was dismiss ed taking judicial notice of the f act th at there was an as tronomical increase in the share price of a company which was not commens urate with the f inancial parame ters of the s aid company, yet this Court f inds that a Coordinate Bench of this Court in PC IT vs. Smt. Krishna Devi [ ITA 125/2022] & connected ITAs has upheld the ITAT order which is impugned in the present appeal.
4. The relevant portion of the order in PC IT vs. Smt. Kris hna Devi (supra) is reproduced hereinbel ow:-
"11. O n a perusal of the record, it is eas ily discernible that in the ins tan t case, the AO had proceeded predominan tly on the bas is of the analysis of the f inancials of M/s Gold Line International Finvest Limited. His conclus ion and f indings agains t the Respondent are chief ly on the s trength of the as tounding 4849.2% jump in share prices of the af ores aid company within a span of two 11 I.T.A. No. 4519/Mum/2025 years, which is not s upported by the f inancials. On an an alys is of the data obtained f rom the websites, the AO observes that the quantum leap in the share price is not justif ied; the trade pattern of the af ores aid company did not move along with the sensex; and the f inancials of the company did not show any reas on f or the extraordinary perf ormance of its s tock. We have nothing adverse to comment on the above analys is, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming f ictitious LTCG, which is exempt under Section 10( 38), in a pre-planned manner to evade taxes. The AO extensi vely rel ied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny s tocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTC G. However, the reliance placed on the report, without f urther corroboration on the bas is of cogent material, does not jus tif y his conclusion that th trans action is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the ques tion of infusion of Respondent's unaccounted money, but he did not dig deeper. N otices iss ued under Sections 133( 6) /131 of the Act were issued to M/s Gold Line Internation al Finves t Limited, but nothing emerged f rom this effort. The payment f or the shares in ques tion was made by Sh. Salas ar Trading Company. N otice was is sued to this enti ty as well, but when the notices were returned uns er ved, the AO did not take the matter any f urther. He thereaf ter simply proceeded on the bas is of the f inancials of the company to come to the concl us ion that the trans actions were accommodation entries, and thus, f ictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking f ictitious LTCG in a pre-planned manner, is theref ore entirely unsupported by any material on record. This f inding is thus purely an ass umption based on conjecture made by the AO. This f lawed approach forms the reas on f or the learned ITAT to interf ere with the f indings of the lower tax authorities. The learned ITAT af ter cons idering the entire conspectus of case and the evidence brought on record, held that the Respondent had s uccessf ully discharged the initial onus cas t upon it under the provis ions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companie s were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed f rom demat account and the consideration has been received through banking channels." The above noted f actors, including the def icient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreemen t between the Respondent and any other party, prevailed upon the ITAT to take a diff erent view. B ef ore us, Mr. Hoss ain has not been able to point out any evidence whatsoever to allege that money changed hands betwe en the Respondent and the broker or any other pers on, or f urther that some person provided the entry to convert unaccounted money f or getting benef it of LTCG, as alleged. In the abs ence of any such material that could support the case put f orth by the Appellant, the additions cannot be sus tained.
12. Mr. Hoss ain's submissions relating to the startl ing spike in the shar e price and other f actors may be enough to show circums tances that might create suspicion; however the Court has to decide an issue on the bas is of evidence and proof , and not on suspicion alone. The theory of human behavi or and preponderance of probabil ities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the C IT(A) were in conf lict with the Impugned Order, we may only note th at the said obs ervations are general in nature and l ater in the order, the C IT(A) its elf notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, f ollowing the same reas oning, and relying upon the report of the Inves tigatio n Wing. Lastl y, rel iance pl aced by the Revenue on Suman Poddar v. ITO (s upra) and Sumati Dayal v. C IT (supra) is of no assis tance. Upon examining the judgment of Suman Poddar (s upra) at length, we f ind that the decision therein was arrived at in light of the peculiar f acts and circums tances demonstrated bef ore 12 I.T.A. No. 4519/Mum/2025 the ITAT and the Court, such as, inter al ia, lack of evidence produced by the Assessee therein to s how actual s ale of shares in that case. On such bas is, the ITAT had returned the f inding of f act against the Assessee, holding that the genuineness of share transaction was not es tablished by him. However, this is quite diff erent f rom the f actual matrix at hand. Similarly, the case of Sumati Dayal v. C IT (s upra) too turns on its own specif ic f acts. The above- stated cas es, thus, are of no ass is tance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the las t f act-f inding authority, on the bas is of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sus tain the addition with out any cogent material on record. We thus f ind no pervers ity in the Impugned Order."
