ACIT, MUMBAI CITY V. SHRI BISHAN JUGRAJ JAIN, MUMBAI CITY

ITA 531/MUM/2025

AI Insights

The case involves an appeal by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) which had deleted the additions made by the Assessing Officer under sections 68 and 69C of the Income Tax Act, 1961. The additions were related to unexplained cash credits and unexplained expenditure towards commission for arranging accommodation entries from the sale of penny stocks. The Tribunal found that no incriminating material was seized during the search and seizure operation that could substantiate the Revenue's claims, and thus upheld the CIT(A)'s decision.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 838465 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 24-01-2025
• Other Referred Cases: Pr. CIT vs. Abhisar Buildwell Pvt. Ltd. [2023] 149 taxmann.com 399 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RIDHISHA JAIN; VIRTUALLY; SATYAPAL KUMAR
• Keywords: Unexplained cash credit; Unexplained expenditure; Capital Gains; Search and seizure; Accommodation entries; Earning of tax free income; Penny stocks; Bogus
• Section: 142(1); 132; 153A; 68; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No.531/Mum/2025 (Assessment Year: 2016-17) ACIT Room No.640, Aayakar Bhawan, Churchgate, Mumbai – 400 020 Vs. Shri Bishan Jugraj Jain, 301/302, Vaastu Park – A Wing, Link Road, Malad (West), Mumbai- 400064 PAN: AFGPJ7399A (Appellant) : (Respondent) Assessee by : Ms. Ridhisha Jain, AR (Virtually Appeared) Respondent by : Shri Satya Pal Kumar, CIT - DR Date of Hearing : 17.12.2025 Date of Pronouncement : 17.02.2026 O R D E R Per Kavitha Rajagopal, JM: This appeal has been filed by the Revenue, challenging the order of the Learned Commissioner of Income Tax [‘Ld. CIT(A)’ for short] passed u/s. 250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2016-17. 2. The Revenue has raised the following grounds of appeal: “1. Whether on the facts and circumstances of the case, the CIT(A) was correct in deleting the addition made under section 68 of the Income Tax Act, 1961, on account of unexplained cash credit arising from the sale of penny stocks, despite the assessee having declared the income under the Income Declaration Scheme, 2016? 2. Whether on the facts and circumstances of the case, the CIT(A) was correct in deleting the addition under Section 68 of the Income Tax Act, 1961, by disregarding the Printed from counselvise.com ITA No.531/Mum/2025 Shri Bishan Jugraj Jain 2 evidentiary findings and statements provided by the Directorate of investigation, which classified the transactions in penny stocks as accommodation entries? 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the addition under Section 69C of the Income Tax Act, 1961, towards commission expenditure alleged to have been paid for arranging accommodation entries, when the Investigation Wing's report indicated a standard rate of commission in such transactions? 4. Whether on the facts and in the circumstances of the case, the CIT(A) was correct in disregarding the report and findings of the Investigation Wing, Kolkata 2, which identified the transactions in penny stocks as part of a larger syndicate providing accommodation entries, and in not treating the long-term capital gains as bogus?” 3. Brief facts of the case are that the assessee is an individual and a partner in M/s. Goldmedal Electricals Pvt. Ltd. The assessee had filed his return of income for the year under consideration declaring total income at Rs.1,32,65,210/- and the same was processed u/s 143(1) of the Act. Pursuant to the search and seizure action u/s 132 of the Act at the assessee’s premises dated 13.11.2019, notice u/s 153A of the Act was issued on 05.11.2022 and in response to which the assessee filed his return of income declaring same as that of the returned income. Notices u/s 143(2) & 142(1) of the Act were duly issued and served upon the assessee. The Learned Assessing Officer (“Ld. AO” for short) observed that the assessee has declared Long Term Capital Gain (“LTCG” for short) from sale of shares of Ojas Assets & Reconstruction Co. Ltd. amounting to Rs.41,41,673/- as being exempt income u/s 10(38) of the Act, which according to the Ld. AO was alleged to be a penny scrip. After considering the assessee’s submission the Ld. AO passed the assessment order dated 05.08.2021 u/s 153A of the Act determining total income at Rs.1,35,24,820/- after making an addition of 1,35,356/- u/s 68 of the Act as unexplained cash credit and Printed from counselvise.com ITA No.531/Mum/2025 Shri Bishan Jugraj Jain 3 Rs.1,24,250/- u/s 69C of the Act as unexplained expenditure pertaining to the commission expenditure incurred for availing accommodation entry from the alleged penny scrip. 4. The assessee was in appeal before the first appellate authority who vide order dated 30.11.2024 deleted the impugned additions made by the Ld. AO on the ground that there was no incriminating material found during the search and seizure action u/s 132 of the Act pertaining to the assessee. 5. Aggrieved, the Revenue is in appeal before us challenging the order of the Ld. CIT(A) on the abovementioned grounds. 