ASST COMMISSIONER OF INCOME TAX CC 1 4 MUMBAI, MUMBAI V. JATIN RAJNIKANT SHAH, MUMBAI

ITA 4468/MUM/2024

AI Insights

The case involves an appeal by Manoj Mansukhlal Ruparel against the order of the National Faceless Appeal Centre (NFAC), which upheld the addition of Rs. 1,49,21,637/- to the assessee's income under section 68 of the Income Tax Act, 1961. The addition was based on the purchase of shares of Sunrise Asian Ltd, considered a 'penny stock' by the tax authorities. The Tribunal examined whether the transactions were genuine and supported by adequate evidence. The Tribunal's decision was influenced by various precedents and judgments, including those from the High Courts of Gujarat and Madhya Pradesh, which found no irregularities in similar transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24024 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: misc
• Other Referred Cases: Haresh Dilip Vora vs. ITO, Aakruti Ketan Mehta vs. ITO, Meenu Ajay Pathak vs. ITO, PCIT-1 vs. Divyaben Prafulchandra Parmar, CCIT (OSD)-1 v. Shri Nilesh Jain (HUF), Lalitaben Praful Shah vs. CIT, CIT vs. Jamnadevi Agarwal
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PRIYAVRAT GUPTA; BALASAHEB NAGWE
• Keywords: Set aside; Capital Gains; Sham transactions; Bogus
• Section: 143(3); 250; 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBERAND SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.4468/Mum/2023 (Assessment Year: 2014-15) Manoj Mansukhlal Ruparel 9/53, Navjivan Society, Lamington Road, Grant Road Mumbai-400 008 PAN :ADRPR5870R vs CIT(A), NATIONAL FACELESS APPEAL CENTRE (NFAC), DELHI APPLICANT RESPONDENT Assessee by : Shri Priyavrat Gupta Respondent by : Shri Balasaheb Nagwe (SR DR) Date of hearing : 24/12/2024 Date of pronouncement : 02/01/2025 O R D E R PER ANIKESH BANERJEE, JM: Instant appeal of the assessee was filed against the order of the National Faceless Appeal Centre, Delhi (NFAC) (for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brief, ‘the Act’) for Assessment year 2014-15, date of orders 18/10/2023. The impugned order was emanated from the order of the Learned Income-tax Officer, Ward 20(2)(2), Mumbai (for brevity the “Ld. AO”),order passed under section 143(3) of the Act, date of order 29/12/2016. 2 ITA No.4468 /Mum/2023 Manoj Mansukhlal Ruparel 2. The assessee has taken the following grounds:- “1. That on the facts and circumstances of the case, the order passed by the Commissioner of Income Tax (Appeals) (hereinafter as \"CIT(A)\") u/s 250 of the Income Tax Act, 1961 (hereinafter as \"the Act\") dated 18.10.2023 are bad in law and should be withdrawn. 2. That on the facts and circumstances of the case, the learned CIT(A) erred in upholding the order of the AO in making additions of Rs. 1,49,21,637 towards investments in M/s. Sunrise Asian from undisclosed sources u/s 68 on the basis of information received from investigation wing Kolkata and Mumbai, and that too is also without any proper facts and evidence and without application of mind merely on the basis of suspect. The addition of Rs. 1,49,21,637 u/s 68 of the act should be deleted. 3. That on the facts and circumstances of the case, the learned CIT(A) erred in upholding the order of the AO and failed to appreciate that Appellant had made Purchase and Sale of shares through BSE, recognized stockbroker by SEBI and transactions with the Brokers through account payee cheques. The addition of Rs. 1,49,21,637 u/s 68 of the act should be deleted. 4. That the addition made is illegal, unjust and bad in law and based on mere surmises and conjunctures and the same cannot be justified by any material on record and the same are arbitrary and highly excessive. 5. The Appellant craves leave to add alter amend and or vary any of the above grounds of appeal relief claimed at any time before the decision of the appeal.” 3. We find that during the hearing before the bench, the Learned Authorised Representative (Ld. AR)argued that the assessee has earned by selling of the scrip “Sunrise Asian Ltd”(in short, SAL) amount to Rs. 35,558/- during alleged assessment year. The Ld. AO noticed that the assessee has purchased 30610 shares for Rs.1,49,21,637/-through BSE and payment was made through banking channel and 27780 shares were sold at Rs.1,36,03,446/-. So, the assessee 3 ITA No.4468 /Mum/2023 Manoj Mansukhlal Ruparel declared long term capital gains (LTCG)amount to Rs.35,558/- in the return of income U/s 10(38) of the Act. After receiving the information from Kolkata Investigation Directorate, the Ld.AO considered the said scrip as penny stock and added back entire purchase of share of SALamount to Rs. 1,49,21637/- under section 68 of the Act with total income of the assessee. Being aggrieved in the appeal order the assessee filed and appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the assessment order. Aggrieved assessee filed an appeal before us by challenging the appeal order. 4. The Ld.AR argued and stated that the issue is squarely covered by the order of the ITAT, Mumbai Bench in the case of Haresh Dilip Vora vs. ITO bearing ITA No.3646/Mum/2024, date of pronouncement 10/09/2024 where the Bench considered that the said SAL scrip is not a sham transaction. During the assessment and appeal proceedings, the assessee filed the detailed submissions and filed evidence related to the transaction. The same documents are also submitted before the bench, which is reproduced as below: - Sr.No. Particulars Page No. 1 Submission dated 17th September, 2023 1-2 2 Submission on various das mentioned: 16thJanuary, 2019 30thJanuary, 2019 11th March, 2020 3-27 3 Broker Transaction Ledger 37-38 4 Sunrise Asian Profit and Loss A/c Statement 39 5 ITR V Acknowledgement 40-41 6 Computation of Income 42-45 7 Financial Statements 46-47 8 Bank Statements 48-53 9 Sales Register 58-59 10 Copy of Contract Notes 98 -123 4 ITA No.4468 /Mum/2023 Manoj Mansukhlal Ruparel 11 Bank Account passbook copy 127-130 5. The Learned Departmental Representative (Ld. DR) argued vehemently and relied on the decisions of the co-ordinate bench of the ITAT, Mumbai Bench, in the cases of Aakruti Ketan Mehta vs. ITO (ITA No. 53/Mum/2023, pronouncement dated 31/01/2024) and Meenu Ajay Pathak vs. ITO (ITA No. 155/Mum/2023, pronouncement dated 18/07/2013). In both cases, the Tribunal ruled in favor of the revenue, holding that the Long-Term Capital Gains (LTCG) claimed were part of a bogus transaction. 6. The Ld. AR, on the other hand, submitted the details of a list provided by the Securities and Exchange Board of India (SEBI), asserting that the final SEBI order did not mention the assessee’s name. Therefore, the assessee was not implicated in any price rigging or other malpractices. Further, the Ld. AR contended that the revenue relied on orders that did not consider the judgment of the Hon’ble High Court of Gujarat at Ahmedabad in PCIT-1 vs. Divyaben Prafulchandra Parmar (R/Tax Appeal No. 812 of 2023, order dated 02/01/2024). Regarding the scrip of SAL, the Ld. AR highlighted the detailed judgment of the Hon’ble High Court of Madhya Pradesh at Indore in CCIT (OSD)-1 v. Shri Nilesh Jain (HUF) (ITA No. 56/2021, judgment dated 30/11/2024). In this case, the Hon’ble High Court held that M/s Santoshima Leasing & Finance was duly amalgamated with SAL, a listed company on the BSE. Consequently, transactions involving SAL could not be categorized as sham transactions. The Ld. AR further respectfully relied on the order of the ITAT, Mumbai Bench \"A,\" in Lalitaben Praful Shah vs. CIT (ITA No. 2008/Mum/2023, pronouncement dated 17/01/2024), where the co-ordinate bench referred to the judgment of the 5 ITA No.4468 /Mum/2023 Manoj Mansukhlal Ruparel Hon’ble Bombay High Court in CIT vs. Jamnadevi Agarwal (20 taxmann.com 529). In that case, the High Court held that transactions relating to the purchase and sale of shares could not be considered bogus when supported by genuine documentary evidence furnished by the assessee. 7. We have heard the rival submissions and perused the material available on record. The issue in the present appeal pertains to the addition made concerning the assessee’s investment in the purchase of shares of SAL. Notably, no addition was made to the LTCG arising from the sale of shares. The Ld. DR relied on decisions of the co-ordinate benches related to LTCG arising from the sale of shares, which are distinguishable on facts. In the present case, the assessee transacted in shares of SAL, which were also the subject of scrutiny by the Hon’ble Gujarat High Court in Divyaben Prafulchandra Parmar (supra) & Hon’ble High Court of Madhya Pradeshin Shri Nilesh Jain (HUF) (supra), where no irregularities were found. The assessee purchased the shares through the BSE, made payments via banking channels, and submitted contract notes, STT was paid and Demat account details evidencing delivery of shares. The assessee subsequently sold 27,780 shares for a total consideration of Rs.1,36,03,446/- through the BSE, with delivery made from the same Demat account. The Ld. AO did not dispute the sale proceeds. Having furnished the requisite documentary evidence, the onus shifted to the Ld. AO to establish the alleged non-genuine nature of the transaction. However, the Ld. AO failed to provide any corroborative evidence to substantiate the allegations. 6 ITA No.4468 /Mum/2023 Manoj Mansukhlal Ruparel We respectfully rely on the ruling of the Hon’ble Bombay High Court in Jamnadevi Agarwal (supra), as followed by the co-ordinate bench in Lalitaben Praful Shah (supra). In our considered view, the addition of Rs. 1,49,21,637/- is unjustified. Accordingly, we set aside the impugned appeal order, and the addition is quashed. 8. In the result, appeal of the assessee ITA No. 4468/Mum/2023 is allowed. Order pronounced in the open court on 02nd day of January 2025. Sd/- sd/- (PRABHASH SHANKAR) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 02/01/2025 Pavanan Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai "