AMEE SHREYANCE SHAH ,MUMBAI V. INCOME TAX OFFICER WARD 19(1)(1), MUMBAI

ITA 2450/MUM/2024

AI Insights

The case involves Smt. Amee Shreyance Shah, who appealed against the order of the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi, which sustained an addition of INR 3,72,18,541 under section 68 of the Income Tax Act, 1961. The addition was initially made by the Income Tax Officer, Ward-19(1)(1), Mumbai, based on allegations that the assessee dealt in shares of Banas Finance Ltd., which were manipulated to provide bogus capital gains. The Tribunal examined the merits of the case, including the procedural validity of the reassessment under section 147 and the substantive issues regarding the genuineness of the capital gains claimed by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633196 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Other Referred Cases: Sonal S. Shah vs. ITA No.1653/Mum/2024, Sejal Jignesh Shah vs. ITA NO.444/Mum/2023, PCIT vs. Swati Bajaj, PCIT vs. Ziauddin A Siddique, CIT vs. Shyam R. Pawar, Pr. CIT vs. Smt. Krishna Devi, Pr. CIT vs. Indravadan Jain (HUF), CIT vs. Jamnadevi Agarwal
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADITYA RAI
• Assessee Lawyers: ANIL KSHATRIYA
• Keywords: Reassessment proceedings; Question of law; Unexplained investment; Income from undisclosed sources; Cost of acquisition; Capital Gains; Bogus
• Section: 148; 143(3); 271(1)(c); 68; 234B

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITANo.2450/MUM/2024 (A.Y. 2012-13) Smt. Amee Shreyance Shah, 1st Floor, 20 Preyas Building, Dadiseth Road, Babulnath, Mumbai–400 007, Maharashtra v/s. बनाम Income Tax Officer, Ward – 19(1)(1), Piramal Chambers, Lalbaug, Mumbai – 400012, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: BBKPS0688G Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Anil Kshatriya, AR Respondent by : Shri Aditya Rai, (Sr. DR) Date of Hearing 03.06.2025 Date of Pronouncement 10.06.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 19.03.2024 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 23.12.2019 as passed by the Income Tax Officer, Ward-19(1)(1), Mumbai for the Assessment Year [A.Y.] 2012-13. P a g e | 2 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai 2. Grounds of appeal are as under:- 1. In law, the facts and the circumstances of the appellant's case, the learned CIT(A) erred by sustaining the addition of INR 3,72,18,541/-under section 68 of the Income- tax Act, 1961, as determined by the Id. AO, based solely on suspicion, surmises, and conjectures, and the preponderance of probability, while disregarding the concrete evidence presented. 2. In law, the facts and the circumstances of the appellant's case, the learned CIT(A) through NFAC erred in not adjudicating any of the following grounds raised by the Appellant without any discussion and thus require adjudication: 1) On the facts and in the circumstances of the case and in law, the learned AO has erred in issuing notice u/s. 148 of the Income tax Act and thereby erred in passing the reassessment order u/s. 143(3) r.w.s. 147 of the Income tax Act. 2) The reassessment u/s. 147 is ab initio void and bad in late as the same was initiated at the satisfaction/instance of other authorities without any independent evaluation by the learned AO. 3) The learned AO erred in completing the assessment without furnishing copies of the statement or information relied upon by his at the time of issuance of notice u/s. 148. These were requested for on several occasions during the entire reassessment proceedings. No certified copies of the statements were furnished till completion of the reassessment and no opportunity was afforded for cross verification/examination of records and third parties. 4) The learned AO erred in not allowing exemption uls. 10(38) in respect of long term capital gain on sale of the shares of M/s. Banas Finance Limited even though all the conditions of the said section were complied with and therefore the claim for exemption u/s.10(38) may kindly be held as genuine. 5) The learned AO erred in law in making the impugned addition u/s, 68 as there were no unexplained investments nor were there any investments not recorded in the books of account of the said amount of Rs. 3,72,18,541/- or any other amount warranting addition under the said section. 6) On the facts and in the circumstances of the case, the learned AO erred in charging interest u/s. 234B of the Income tax Act. 7) On the facts and in the circumstances, the learned AO erred in initiating penalty proceedings u/s. 271(1)(c) of the Act. 3. In law, the facts and the circumstances of the appellant’s case, the learned CIT(A) has erroneously adjudicated grounds 4, 5, and 6 in a single paragraph, relying solely on paragraph 7 of the assessment order under section 143(3) without considering the appellant's specific contentions or providing adequate reasoning. 