5. Consequently, this C ourt is of the view that no subs tantial question of law aris es f or cons ideratio n in the pres ent appeal. Accordingly, the s ame is dis missed.
10. The Hon'ble High Court of Delhi in the case of Pr. CIT Vs. Krishna Devi, 126 taxmann.com 80 has observed as under:
Section 68 of the Income-tax Act, 1961 Cas h credit (Bogus LTC G on sale of shares) - Assessment years 2014-15 and 2015- 16 Ass essee had sol d shares of a company held by it and claimed exemption under s ection 10( 38) on account of long- term capital gain (LTCG) arose on such s ale of shares - Assess ing Off icer noted that there was astounding 4849.2 per cent jump in share prices of said company within a span of two years and f inancials of said company did not s how any reas on f or such extraordinary perf ormance of its s tock - Thus, he concl uded that assessee had adopted a colourable device of LTCG to avoid tax and, accordingly, made addition under s ection 68 treating such LTC G arose on s ale of such shares as bogus It was noted that there was no dispute that shares of said company were purchased by assessee online and payments were made through banking channel - Shares were dematerialized and sales were routed from demat account and cons ideration was received through banking channels Assessing Off icer simply proceeded on bas is of f inancials of company to come to conclusion that transactions were bogus Assess ing Off icer had not made its conclusion on basis of any cogent material Finding of Assess ing Off icer was thus purely an assumption bas ed on conjecture made by Assessing Off icer Whether, on f acts, impugned additio n made under section 68 by treating impugned LTC G as bogus was unjus tif ied and s ame was to be deleted - Held, yes [Paras 11 and 13 in f avour of assessee]
11. On a perus al of the record, it is eas ily discernible that in the instan t cas e, the AO had proceeded predominan tly on the bas is of the analysis of the f inancials of M/s Gold Line International Finves t Limited. H is conclusion and f indings agains t the Respondent are chief ly on the s trength of the as tounding 4849.2% jump in share prices of the af ores aid company wi thin a span of two years, which is not s upported by the f inancials. O n an an alys is of the data obtained f rom the webs ites, the AO observes that the quantum leap in the share price is not justif ied; the trade pattern of the af ores aid company did not move along with the sensex; and the f inancials of the company did not sho w any reas on f or the extraordinary perf ormance of its stock. We have nothing advers e to comment on the above analys is, but are concerned with the axiomatic conclus ion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming f ictitious LTC G, which is exempt under Section 10( 38), in a preplanned manner to evade taxes. The AO extens ively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the bus iness of providing entries of bogus LTCG. However, the reliance placed on the report, without f urther corroboration on the bas is of cogent material, does not jus tif y his conclus ion that the trans action is bogus, sham and nothing other than a 13 I.T.A. No. 4519/Mum/2025 racket of accommodation entries. We do notice that the AO made an attemp t to delve into the questi on of inf usion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were iss ued to M/s Gold Line Internation al Finves t Limited, but nothing emerged f rom this eff ort. The payment f or the shares in ques tion was made by Sh. Sal as ar Trading Company. Notice was iss ued to this entity as wel l, but when the notices were returned uns erved, the AO did not take the matte r any f urther. He thereaf ter simpl y proceeded on the bas is of the f inancials of the company to come to the conclus ion that the trans actions were accommodation entries, and thus, f ictitious. The conclus ion drawn by the AO, that there was an agreement to convert unaccounted money by taking f ictitious LTCG in a pre-planned manner, is theref ore entirely uns upported by any material on record. This f inding is thus purely an ass umption bas ed on conjecture made by the AO. This f lawed approach f orms the reason f or the learned ITAT to interf ere with the f indings of the lower tax autho rities. The learned ITAT af ter cons idering the entire conspectus of cas e and the evidence brought on record, held that the Respondent had successf ully discharged the initial onus cas t upon it under the provis ions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the s ales have been routed f rom de-mat account and the consideration has been received through banking channels." The above noted factors, including the def icien t enquiry conducted by the AO and the lack of any independent s ource or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a diff erent vie w. Bef ore us, Mr. Hoss ain has not been able to point out any evidence whatsoever to allege that money chan ged hands between the Respond ent and the broker or any other person, or f urther that s ome person provided the entry to convert unaccounted money f or getting benef it of LTCG, as alleged. In the absence of any such material that could support the case put f orth by the Appel lant, the additions cannot be s ustained.
12. Mr. Hoss ain's submiss ions relating to th e s tartling spike in the share price and other f actors may be enough to show circums tances that might create s uspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on s uspicion alone. The theory of human behavior and preponderance of probabil ities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that obs ervations made by the C IT(A) were in conf lict with the Impugned Order, we may only note th at the said obs ervations are general in nature and l ater in the order, the C IT(A) its elf notes that the broker did not respond to the notices. Be that as it may, the C IT(A) has only approved the order of the AO, f ollowi ng the s ame reasoning, and relying upon the report of the Inves tigation Wing. Las tly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. C IT (supra) is of no ass is tance. Upon examining the judgment of Suman Poddar (s upra) at length, we f ind that the decis ion therein was arrived at in l ight of the peculiar f acts and circums tances demonstrated bef ore the ITAT and the Court, such as , inter al ia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the f inding of f act agains t the Assessee, holding that the genuineness of share trans action was not establis hed by him. However, this is quite diff erent f rom the factual matrix at hand. Simil arly, the cas e of Sumati Dayal v. C IT (supra) too turns on its own specif ic f acts. The above-s tated cas es, thus, are of no ass istance to the cas e sought to be canvassed by the Revenue.
13. The learned ITAT, being the last f act-f inding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax au thorities are not able to s us tain th e addition without any cogent material on record. We thus f ind no pervers ity in the Impugned Order.
14I.T.A. No. 4519/Mum/2025
14. In this view of the matter, no ques tion of law, much less a substantial ques tion of law aris es for our cons ideration.
11. We find the Jurisdictional High Court of Bombay in the case of CIT Vs. Shyam R. Pawar, 54 taxmann.com 108 has observed as under:
Section 68 of the Income-tax Act, 1961 C ash credit (Share dealings) - Assessment years 2003-04 to 2006- 07 Ass essee declared capital gain on sale of shares of two companies. Assess ing Off icer, obs erving that trans action was done through brokers at Calcutta and perf ormance of concerned companies was not s uch as would jus tif y increase in share prices. held s aid tran s action as bogus and having been done to convert unaccounted money of asses see to accounted income and, theref ore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stopped inquiry at particular point and did not carry f orward it to dis charge bas ic onus Whether on f acts, trans actions in shares were rightly held to be genuine and addition made by Assessing Off icer was rightly del eted Held, yes [Para 7] [ In f avour of ass essee] It was revealed during the course of inquiry by the Assessing Off icer that the C al cutta Stock Exchange- words showed that the shares were purchased f or code numbers S003 and R121 of STPL and RMPL pectively. Out of these two, only RMPL is l is ted in the apprais al report and it is s tated to be involved in dus operandi It is on this material that the Assessing Off ices holds that the transactions of sale and purchas e of shares are doubtf ul and not genuine. In relation to ass essee's role in all this, all that the Commiss ioner observed is that the assessee transacted through brokers at C alcutta, which its el f rais es doubt about the genuineness of the trans actio ns and the f inancial result and perf ormance of the company was not such as would jus tif y the increase in the share prices. Theref ore, he reached the conclusion that certain operators and brokers devis ed the scheme to convert the unaccounted money of the assessee to the accounted income and the assess ee utilized the scheme Para 5] The Tribunal