6. The Learned Departmental Representative (“Ld. D.R.” for short) contended that based on the investigation carried out by the Directorate of Investigation, Kolkata it was found that assessee had dealt in the alleged penny scrip of Ojas Assets & Reconstruction Co. Ltd. which had manipulated the scrips for providing bogus LTCG to various beneficiaries including the assessee. The Ld. DR further contended that the assessee had challenged the notice issued u/s 153A of the Act stating that the impugned assessment year was unabated assessment and since no incriminating material was found during the search and seizure operation no addition could have been made in the hands of the assessee, which was not factually right as the statements recorded u/s 132(4) of the Act was itself an incriminating material. The Ld. DR further argued that the assessee himself had declared that his family members had voluntarily declared the proceeds of the LTCG from the sale of the penny scrips under the IDS Scheme, 2016 which corroborates that the assessee was the beneficiary of the penny scrip. The Ld. DR reiterated that the statement of the third party recorded u/s 132(4) of the Printed from counselvise.com ITA No.531/Mum/2025 Shri Bishan Jugraj Jain 4 Act is per se incriminating material basis which the addition made by the Ld. AO ought to be upheld. The Ld. DR relied on the order of the Ld. AO. 7. The Learned Authorized Representative (“Ld. AR” for short) for the assessee, on the other hand, controverted the said fact and contended that there was no incriminating material seized during the search and seizure action and this being an unabated assessment year the Ld. AO has faulted in making the impugned additions. The Ld. AR further argued that the Ld. AO has not brought anything on record to show that the assessee was involved in the rigging of the alleged penny scrip and in the absence of the same, the Ld. CIT(A)’s order to be upheld. The Ld. AR relied on a catena of decisions in support of her contention and extensively relied on the order of the Ld. CIT(A). 8. We have heard the rival submissions and perused the materials available on record. It is an admitted fact that there was no incriminating material seized during the search and seizure action carried out in the premises of the assessee and its group entities namely M/s. Goldmedal Electricals Pvt. Ltd. & ors. and the Ld. AO has relied on the investigation report of Kolkata Directorate which has identified various penny scrips for the purpose of providing bogus LTCGs to various beneficiaries and basis which various accommodation entry operator statements were recorded on oath who have admitted to providing accommodation entries to such beneficiaries. 9. On perusal of the assessment order, it is also observed that the Ld. AO has relied on the statement of the assessee recorded u/s 132 of the Act during the search proceeding where he is said to have admitted to fact that the proceeds of LTCG through the alleged Printed from counselvise.com ITA No.531/Mum/2025 Shri Bishan Jugraj Jain 5 penny scrips has been voluntarily declared to tax by the family members of the assessee in the IDS Scheme, 2016, which according to the Ld. AO cannot be ignored for considering the fact that the assessee was one of the beneficiaries of such accommodation entries. The Ld. AO made an addition on the difference amount of the actual sale consideration and the amount declared in IDS Scheme, 2016 as unexplained cash credit u/s 68 of the Act amounting to Rs.1,35,356/- and also made a disallowance of Rs.1,24,250/- as being 3% of the commission which is generally paid for availing such accommodation entries. The Ld. CIT(A), on the other hand, deleted the impugned additions on the ground that there was no incriminating material found or seized during the search and seizure action u/s 132 of the Act where the assessee’s involvement in availing bogus LTCG is not established. The Ld. CIT(A) had relied on various decisions of the Hon’ble High Courts wherein it has been held that in the case of unabated assessment there can be no additions made pursuant to the search and seizure operation unless any incriminating material has been found and seized. In the absence of the same, the assumption of jurisdiction u/s 153A of the Act ought to be vitiated in law. The Ld. CIT(A) had also relied on the decision of the Hon’ble Apex Court in the case of Pr. CIT vs. Abhisar Buildwell Pvt. Ltd. [2023] 149 taxmann.com 399 (SC) for the said proposition. On perusal of the assessment order as well as the contentions of either parties there is no iota of doubt that the Ld. AO was not in possession of any incriminating material qua the assessee seized during the search and seizure operation and this being an unabated assessment warrants no addition dehors such incriminating material. Further, it is also observed that the Ld. AO has made an addition only on the difference value of the actual sale consideration and the amount declared in IDS Scheme, 2016, where the Ld. AO has not made any addition on the total Printed from counselvise.com ITA No.531/Mum/2025 Shri Bishan Jugraj Jain 6 sale consideration of Rs.41,41,673/- out of which Rs.40,06,317/- has been declared by the assessee in the IDS Scheme, 2016. 10. On the above observation, we deem it fit to hold that there is no infirmity in the order of the Ld. CIT(A) and hence are justified in dismissing the grounds of appeal raised by the Revenue. 11. In the result, the appeal filed by the Revenue is hereby dismissed. Order pronounced in the open court on 17.02.2026 Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 17.02.2026 * Kishore, Sr. P.S. Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "