DCIT-2(1)(1), MUMBAI V. BP COMTRADE PVT. LTD., MUMBAI

ITA 6644/MUM/2024

AI Insights

The case involves BP Comtrade Pvt. Ltd., which was accused by the Deputy Commissioner of Income Tax of engaging in transactions involving penny stocks to generate bogus long-term capital gains. The Assessing Officer made additions to the assessee's income for the assessment years 2016-17, 2017-18, and 2018-19 based on these transactions. The CIT(A) later deleted these additions, leading the Revenue to appeal against this decision. The Tribunal examined the factual matrix, including the nature of the transactions and the evidence provided by both parties, and concluded that the additions were unjustified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713245 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2017-2018
• Other Referred Cases: Raymond Woollen Mills Ltd. vs. ITO, CIT vs. Durga Prasad More, Sumati Dayal vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Difference of opinion; Change of opinion; Reopening of assessment; Capital Gains; Accommodation entries; Transactions in derivatives; Penny stocks; Bogus
• Section: 147; 148

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA Nos.6643, 6644 and 6645 /MUM/2024 Assessment Years: 2016-17, 2017-18 and 2018-19 Deputy Commissioner of Income Tax-2(1)(1), Mumbai Vs. BP Comtrade Pvt. Ltd., 24/26, 1st Floor, Cama Building, Dalal Street, Fort, Mumbai - 400023 (PAN : AAACA3758Q) (Appellant) (Respondent) AND CO Nos. 18, 17 and 19/MUM/2025 Assessment Years: 2016-17, 2017-18 and 2018-19 (Arising out of ITA Nos. 6643, 6644 and 6645 /MUM/2024) BP Comtrade Pvt. Ltd., 24/26, 1st Floor, Cama Building, Dalal Street, Fort, Mumbai - 400023 (PAN : AAACA3758Q) Vs. Deputy Commissioner of Income Tax-2(1)(1), Mumbai (Appellant) (Respondent) Present for: Assessee : Shri Jay Bhansali, AR Revenue : Shri Leyaqat Ali Aafaqui, Sr. DR Date of Hearing : 31.07.2025 Date of Pronouncement : 31.07.2025 O R D E R PER BENCH: Printed from counselvise.com 2 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 These appeals filed by the Revenue and Cross Objections filed by the assessee are against the orders of Ld. CIT(A), National Faceless Assessment Centre, New Delhi, vide i) Order No. ITBA/NFAC/S/250/2024-25/1069793803(1), dated 19.10.2024 passed against the assessment order of National Faceless Assessment Centre, Delhi, u/s. 147rws144B of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 30.03.2022 for AY 2016-17. ii) Order No. ITBA/NFAC/S/250/2024-25/1069794029(1), dated 19.10.2024 passed against the assessment order of National Faceless Assessment Centre, Delhi, u/s. 147rws144B of the Act, 1961, dated 30.03.2022 for AY 2017-18 and iii) Order No. ITBA/NFAC/S/250/2024-25/1069794392(1), dated 19.10.2024 passed against the assessment order of National Faceless Assessment Centre, Delhi, u/s. 147rws144B of the Act, 1961, dated 22.03.2024 for AY 2018-19. 2. Grounds taken by the Revenue are reproduced as under: ITA No.6643/MUM/2024 i) On the facts and circumstances of the case, whether the Ld. CIT(A) was right in directing the Assessing Officer to delete the addition of Rs. 1,79,18,081/- on account of bogus long term capital gain through transaction in penny scrips, when the Assessing officer had detailed the bogus nature of the transaction in these scrips. ii) On the facts and circumstances of the case, the Ld. CIT(A) was right in directing the Assessing Officer to delete the addition of Rs. 1,79,18,081/- when he had the option of directing the Assessing officer to carry out in- depth verification of transaction in the penny scrips since the trading in these scrips had been for the sole purpose of generation bogus long term capital gain/loss. Therefore, monetary low limit in filing appeal would not apply in this case as per CBDT Circular No. 5/2024 dated 15.03.2024 as per clause 3.1 para h. Printed from counselvise.com 3 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 ITA No.6644/MUM/2024 1. On the facts and circumstances of the case, whether the Ld. CIT(A) was right in directing the Assessing Officer to delete the addition of Rs. 61,35,279/- on account of bogus long term capital gain through transaction in penny scrips, when the Assessing officer had detailed the bogus nature of the transaction in these scrips. 2. On the facts and circumstances of the case, the Ld. CIT(A) was right in directing the Assessing Officer to delete the addition of Rs. 61,35,279/- when he had the option of directing the Assessing officer to carry out in- depth verification of transaction in the penny scrips since the trading in these scrips had been for the sole purpose of generation bogus long term capital gain/loss. 3. On the facts and circumstances of the case, whether the Ld. CIT(A) was right in directing the Assessing Officer to delete the addition of Rs. 67,66,778/-, relying only on the assessee's statement regarding submission of letter dated 15/06/2021 before the AO about not availing such loans, when he had the option of directing the Assessing officer to carry out in-depth verification on this issue. ITA No.6645 /MUM/2024 1. On the facts and circumstances of the case, whether the Ld. CIT(A) was right in directing the Assessing Officer to delete the addition of Rs. 37,37,280/- on account of bogus long term capital gain through transaction in penny scrips, when the Assessing officer had detailed the bogus nature of the transaction in these scrips. 2. On the facts and circumstances of the case, the Ld. CIT(A) was right in directing the Assessing Officer to delete the addition of Rs. 37,37,280/- when he had the option of directing the Assessing officer to carry out in- depth verification of transaction in the penny scrips since the trading in these scrips had been for the sole purpose of generation bogus long term capital gain/loss. Therefore, monetary low limit in filing appeal would not apply in this case as per CBDT Circular No. 5/2024 dated 15.03.2024 as per clause 3.1 para h. 2.1 Grounds taken by the Assessee in its cross objections are reproduced as under: CO Nos. 18/MUM/2025 1. The Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in reopening the case of the assessee for reasons which are wrong, contrary to facts and position in law; 2. The Assessing Officer erred in relying on certain data and findings of the general investigation in unrelated cases. Neither has such material been shown Printed from counselvise.com 4 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 to establish any connection with the case of the assessee nor was assessee given an opportunity to cross examine such material; CO Nos.17/MUM/2025 1. The Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in reopening the case of the assessee for reasons which are wrong, contrary to facts and position in law; 2. The Assessing Officer erred in relying on certain data and findings of the general investigation in unrelated cases. Neither has such material been shown to establish any connection with the case of the assessee nor was assessee given an opportunity to cross examine such material; CO Nos.19/MUM/2025 1. The Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in reopening the case of the assessee for reasons which are wrong, contrary to facts and position in law; 2. The CIT(A) / Assessing Officer failed to appreciate that order dated 29.04.2022 under section 148A(d) of the Act and the notice dated 29.04.2022 under section 148 of the Act are bad in law in as much as they have been passed / issued on the basis of sanction of the Principal Commissioner of Income-tax instead of the Principal Chief Commissioner of Income-tax as required under section 151 of the Act. Consequently, the reassessment order dated 22.03.2024 under section 147 rws 144B of the Act (hereinafter referred to as \"the reassessment order\") is bad in law; 3. The CIT(A) / Assessing Officer erred in reopening the case of the assessee merely on the basis of change of opinion which is not permissible. Consequently, the reassessment order is liable to be quashed; 4. The CIT(A)/ Assessing Officer failed to appreciate that the order dated 29.04.2022 under section 148A(d) of the Act and the notice dated 29.04.2022 under section 148 of the Act was required to be passed /issued in a faceless manner in accordance with the e-Assessment of Income Escaping Assessment Scheme, 2022 prescribed under section 151A of the Act and therefore the said notice was bad in law. Consequently, the reassessment order is liable to be quashed; 5. The CIT(A) / Assessing Officer erred in reopening the case of the assessee beyond a period of three year from the end of the relevant assessment year without there being any income in the form of asset /entry / expenditure more than Rs. 50 Lakhs which has escaped assessment. Consequently, the reassessment order is liable to be quashed; 6. The Assessing Officer erred in relying on certain data and findings of the general investigation in unrelated cases. Neither has such material been shown to establish any connection with the case of the assessee nor was assessee given an opportunity to cross examine such material; Printed from counselvise.com 5 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 3. The issues raised by the Revenue in its appeal are common in all the three appeals. In the cross objections filed by the assessee, legal issues are raised challenging the reopening which are also common for all the three years. Thus, we take up all the three appeals and cross objections together for adjudication by passing this consolidated order. Since the assessee has challenged the jurisdictional issue of the impugned assessment order, we first take up the grounds raised by the assessee, in its cross objections. 3.1. We take up Assessment Year 2016-17 as the lead year to draw the facts and make our observations to arrive at the findings which will apply mutatis mutandis to the other two assessment years in appeal before us. 4. Brief facts of the case are that assessee filed its return of income on 13.10.2016 reporting total income at Rs.93,17,310/-. Subsequently, ld. Assessing Officer received information from the Director of Income Tax (Inv), Kolkata. From such information, ld. Assessing Officer observed that assessee had traded in certain penny scrips and derived fictitious profits from the same. Ld. Assessing Officer identified 10 scrips from which assessee had booked bogus long term capital gain amounting to Rs.1,79,18,081/- by trading in the same. Details of same is tabulated as under: S.N. Scrip Code Scrip Name Value of Transaction (Rs.) 1 534060 Pmc Fincorp Ltd. 22,65,868 2 524322 Kabra Drugs Ltd. 4,23,056 3 521167 Frontline Business Solutions Ltd. 13,41,025 4 503663 Kushal Limited 113 Printed from counselvise.com 6 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 5 526735 Excel Castronics Ltd. 81,63,842 6 511012 Yamini Investments Company Limited 31,762 7 503675 Wagend Infra Venture Limited 42 8 531723 Stampede Captial Ltd. 5,42,326 9 534741 Virtual Global Education Ltd. 13,34,258 10 532801 Cambridge Technology Enterprises Ltd. 38,15,789 Total 1,79,18,081 4.1. According to the ld. Assessing Officer, assessee is a beneficiary of these accommodation entries and the transactions reported on trading of these penny scrips are nothing but colourable arranged transactions and therefore unexplained. He thus, recorded reasons to believe that income chargeable to tax of Rs.1,79,18,943/- has escaped assessment within the meaning of section 147. Accordingly, he issued notice u/s.148, dated 13.05.2021 which is within the four years of end of the relevant assessment year. Assessee filed its return of income on 09.04.2021 in response to the said notice u/s.148. 4.2. Assessee is engaged in the business of trading in shares and securities in normal course. During the year, assessee has traded in more than 2000 scrips, details of which were placed on record in the course of assessment proceedings. Assessee offers profits and gains earned by it in respect of trading in shares as well as other transactions on commodity and derivative products under the head ‘Profits and gains of business or profession’. There is no capital gain reported by the assessee in its return of income. In this respect, reference was made to the computation to the total income placed in the paper book at page- 2, wherein total income of Rs.93,17,311/- comprises of income from Printed from counselvise.com 7 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 partnership firm, i.e., Gajanan Enterprise of Rs.300/- and the balance from its own profit and loss account. Reference is made to note No.13 of the audited financial statements which gives details of revenue from operations for the year under consideration, totalling to Rs.2,60,85,888/-. This comprises of profit/loss from trading amounting to Rs.1,72,61,843/-. Further break up of this profit/loss from trading is detailed as below: Summary of Trading 4.3. Also, in respect of the net profit of Rs.1,48,63.647/- in the above table pertaining to the cash segment for trading done by the assessee based on delivery of shares, assessee has furnished detailed report running from page 40 to page 66 of the paper book, giving scrip-wise details with their quantity of buying and selling as well as value. Out of these more than 2000 scrips, ld. Assessing Officer identified 10 scrips which are alleged to be penny scrips and has thus, made an addition while completing the impugned assessment. Details of these 10 scrips on which assessee has recorded net loss of Rs.8,18,202/- is tabulated below: Scrip Name OP Qty OP Value Bqty BValue Sqty SValue Net Amt P/L 532801 CTE 966,004 83,622,412 966,004 85,570,023 - - 1,947,610 526735 EXCAST 654,325 8,152,433 654,325 8,234,807 - - 82,374 521167 FRONTBUSS 64,907 1,382,491 64,907 1,341,016 - - 41,475 A.Y. 2016-17 Commodity 5,36,256 CASH 1,48,63,647 F&O 18,61,940 Total 1,72,61,843 Printed from counselvise.com 8 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 524322 KABRADG 44 3,630 34,782 420,872 34,826 423,053 - - 1,448 534060 PMCFIN 1,539 19,281 2,237,470 1,539,281 2,265,873 - - 28,403 531723 STAMPEDE 202,377 21,998,021 173,352 22,294,200 29,025 1,129,073 1,425,251 503663 TILAKFIN 5,061 36,987 5,061 30,017 - - 6,970 534741 VIRTUALG 887,770 11,224,126 686,270 5,502,773 201,500 1,501,175 4,220,178 503675 WAGEND 6 42 6 42 - - - 511012 YAMNINV 15,507 801,366 15,507 769,597 - - 31,769 TOTAL: 44 3,630 4,370,020 129,876,222 4,139,539 126,431,402 230,525 2,630,248 818,202 4.4. Further, in all these scrips alleged as penny scrips by the ld. Assessing Officer, assessee has tabulated the details for each of the 10 scrips date wise, when the transaction was undertaken throughout the year on various dates to demonstrate that it is not one single transaction for each scrip which was undertaken but was based on certain algorithms. These details with date wise transactions in the said 10 scrips runs from page 68 to page 79 of the paper book. 5. On the reopening of assessment, after receipt of the reasons to believe recorded by the ld. Assessing Officer, assessee filed its objections vide