4. In law, the facts and the circumstances of the appellant's case, the learned CIT(A) erred in sustaining the addition made by the Id. AO without fully and correctly comprehending the pertinent facts of the case. The appellate order merely reproduces the statement of facts and grounds of appeal from the comprehensive submission filed by the assessee, neglecting the critical legal and factual submissions. Furthermore, the order overlooks the numerous supporting annexures provided by the assessee, which substantiate the claims made. 5. In law, the facts and the circumstances of the appellant’s case, the learned CIT(A) erred by not granting the exemption under section 10(38) of the Income-tax Act, P a g e | 3 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai 1961, for long-term capital gains from the sale of shares of M/s. Banas Finance Limited, despite compliance with all requisite conditions of the section, without any discussion or justification provided. 6. In law, the facts and the circumstances of the appellant's case, the learned CIT(A) erred in law by upholding the disputed addition under section 68 of the Income-tax Act,1961, as there were no unexplained investments nor any investments unrecorded in the books amounting to INR 3,72,18,540/- or any other amount that would justify an addition under this section. 7. In law, the facts and the circumstances of the appellant's case, the learned CIT(A) erred by disregarding relevant, binding judicial pronouncements relied upon by the appellant, thus breaching judicial discipline and undermining legal precedents. 8. In law, the facts and the circumstances of the appellant's case, the learned CIT(A) erred in upholding the action of the Id. AO in taxing the entire proceeds from the sale of shares of Banas Finance Limited without allowing any deduction for purchase costs, despite the provisions of section 115BBE-stating that no deduction for any expenditure or allowance is allowed in computing income referred to in Section 68- only taking effect from April 1, 2013, and thus not applicable to the year under appeal. 3. Ground Nos.1,3 to 7 are related to the addition of Rs. 3,72,18,541/-. Facts in brief are that the assessee an Individual field original return of income disclosing total income of Rs 8,896/- for the relevant year in which she disclosed inter alia Long Term Capital Gain on sale of share which was claimed exempt u/s 10(38) of the Act. Subsequently, her case was reopened by the AO u/s 148 of the Act as information received at his end from the Investigation wing revealed that she dealt in share of Banas Finance Ltd. (in short ‘BFS’) which was allegedly manipulated on the stock exchange for providing bogus capital gains. Entire modus operandi of creating such bogus capital gains have been elaborated in the assessment order. Total sale proceeds of Rs 3,72,18,541/- were treated as unexplained u/s 68 of the Act. P a g e | 4 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai 4. In the subsequent appeal before the ld.CIT(A), the assessee did not get any relief as he upheld the addition on the observations that the said scrip had been used to provide Long Term Capital Gains/Short Term Capital losses to various beneficiaries. He held that no satisfactory and logical explanation had been given by either the exit providers or the directors to justify that the transactions were genuine without malicious intent. Value of the shares had increased over 1800% in just over a year which was clearly due to manipulation. 5. In the course of hearing before us, the ld.AR has contented that from the contents of the assessment order that the AO did not take cognizance of the contentions of the assessee that the impugned transaction i.e. contract notes, demat account, banking channels, transactions through Registered broker, Sale on platform of stock exchange, and holding period of more than a year. It was also contented that Banas Finance Ltd was exonerated by SEBI from all charges of irregularities relating to preferential allotment of these shares. 5.1 The ld.AR has drawn attention to the appellate order passed by the coordinate bench of ITAT, Mumbai in the case of assesses own sister in law Sonal S. Shah in ITA No.1653/Mum/2024 dated 16.10.2024 wherein the whole issue involved the same scrip of BFC P a g e | 5 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai who also disclosed LTCG of Rs 3,72,18,541/- which was treated by the AO as bogus income consequent to reopening of original assessment u/s 148 of the Act. The coordinate bench allowed appeal of the assessee both on legal ground of section 148 and also the addition made u/s 68 of the Act on merit. He has further drawn attention to the case of another relative Sejal Jignesh Shah in ITA NO.444/Mum/2023 for AY 2012-13 dated 15.01.2025 