concluded that there was something more which was required, which would connect the assessee to the trans actions and wh ich are attributed to the promoters /directors of the two companies. The Tribunal ref erred to the entire material and f ound that the inves tigation stopped at a particul ar point and was not cared f orward by the revenue. A copy of the DMAT account, pl aced bef ore the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were av ailable which gave details of the transactions. The contract note is a sys tem generated and prescribed by the stock exchange. From this material, the Tribunal concl uded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the C alcutta Stock Exchange regarding client code has been ref erred to. But the Tribunal concl uded that s ame, by its elf , is not enough to prove that the trans actions in the impugned shares were bogus sham. The details received f rom s tock exchange have been relied upon f or the purpos es of f aulting the revenue in f ail ing to discharge the bas ic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initi al or bas ic onus, then such concl us ion of the Tribunal cannot be termed as pervers e. The conclusions as recorded in the Tribunal's order are not vitiated by any error of law apparent on the f ace of the record either. [Para 6]
12. Hon'ble Supreme Court in the case of Pr. CIT Vs. Parasben Kasturchand Kochar, 130 taxmann.com 177 (SC) has observed as under:
15I.T.A. No. 4519/Mum/2025 Section 10( 38) of the Income-tax Act, 1961 Capital gains Income arising f rom transf er of long-term securities (Shares) Asses sment year 2014-15 Assessee- individual engaged in bus iness of trading in shares claimed long term capital gains arising out of sale of shares as exemption under s ection 10(38) - Assessing off icer denied cl aim and made certain additions into ass essee's income on grounds that s aid gains were earned through bogus penny s tock transactions and companies to whom s old s hares belonged were bogus in nature Tribunal observing that assessee by s ubmitting records of purchase bills, sale bills, demat s tatement, etc., had discharged his onus of es tablishing s aid trans actions to be f air and transparent, s ame not being earned f rom bogus companies was eligible f or exemption under section 10( 38) High court by impugned order held that no substan tial ques tion of law. arose from Tribunal's order - Whether SLP agains t s aid impugned order was to be dis missed -H el d, yes (Para 2) ( In f avour of assessee)
13. Similarly Hon'ble High Court in the case of Pr. CIT Vs. Prem Pal Gandhi, (401 ITR 0253) (P & H) has observed as under:
C apital gain-Share trans action- Addition-Deletion thereof -During course of assess ment proceedings u/s 153A, it was noticed by AO that assess ee had shown long term capital gain on s ale of shares of company- AO treate d share transaction as non-genuine transaction and amount was shown as long term capital gain on share trans action was added to income of assessee-C IT(A) deleted addition-Tribunal upheld order passed by C IT(A) and dis miss ed appeal of revenue-Held, assessee sold shares through MTL s hares and Stock Broker limi ted which was SEB I registered Stock Broker-Payment f or s al e of shares was received through banking channels-All documentary evidence being in f avour of assessee, del etion of addition made by C IT(A) was upheld by Tribunal-All these documentary evidences in f avour of assessee were rejected by AO merely on bas is of some casual replies given by assessee to AO- Documentary evidences were in f avour of assessee and C IT(A) had passed very reas oned and speaking order- Dividend am ount was received with regard to holding of shares and s aid amount was disclos ed by assessee in his return of income and exemption was claimed accordingly-Thus, addition being wi thout any logical bas is was del eted-Revenue's appeal dismissed.
Held:
The C IT( A) examined the matter and the comments of the Assess ing Off icer in the remand report. It has been recorded by the C IT(A) that the purchase of shares in the f inancial year 2006-07 f or an amount of Rs. 11 lakhs had been phys ically transf erred in f avour of the assess ee in the books of the company namely GeeFCee Finance Limited. Further, the s aid shares were dematerialized and credited in the ass essee's account maintained with depos itary participant i.e. HDFC on 16.10.2006. The dividend amount of Rs. 1,50, 000/- had been received wi th regard to aforementioned holding of shares on 23.10.2007. The s aid amount had been disclos ed by the in his return of income and exemption was cl aimed accordingly. Thus, the addition being wi thout any logical bas is was directed to be del eted. (Para 4) Assessee had sol d shares through MTL s haes and Stock Brokers Limite d as is noted by Assessing O ff icer in reply to question No.24 which is a SEB I regis tered Stock Broker. Furthermore the payment f or sal e of shares was received through Banking channels. All thes e documentary evidences in f avour of the ass essee were rejected by Assess ing Off iver merely on the bas is of some casual replies given by assessee to the Ass essing Off icer. However, the f act remains that al l the documentary evidences are in f avour of as sessee and learned C IT(A) has passed a very reasoned and speaking order and we do not f ind any inf irmity in the s ame."16
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14. The Hon'ble High Court of Bombay in the case of CIT Vs. Smt. Jamnadevi Agrawal, 328 ITR 656 (Bom) has observed as under:
Income-C as h credit- Genuineness of share trans actions-Assessees off ered long- term capital gains aris ing f rom s ale of shares-On the basis of material seized during the search in the case of var ious ass essees who belong to H group, AO did not accept the capital gains and treated the enti re sale proceeds of the s hares as income f rom undisclos ed sources under s. 68-Not jus tif ied-Fact that the assessees in the group have purchas ed and sold shares of the same companies through the same broker cannot be a ground to hol d that the transactions are sham and bogus, especially when documentary evidence has been produced to establis h the genuineness of the s ale- Company has conf irmed that it has handed over the s hares purchas ed by the assessees-Simil arly, the s ale of shares to the respective buyers is also es tablished by producing documentary evidence-Purchas e and sale price of the shares decl ared by the assessees is in conf ormity with the market rates prevail ing on the respective dates-Thus, the f act that some of the trans actions were off-market trans ac tions cannot be a ground to treat the trans acti ons as sham transactions- Tribunal has arrived at a f inding of f act that the transactions were genuine-N othing has been brought on record to show that the f indings recorded by the Tribunal are contrary to the documentary evidence-Also, no f aul t can be f ound with the f inding recorded by the Tribunal that the cash credits in the buyers' bank accounts cannot be attributed to the assessees-Theref ore, the decis ion of the Tribunal is based on f indings of f act and no subs tantial question of law arises.
The f act that the asses sees in the group have purchased and s old shares of similar companies hrough the s ame broker can not be a ground to hold that the transactions are sham and bogus, especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced, it is seen that the shares in ques tion were in f act purchas ed by the assessees on the respective dates and the company has conf irmed to have handed over the shares purchas ed by the assessees. Similarly, the s ale of the shares to the respective buyers is als o es tablis hed by producing documentary evidence. It is true that some of the trans actions were off-market trans actions. However, the purchas e and s ale price of the shares declared by the as sessees were in conf ormity with the market rates prevailing on the respective dates as is s een f rom the documents f urnished by the assessees. Theref ore, the f act that s ome of the trans actions were off -market transactions cannot be a ground to treat the trans actions as sham transactions. The s tatement of the broker P that the trans actions with the H Group were bogus has been demons trated to be wrong by producing documentary evidence to the eff ect that the shares sold by the ass essees were in cons onance with the market price. On perus al of those documentary evidence, the Tribunal has arrived at a f inding of f act that the trans actions were genuine. N othing is brought on record to show that the f indings recorded by the Tribunal are contrary to the documentary evidence on record. The Tribunal has f urther recorded a f inding of fact that the cash credits in the bank accounts of some of the buyers of shares cannot be linked to the assessees. Moreover, in the light of the documentary evidence adduced to sho w that the shares purchased and sold by the assess ees were in conf ormity with the market price, the Tribunal recorded a f inding of f act that the cash credits in the buyers' bank accounts cannot be attributed to the assessees. No f ault can be f ound with the above f inding recorded by the Tribunal. Theref ore, the decis ion of the Tribunal is based on f inding of f acts. No s ubs tanti al question of law aris es f rom the order of the Tribunal.-Asstt. C IT vs. Kamal Kumar S. Agrawal ( Indl.) & Ors. (2010) 41 DTR ( Nag) (Trib) 105:
(2010) 133 TT) (Nag) 818 aff irmed; Sumati Dayal vs. C IT (1995) 125 CTR (SC ) 124: (1995) 80 Taxman 89 (SC) distinguis hed. (Paras 11 to 14 & 16) Conclusion:17
I.T.A. No. 4519/Mum/2025 Assessees having es tablis hed the genuineness of purchas e and s al e of shares by producing documentary evidence and decl aring the purchas e and s ale price of shares in conf ormity with the market rate s prevailing on the res pective dates, the f inding of the Tribunal that the trans actions were genuine is a f inding of f act bas ed on documentary evidence on record and, therefore, no subs tantial ques tion of l aw aris es f rom the order of the Tribunal deleting the addition under s. 68.
15. We have considered the overall facts, submissions and the information find that the assessee has furnished the financials, details of broker, affidavit and the transactions status and MCA website details of the company. The AO has doubted the purchase and sale of shares and observed that the price rigging is not commensurate with the financials of the assessee company. The assessee has substantiated with all details and information and the revenue could not make out a case that there is unaccounted money transactions took place in the hands of the assessee and the AO has relied on the investigation report of income tax department and treated the long term capital gains on sale of shares as not genuine. Further the A.O. has not made any enquiry or independent investigation and relied on the statement of the parties and the assessee's name is not included in the list of investigation report. The fact remains that the assessee has submitted the requisite details in respect of purchase and sale of shares and were not disproved. The transaction of purchase and sale of shares is through banking channel. Further as discussed in the above paragraphs the Honble Tribunal dealt on the same scrip of share and for the same assessment has up held the relief granted by the CIT(A) and has dismissed the revenue appeal. Accordingly, we considering facts, circumstances, ratio of judicial decisions, submissions, evidences and rely on the judicial precedents and are of the opinion that the addition cannot be sustained and set aside the order of the CIT(A) and direct the assessing officer to delete the additions and allow the grounds of appeal in favour of the assessee."
6.1. The Ld.DR has not been able to controvert the observations of this Tribunal wherein categorically this Tribunal observed that the nature of the business activities and the financial statements of KDJ Holidayscapes Resorts Limited, along with justification of increase in share prices were filed before the authorities below and the AO has failed to examine the company profile and made addition on conjectures and presumptions. This Tribunal has also relied on a previous decision in the case of Shri Jimeet Vipul Modi 18 I.T.A. No. 4519/Mum/2025 (supra), wherein it is held that once assessee has discharged his onus to prove the transactions of purchase of shares including the source of funds for purchase unless the revenue has any evidence of any cash transactions, to support the gains were not genuine, additions could not have been made.
7. In the facts of the present case also, we note that, the revenue has not been able to establish any of the requirements to justify the addition u/s 68 of the Act. We, therefore, do not find it fit to confirm the addition made by the Ld.AO. Accordingly, the additions made in relation to transactions with KDJ Holidayscapes Resorts Limited, stands deleted.
Accordingly, the grounds raised by the assessee stands allowed.
In the result, appeal filed by assessee stands allowed.
Order pronounced in the open court on 04/12/2025
Sd/- Sd/-
(PADMAVATHY S.) (BEENA PILLAI)
Accountant Member Judicial Member
Mumbai
Dated: 04/12/2025
SC Sr. P.S.
19
I.T.A. No. 4519/Mum/2025
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.
True Copy
By order
(Asstt. Registrar)
ITAT, Mumbai