letter dated 15.06.2021 explaining its case. According to the assessee, reasons to believe so recorded does not bear any specific working to state how the traded value for the 10 alleged scrips has been arrived at. Further, it was mentioned that assessee had not taken any unsecured loan for which also allegation was made in the reasons to believe which amounts to Rs.862/-. In respect of this amount, assessee submitted that no such transaction was undertaken by it from the stated party. Assessee very categorically stated in this letter that it deals in shares in normal course of business which are based on price movements. The total trade values mentioned in respect of the 10 alleged scrips are sale value of the scrips and not the gain or loss. Printed from counselvise.com 9 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 Further, there are major differences in the values noted in the reasons to believe when compared with the same recorded in the books of accounts of the assessee. Factually the details contained in the reasons to believe for the 10 alleged scrips are wrong and without any basis. Assessee had offered the profits/gains as business income on trading of these shares though the reasons to believe recorded by the ld. Assessing Officer mentions about long term capital gains, booked by the assessee and claimed as exempt. 5.1. While disposing the objections raised by the assessee vide order dated 04.02.2022, it was pointed out that in para – 4.3, ld. Assessing Officer refers to assessee has reported substantial value of trading of the alleged 10 bogus penny scrips for which the profit/loss is artificial, just to claim long term capital gain as exempt from tax or short term capital loss to reduce the tax liability on the genuine short term capital gain. Further, he records in para-4.5 that information was received by him and the reasons to believe were recorded on the basis of material in his office as provided by DGIT (Inv), Lucknow and DGIT(Inv), Kolkata. After considering the submissions made by the assessee, ld. Assessing Officer took adverse view and made the addition for which assessee went in appeal before the ld. CIT(A). 6. Before the ld. CIT(A), factual details were reiterated to demonstrate that the reasons to believe are based on wrong and incorrect facts and therefore entire re-assessment proceedings is vitiated, liable to be quashed void ab initio. Further, it was asserted that addition has been made based on general investigation undertaken by the Department and the findings are not specific to the assessee. No cogent material has been brought on record to demonstrate and establish the connection of the assessee for carrying out manipulative Printed from counselvise.com 10 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 transactions. It was also asserted that no opportunity to cross examine was granted so as to examine the material which has been relied upon to take an adverse view. In the course of first appellate proceedings, assessee had submitted break-up of profit it has earned from share trading in recognised stock exchanges duly accounted and reflected in its financial statements. Details of the same are already tabulated above. 6.1. It was asserted that out of 2086 scrips traded during the year, ld. Assessing Officer has picked up 10 scrips as penny stock on which assessee has in fact incurred loss of Rs.8,18,202/- though the addition has been made at Rs.1,79,18,081/-. Assessee has also given date-wise, scrip-wise details of actual profit/loss duly accounted in its books of accounts and corroborated by verifiable documentary evidences to prove that all these transactions were carried out on stock exchange platforms through the members of BSE/NSE, settled through banking channel by delivery through DMAT account. Assessee has strongly submitted that ld. Assessing Officer has made the addition without making any reconciliation of these transactions with the value of transaction as per information in his possession. Further, it was submitted that assessee had made huge sales turnover in the cash segment amounting to Rs. 3730.94 Crores in all the 2086 scrips. As against this, the sale turnover in alleged penny stock of 10 scrips is a meagre amount of Rs. 12.64 Crores, which constitutes 0.34% of the overall sale turnover. Relevant details in this respect is summarised as below: Name of scrip Op. Qty Op. Value Buy Qty. Buy Value Sale Qty. Sale Value Net Amt Profit/(Loss) All scrips 46 3642 510958976 37343010711 509266374 37309421794 1692648 78756837 14863647 Impugned penny stocks 44 3630 4370020 129876222 4139539 126431402 230525 2630248 (818202) Printed from counselvise.com 11 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 %age of sale turnover of impugned penny stocks to all scrips 0. 34% 6.2. Further, ld. CIT(A) analysed the information as was available with ld. Assessing Officer and compared the same with that provided by the assessee. The same is tabulated below: Name of scrip Value of Transaction as per AO As per appellant Remarks Sale Value Cost of Sale (Purchase + Op. Stock - Cl. Stock) Profit/(Loss) PMCFIN 22,65,868 22,65,873 22,37,470 28,403 Value of transaction as per AO almost matches with sale value as per appellant. KABRADG 4,23,056 4,23,053 4,24,501 (1,448) Value of transaction as per AO almost matches with sale value as per appellant. FRONTBUSS 13,41,025 13,41,016 13,82,491 (41,475) Value of transaction as per AO almost matches with sale value as per appellant. TILAKFIN (Kushal) 113 30,017 36,987 (6,970) Not reconciled. EXCAST 81,63,842 82,34,807 81,52,433 82,374 Value of transaction as per AO almost matches with sale value as per appellant. Printed from counselvise.com 12 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 YAMINI 31,762 7,69,597 8,01,366 (31,769) Value of transaction as per AO almost matches with profit/ (loss) figure as per appellant. WAGEND 42 42 42 - Value of transaction as per AO matches with sale value as per appellant. STAMPEDE 5,42,326 2,22,94,200 2,08,68,949 14,25,251 Not reconciled. VIRTUALG 13,34,258 55,02,773 97,22,951 (42,20,178) Not reconciled. CTE 38,15,789 8,55,70,023 8,36,22,413 19,47,610 Not reconciled. Total 1,79,18,081 12,64,31,402 12,72,49,604 (8,18,202) 6.3. On the above table, ld. CIT(A) observed based on his analysis that ld. Assessing Officer had adopted the sale value in case of five scrips without granting any deduction for cost thereon. In one scrip, ld. Assessing Officer had adopted the profit/loss figure, wherein loss figure has been added. In the remaining four scrips, figures adopted by the ld. Assessing Officer are not at all reconciled with the actual transaction furnished by the assessee. In respect of the transactions executed for the alleged 10 scrips, ld. CIT(A) observed that both purchase and sale are accounted for as business transactions which are carried out on BSE and NSE recognised stock exchange platforms. The quantum of profit/loss earned on these 10 alleged penny scrips are not significant and thus the presumption that the assessee has arranged bogus capital gain for claiming it as exempt is factually incorrect. He also observed that there are no astronomical gains in the alleged 10 penny scrips Printed from counselvise.com 13 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 which is common feature for alleging the scrip as penny scrip to make an addition in the form of bogus long term capital gain. Further, there is nothing brought on record in respect of any report by SEBI to demonstrate any involvement of the assessee in respect of these said alleged 10 scrips. 7. We have perused the order of ld. CIT(A) whereby detailed analysis of entire transactions has been undertaken and all the aspects have been thoroughly analysed to give a fact based finding. We extract the same for ready reference. “9.16 I note that on his part, the appellant has discharged its onus by submitting scrip-wise details as reconciled with its audited financial statements, and no further enquiry has been made by the Assessing Officer in that regard. The Assessing Officer has just discussed the information in his possession, without providing any evidence of involvement of appellant in any wrong-doing. The Assessing Officer has not discussed anything about the factual profit/ (loss) of the appellant in impugned penny stocks, and/or about the trading pattern of the appellant. The Assessing Officer has even failed to observe that as against the information in his possession about the bogus LTCG earned by beneficiaries in such penny stock, the appellant has already offered the profit/ (loss) in said scrips to tax under business income head; hence, in any case there would be no escapement of income. Hence, it appears that the addition has been made by the Assessing Officer of Rs. 1,79,18,081/- just for sake of making addition on basis of information received. Thus, the entire addition made is without any basis, and hence, cannot be sustained. 9.17 The appellant has relied upon several case laws, wherein the additions made on account of dealing in penny stocks have been deleted on submitting the documentary evidences and in absence of direct involvement of assessee. I find the present case even on a better footing, given that the no. of alleged penny stocks traded/profit (loss) earned thereon constitutes a very small portion of the appellant's overall trading in large no. of scrips and profits earned thereon; and also, since the appellant has already offered the profit/ (loss) on such scrips as business income hence the addition made u/s 68 would amount to double taxation which is not permissible. 9.18 I further note that as regards the addition made on account of Unsecured Loans from Shri Naresh Manakchand Jain (PAN - AACPJ9811A) of Rs. 862/-, the appellant had already informed the Assessing Officer vide aforesaid letter dated 15.06.2021 that it has not taken any unsecured loans from the said party and that no transaction are done with the said party. The onus cannot be cast upon the appellant to prove the negative, and hence the onus was upon the Assessing Officer only to prove the allegation made. However, the Assessing Officer has not brought any evidence on record to prove that the appellant is in receipt of any Printed from counselvise.com 14 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 such unsecured loan from the party. The addition cannot be sustained merely on basis of information received by Assessing Officer, without any evidence brought on record.” 