stating that facts of the case as also the grounds of appeal were identical, the Tribunal deleted the addition on merits and kept the ground of appeal on invocation of section 148 of the Act open, thus allowing appeal of the said assessee. Relevant parts of order are extracted below: “6. The entire assessment revolves around the information received from DDIT (Inv.), Unit-8(2) Mumbai that the assessee transacted in shares of M/s. Banas Finance Ltd. (hereinafter 'BFL'). As per the information, it has been found that scrip of BFL is a penny stock listed on BSE and this company has been used to facilitate introduction of unaccounted income of members of beneficiaries in the form of exempt capital gain. During the course of scrutiny assessment proceedings, vide notice dated 14.12.2019, the assessee was asked to explain the transaction in the shares of BFL. In its reply, the assessee provided contract notes for sale of the shares, brokers ledger account, bank statements wherein the sale consideration received from the broker is reflected, bank statement giving evidence of purchase of shares and payment towards these shares purchase, Demat account statement for two years, details of investment in shares for three years. 7. It was explained that the shares of BFL were acquired in F.Y. 2010- 11 through preferential allotment and private placement. As per the details exhibited from pages 30 to 33 of the paper book, the assessee was allotted 1,50,000 shares at face value of Rs.10/- and at a premium of Rs.10/- per share. The shares were dematerialized on 19.01.2011 as per the Demat statement at page 59 of the paper book. Keeping these demonstrative evidences in mind, we find that the name of the assessee is nowhere in the investigation report, not even the broker of the assessee is mentioned in the said report. The entire action of the AO is based upon the following observations: \"6. In response to the said show cause notice, the assessee filed reply on 16.12.2019. The submission filed by the assessee is considered but found not P a g e | 6 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai tenable. From the above set of circumstances, coupled with the fact as discussed in the above paragraphs wherein the modus operandi have been discussed in detail, it is not out of place to mention here that the entire transaction is concocted one and has been carried out with the intention to reduce the short term capital loss. In view of the above, an amount of Rs. 8,01,06,478/- received by the assessee on sale of shares of BANAS FINANCE LIMITED is treated as an accommodation entry and added to the total income of the assessee as per the provisions of section 68 of the Income Tax Act. Similarly, the loss booked by the assessee in the garb of short term capital loss is disallowed to the extent of loss on shares of BANAS FINANCE LIMITED to the tune of Rs. 8,01,06,478/- Penalty provisions u/s.271(1)(c) r.w.s. 274 of the IT Act are hereby initiated separately for furnishing inaccurate particulars of income.\" 8. A perusal of the above shows that the AO has hurriedly made the addition without realizing that the assessee has not booked any loss in the garb of Short Term Capital Loss as is evident from the statement of total income exhibited elsewhere. The AO has placed heavy reliance on the order of Adjudicating Officer, SEBI by which BFL was penalized for SEBI violation. What has lost the sight of the AO is the order of the Securities Appellate Tribunal dated 26.07.2019 by which the Tribunal held that BFL had shown that the required disclosure was made. 9. Coming back to the merits of the case, neither the assessee nor her broker is named in the alleged price regime of BFL. On the contrary, the documents mentioned hereinabove go on show that the assessee had done transactions through stock exchange and the consideration received is through banking channel, therefore, on such evidences no adverse inference can be drawn. 10. The Sr.DR placed strong reliance on the decision in the case of PCIT vs. Swati Bajaj as reported in 446 ITR 56 (Cal). The decision relied by the Ld. DR in the case of Pr. CIT v. Swati Bajaj [446 ITR 56 (Calcutta)] is misplaced for the primary reason that in the case of Swati Bajaj sale/purchase was not from the Demat Accounts. In most of the cases the purchases were through private placements. Whereas, in the case on hand, the trades were made on the stock exchange. Further, in the case of Swati Bajaj (supra) there were statements recorded from the brokers of the assessee, who had agreed to price manipulation and therefore adverse view was taken. In the case on hand, neither the broker of the assessee was examined nor his name is surfaced in any of the Investigation Report and the Hon'ble High Court of Bombay in the case of PCIT vs. Ziauddin A Siddique was dealing with the following question of law. \"Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs.1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?\"\" And the Hon'ble High Court held as under: P a g e | 7 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai \"2. We have considered the impugned order with the assistance of the learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (\"RFL\") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (\"STT\") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd.' but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.\" 11. Considering the facts of the case in totality, in the light of the judicial decisions discussed hereinabove, we do not find any merit in the additions made by the AO. The same are directed to be deleted. 12. Before parting, it would be apt to refer to the decision of the Co- ordinate Bench in the case of Sonal Snehal Shah, in ITA.1653/Mum/2024 wherein the Co-ordinate Bench was considering the same scrip BFL. The relevant findings read as under: \"Even otherwise on the merits of the case, the learned assessing officer was confronted with all the evidences available with the assessee of purchase, dematerialization, sale, transaction by cheque. The names of all the persons from boom the assessee has purchased the shares, the manner of purchasing the shares and how assessee has sold the shares and through which broker assessee has sold the shares are provided to the assessing officer. The learned assessing officer did not make any enquiry and merely on the basis of the report of investigation wing confirmed the addition under section 68 of the act. Therefore, according to us the assessee has discharged his onus under section 68 of the act by proving the nature and source of the amount received. It is for the learned assessing officer to throw back onus on the assessee which the learned assessing officer has failed to do so. Therefore, in the circumstances even the addition under section 68 on the merits of the case is not sustainable.\" 5.2 The ld.AR has also placed reliance on decision of the coordinate Bench in ITA No.01/Ind/2023 in Shiv Kripa Devkon P.Ltd, dated 28.08.2023 wherein on similar issue involving the same P a g e | 8 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai scrip of BFL, entire additions made u/s 68 of the Act have been deleted. 5.3 The ld.DR has placed reliance on the orders of the authorities below. 6. Perusal of the assessment order reveals that the AO has discussed entire modus operandi in such bogus transactions as per the Investigation wing report. Based on such findings he issued a show cause notice which was properly responded. However, the reply of the assessee was brushed aside as being not tenable. Even before the ld.CIT(A),the assessee made a detailed submission vide reply dated 02.04.2022.But the first appellate authority has dismissed appeal of the assessee in a rather cryptic order fully endorsing the assessment order and upholding the same. 6.1 We are of the considered opinion that the documentary evidences could not be rejected without bringing on record any substantial piece of evidence. Reference could also be made to a plethora of decisions of hon’ble Bombay High court on similar issue i.e. CIT vs. Shyam R. Pawar-54 Taxmann.com 108 (Bom-HC], Pr. CIT vs. Smt. Krishna Devi - 126 Taxmann.com 80 (Del-HC), Pr. CIT vs. Ziauddin A. Siddique - ITA No. 2012 of 2017 (Bom-HC),- P a g e | 9 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai Shyam Pawar (54 taxmann.com 108) (Bom), PCIT vs. Indravadan Jain (HUF) (ITA No. 454 of 2018) (Bom),CIT vs. Jamnadevi Agarwal 20 taxmann.com 529 (Bom)etc. The Hon'ble Bombay High Court has consistently held that the transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. 6.2 Thus, the decisions by the jurisdictional High Court decisions cited supra on identical facts as also co-ordinate benches of Mumbai tribunal have a binding precedence. Respectfully following the above cited decisions and also in the light of co-ordinate bench decisions discussed in preceding paras, we hold that the impugned appellate order has been passed in a preconceived manner, dittoing the assessment order rather than by way of independent application of mind. We have therefore, no hesitation setting aside the appellate order and allowing the grounds in this regard. The AO is therefore, directed to delete the addition made u/s 68 of the Act. 7. Since we have deleted the addition, challenging the reopening of the assessment in ground no.2has been left open. P a g e | 10 ITA No. 2450/Mum/2024 A.Y. 2012-13 Amee Shreyance Shah, Mumbai 8. In the result, the above appeal of the assessee is allowed. Order pronounced in the open court on 10.06.2025. Sd/- Sd/- SANDEEP GOSAIN PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 10.06.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. "