8. In the course of hearing before us, all the above narrated factual positions were brought to fore by referring to the corroborative material placed on record. Ld. Sr. DR had placed reliance on the order of the ld. AO since it was based on information received from the Investigation Wing, whereby it was found that assessee is beneficiary of executing transactions into certain alleged penny scrips. The subsequent information was made available from the exit providers who executed transactions in the alleged penny scrips. A written submission dated 31.07.2025 is also placed on record as rebuttal to the submissions made by the assessee for its cross objections. Reliance is placed on judicial precedents of Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. vs. ITO [1999] 236 ITR 34 (SC), to contend that sufficiency of reasons for forming a belief is what is material for the purpose of forming the belief by the ld. AO. According to the ld. Sr. DR, report of the Investigation Wing constitutes such material. For the specific information relating to the assessee, it is contended by ld. Sr. DR that ld. AO is not required to conduct a full investigation at the stage of recording of reasons. According to him transactions undertaken by the assessee are colourable device to evade tax. He placed reliance on the decision of Hon’ble Supreme Court in the case of CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) to contend upon the preponderance of human probability. 9. We have heard both the parties and perused the material placed on record. We have also given our thoughtful consideration to the detailed analytical observations and findings made by ld. CIT(A) on the nature of business undertaken by the assessee as well as those relating Printed from counselvise.com 15 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 to specific and alleged penny scrips for which the impugned re- assessment was undertaken. The factual position demonstrated by the assessee as discussed above as well as drawn from the order of ld. CIT(A), remain uncontroverted. Nothing cogent and positive has been brought on record by the Revenue to demonstrate how the assessee is a party to what has been alleged in the Investigation Wing’s report, more particularly, when there is nothing specific to point out the role of assessee. Assessee had at the threshold raised its objection and laid down the correct factual position from its books of accounts vis-a-vis the facts recorded in the reasons to believe for which no effort was made at the end of the ld. AO on receipt of information from the Investigation Wing so as to draw factually correct position before recording reasons to believe for invoking the re-assessment proceedings. We note that reopening is based on wrong and irrelevant facts, recorded under the reasons for formation of belief for escapement of income without any verification or examination by the ld. AO. Considering the above discussion including a detailed analysis of correct factual position, we are in agreement with the fact based analytical findings arrived at by ld. CIT(A) and find no reason to interfere with the same. Accordingly, grounds raised by the assessee in its cross objection are allowed. 10. In the result, cross objection filed by the assessee is allowed. 11. Identical fact pattern exists for appeal in AY 2017-18 wherein also on the transaction for alleged penny scrips, assessee had suffered loss. In the case for appeal for AY 2018-19, there is a scenario of profit booked by assessee on the alleged penny scrip transactions. Except for this specific change in AY 2018-19, the observations and findings made by us in the appeal for AY 2016-17 apply mutatis mutandis to the cross objections of the assessee for the other two years, i.e., AY 2017-18 and Printed from counselvise.com 16 ITA No. 6643/MUM/202 and ors. BP Comtrade Pvt. Ltd. AYs 2016-17, 2017-18 and 2018-19 2018-19. Accordingly, cross objections for these two years are also allowed. 12. Having allowed the cross objections of the assessee as stated above, the appeals filed by the Revenue on the merits of the additions made by ld. AO and deleted by the ld. CIT(A) are rendered academic in nature. Accordingly, all the three appeals for the three assessment years filed by the Revenue are dismissed. 13. In the result, three appeals by the Revenue are dismissed and the three cross objections filed by the assessee are allowed. Order is pronounced in the open court on 31 July, 2025 Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 31 July, 2025 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "