DCIT(CC)-8(3) , MUMBAI V. NAKCHHATRA VIMLESHKUMAR MEHTA, MUMBAI

ITA 3777/MUM/2025

AI Insights

The case revolves around the reassessment of the assessee's income for the assessment year 2012-13, where the Revenue challenged the order of the Ld. CIT(A) that had favored the assessee. The assessee had declared a long-term capital gain (LTCG) from the sale of shares of M/s. Banas Finance Limited, which the Assessing Officer later deemed as bogus, alleging manipulation and use of penny stocks for unaccounted income. The Ld. CIT(A) found the transactions to be genuine, supported by substantial evidence, and not merely based on the findings of the Investigation Wing. The Revenue's appeal contested the deletion of the addition made by the Assessing Officer, but the court upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772322 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2012-2013
• Other Referred Cases: CIT vs. Durga Prasad More, Sumati Dayal vs. CIT, Kailash Chandra Gupta HUF vs. ITO, Shanno Mohammed Yusuf Warsi vs. ITO, Manju Hiralal Bafna vs. ITO, Sanjay Bimalchand Jain vs. ITO, CIT vs. P. Mohanakala, CIT vs. Gagandeep Infrastructure Private Limited, Lovely Exports (P) Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: DEVENDRA JAIN
• Keywords: Retrospective amendment; Reassessment proceedings; Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Onus to prove; Capital Gains; Accommodation entries; Source of fund; Earning of tax free income; Penny stocks; Bogus
• Section: 147; 148; 143(3); 68; 131; 69; 133(6); 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “B” BENCH : MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. A.Y. Appellant Respondent 3726/Mum/2025 2012-13 DCIT, CC-8(3), Room No. 661, 6th Floor, Aayakar Bhavan, Maharshi Karve Road, Mumbai-400020. Nakchhatra Vimleshkumar Mehta, 10, Mumbadevi Road, Dagina Bazar, Mumbai-400002 PAN: AFOPM5486R 3777/Mum/2025 2012-13 For Assessee : Shri Devendra Jain For Revenue : Shri Leyaqat Ali Aafaqui Date of Hearing : 31-07-2025 Date of Pronouncement : 25-08-2025 O R D E R PER AMIT SHUKLA, J.M : At the very outset, the learned Departmental Representative submitted that, due to an inadvertent mistake, two separate appeals have been filed by the Revenue against the very same appellate order dated 21st March, 2025, passed by the Learned Commissioner of Income Tax (Appeals)–50, Mumbai [“Ld. CIT(A)”] for A.Y. 2012–13. Both appeals arise from the same order and contain identical grounds. In such circumstances, it was fairly conceded that one of the appeals deserves to be treated as withdrawn. Since ITA No. 3777/Mum/2025 was filed subsequently, it is rendered infructuous and stands dismissed accordingly. 2. We therefore proceed to consider ITA No. 3726/Mum/2025, which remains for adjudication. This appeal by the Revenue is Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 2 directed against the order dated 21st March, 2025, passed by the Ld. CIT(A), arising from the assessment framed under section 143(3) read with section 147 of the Income-tax Act, 1961, for the assessment year 2012–13. In its memorandum of appeal, the Revenue has raised the following grounds for our consideration: 3. The brief facts of the case are that the assessee filed his return of income for the assessment year 2012–13 on 21st December, 2012. In the said return, he declared a total taxable income of ₹16,55,116/–. Along with this, the assessee also disclosed exempt income of ₹4,00,69,645/–, shown as Long-Term Capital Gains (LTCG) arising from the sale of shares, and claimed exemption under section 10(38) of the Income-tax Act, 1961 (“the Act”). This return was taken up for routine processing and was accepted under section 143(1) of the Act on 18th March, 2013. Thus, at that stage, no variation was made and the return stood concluded. 4. Subsequently, the Assessing Officer received information from the Investigation Wing, Mumbai. The information suggested that the scrip of M/s. Banas Finance Limited, a company listed on the Bombay Stock Exchange (BSE), was a “penny stock” which had been misused for providing accommodation entries. It was alleged that such scrips were used as a device to bring unaccounted income into the books of beneficiaries, either as exempt capital gains or as artificial short-term losses. It was also noted that the assessee had sold shares of M/s. Banas Finance Limited for a total consideration of ₹4,22,93,793/–. Acting upon Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 3 this information, the Assessing Officer formed the belief that income had escaped assessment and reopened the case under section 147 of the Act by issuing notice under section 148 on 27th March, 2019. 5. In the reassessment proceedings, the Assessing Officer referred extensively to the findings of the Investigation Wing. He described the general modus operandi allegedly followed in penny stock transactions. He observed that M/s. Banas Finance Limited, incorporated on 6th June, 1983, had made several preferential allotments. On 30th December, 2010, it issued 99 lakh equity shares of ₹10 each at a premium of ₹10 per share to promoters and others. On 12th September, 2011, the company carried out a stock split in the ratio of 10:1. Again, on 26th March, 2013, it issued 1,17,60,000 equity shares of Re. 1 each at a premium of ₹16 per share to non-promoter entities. The Assessing Officer further highlighted the sharp movements in the share price: from ₹9.40 on 27th January, 2011, the price rose to ₹562.00 on 29th October, 2013, and later fell to ₹13.30 on 22nd December, 2015. He also analysed the financials of the company, its trading volumes, and the turnover in the stock exchange, and recorded the listing prices during February to September 2011 to support his view that the price movements were abnormal. 6. The Assessing Officer also relied upon statements recorded by the Investigation Wing of certain alleged “exit providers,” many of whom were found to be fictitious or non-existent. The assessment order reproduced large portions of the Investigation Wing’s report Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 4 almost verbatim, but no specific or direct link was shown with the assessee. In addition, reference was made to an order passed by the Securities and Exchange Board of India (SEBI) on 27th April, 2018, imposing penalties on M/s. Banas Finance Limited for violations of SEBI regulations. On this basis, and after denying the assessee’s request for cross-examination of the alleged exit providers, the Assessing Officer concluded that the assessee had taken accommodation entries in the form of bogus LTCG. Accordingly, the entire amount of ₹4,00,69,645/– was treated as unexplained money under section 69 of the Act. 7. Aggrieved, the assessee preferred an appeal before the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)]. After considering the matter in detail, the Ld. CIT(A) found that the addition made by the Assessing Officer was not justified. The appellate authority examined the assessment order, the submissions made by the assessee, and the evidences produced, and concluded that the transactions were genuine. In support of his claim, the assessee had furnished the following documents: 1. Copy of the share application dated 11.12.2010 submitted to M/s. Banas Finance Ltd. for allotment of preferential shares; 2. Copy of the cheque dated 11.12.2010 for ₹20 lakhs drawn on Syndicate Bank in favour of M/s. Banas Finance Ltd.; 3. Allotment letter dated 01.01.2011 confirming the allotment of one lakh preferential shares to the assessee; 4. Copy of the assessee’s demat account reflecting the shares held; Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 5 5. Copies of broker’s notes issued by RBK Share Broking Ltd. for the sale transactions; 6. Bank statements showing the payment made for purchase and the sale proceeds received; and 7. Copy of the order of the ITAT, Mumbai dated 02.01.2019 in the case of M/s. Banas Finance Ltd., where the genuineness of the preferential allotments was upheld. 8. After analysing the above materials, the Ld. CIT(A) recorded detailed findings in favour of the assessee, the relevant extracts of which are set out hereunder:- “9. I have considered the assessment order, submission of the appellant and facts available on record. The appellant had applied for allotment of preferential shares of M/s Banas Financial Ltd and for the same has issued a cheque of Syndicate Bank amounting to Rs. 20 lakhs on 11.12.2010. The appellant has furnished the copies of the concerned share application form and statement of bank showing payment of Rs. 20 lakhs for purchase of shares. Thereafter, the company has allotted 1 lakh preferential shares of face value of Rs. 10 each at a premium of Rs. 10 per share. Subsequently, these shares were dematerialized in the demat account maintained with RBK Share Broking Ltd. The appellant has furnished the copy of the demat account to substantiate his claim. Thereafter, the shares of Banas Finance Ltd were split in the ratio of 1:10 on 12.09.2011 and the appellant received total 10 lakh shares. These shares were subsequently sold on the stock exchange in the month of February and March 2012 for Rs. 4,21,43,793/-. The details of sale is as under- Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 6 The appellant has shown LTCG of Rs. 4,00,69,644/- from the sale of these shares and the same is claimed as exempt u/s 10(38) of the IT. Act. From the above, it is seen that the appellant has purchased the preferential shares of M/s Banas Financial Ltd and for the same payment of Rs. 20 lakh has been made through the banking channels. Subsequently, these shares were sold on the stock exchange and the receipts are reflected in the bank account. 10. Now, coming to the observations of the AO that the price of the shares is not supported by the fundamentals of the company. The appellant has submitted the financials of this company and has contended that when this company started its operation in A.Y 2010-11, the turnover was only Rs. 2 lakhs which has increased to Rs. 7 crores in the AY 2011-12 Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 7 and 2012-13 showing revenue growth at 350 times. This growth in revenue has increased investor confidence which led to the rise in the price of these shares. The price rise on the stock exchange depends on multiple factors and mostly it is driven by the investors' sentiment. In this case, the substantial rise in revenue along with future prospects of the company has contributed to the rise in price of this alleged share. Regarding the authenticity of Banas Finance, the appellant has submitted that this company is still listed on BSE and is regularly traded. Further, recently it has acquired another listed company, Proaim Enterprises Ltd. From the details submitted by the appellant, I find that there is substantial force in the appellant's contention and hence the same cannot be brushed aside. 11. The next contention of the appellant that the investments made by the appellant for purchase of the preferential shares of M/s Banas Financial Ltd is held to be genuine as the Hon'ble ITAT Mumbai has upheld the investment received by M/s Banas Financial Ltd as genuine. It is seen that Hon'ble ITAT vide order dated 02.01.2019 decided the appeal in case of M/S Banas Financial Ltd forA.Y 2011-12 (ITA No. 1096/MUM/2016). The relevant portion of the decision of Hon'ble ITAT is reproduced as under: \"We have carefully heard the rival contentions and perused relevant material on record including written submissions/documents placed in the paper-book & judicial pronouncements cited before us. Some undisputed facts to be noted are that the assessee is a public listed company and the made preferential allotment of shares having face value of Rs. 10/- per share to as many as 49 investors at a premium of Rs. 10/- per share. The Ld. AO has doubted the valuation of shares on the premise that the market value was much lower than the issue price LAW & HUSTI the financials of the company did not justify issue of shares at high premium However, we find that nothing in law prohibits issue of shares at prices higher than the prevailing market prices. The revenue by questioning the wisdom of the investor, could not make addition in the hands of the assessée as Unexplained cash credit u/s 68 unless it was established Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 8 that the assessee's unaccounted money was routed in the books through the mechanism of fictitious share allotment. Nothing on record dermonstrate such exchange of cash between the investor and the assessee. 5.2 It is noted that the addition has been made as unexplained cash credit u/s 68 which cast onus on the assessee to demonstrate fulfilment of three primary conditions viz. identity of the investor is established by the assessee, the investors had creditworthiness to make those investment and the transactions were genuine. So far as the fulfilment of these primary ingredients of Section 68 is concerned, we find that the assessee has successfully demonstrated the fulfilment of the same which is evident from the orders of both the lower authorities. The transactions have duly been confirmed by the investors in response to notice u/s 133(6). The assessee has filed voluminous documentary evidences before both the lower authorities which prove the fulfilment of these conditions. Even the assessment order u/s 143(3) of an entity who made an investment of Rs.290 Lacs has been placed on record wherein no adverse view has been taken against the investor. The Share allotment has been made after following due procedure of law and after obtaining statutory approval from the concerned government agencies SEBI & Stock Exchanges. The complete details of the same, as required by law, has been filed with Registrar of companies and the new shares have subsequently been listed on the stock exchange. The nature of documents filed by the assessee, to support the transactions, have elaborately been given on page numbers 22 to 24 of the impugned order and the same are not under dispute 5.3 The Ld. CIT-DR has alleged price rigging /manipulation on the part of the assessee to submit that the same was done to generate fictitious LTCG for the investors. However, we find that this matter is the domain of SEBI/Stock Exchange or other concerned government agencies and this fact, alone, could not be the basis for making addition in the hands of the assessee unless the aforesaid fact of price manipulation is established conclusively and it could be demonstrated that Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 9 the assesse's unaccounted money got routed in the system through this manipulation. It is trite law that the additions could not be made merely on basis of guess work, doubts, suspicion, conjectures of surmise Nothing on record establishes this fact and secondly, it was not the case of the Ld. AO to make the additions in the hands of the assessee on the sis of subsequent price manipulation in the market. The Ld. AO has doubted the transactions primarily by questioning the high share premium. However, to reiterate, the revenue, by questioning the wisdom of the investor, could not make addition in the hands of the assessee as unexplained cash credit u/s 68 unless it was established that the assessee's unaccounted money was routed in the books through the mechanism of fictitious share allotment. Nothing on record establishes. So far as the nature of proviso to Section 68 as introduced by Financ Act, 2012 with effect from 01/04/2013 is concerned, the same has aptly been settled by jurisdictional Bombay High Court in CIT Vs. Gagandeep Infrastructure Private Limited (80 Taxmann.com 272) wherein it has been held as under:- (e)We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced \"for removal of doubts\" or that it is \"declaratory. Therefore, it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identify and the capacity of the investor have Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 10 all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders ie, they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre- amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit Respectfully following the same, we find substantial force in this argument advanced by Ld. AR that the assessee was required to prove the source of the money only and nothing beyond. We find that the assessee has demonstrated the same by filing bank statements, Income Tax Returns, financial statements & various other documents as noted by lower authorities and which are not under dispute.\" From the above, it can be seen that Hon'ble ITAT has held the amount received by M/s Banas Finance on account of preferential shares allotment as genuine. 12. The appellant further contended that the reliance on SEBI's order dated 27 April 2018 in the case of Banas Financial Ltd is erroneous. On perusal of this order dated 27 April 2018, it is observed that SEBI has levied penalty for violation as per SEBI's guidelines. The name of the appellant is neither appearing in this order nor there is any reference of the appellant in the same. Further, it is observed that the investigation period considered by the SEBI is not the same when the appellant has sold the shares. In view of this fact, I agree with the contention of the appellant that this order of SEBI cannot be used against the appellant as appellant's name is not mentioned in this order. 13. It is seen that a survey u/s 133A of the I.T. Act was conducted on M/s Mehta Sawant Raj Hanwant Raj on 10.01.2019. In this connection, statement of the appellant was also recorded u/s 131 of the I.T. Act on 11.01.2019. In Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 11 this statement, the appellant has stated that the investment was made by his late father Shri Vimlesh Kumar Mehta and hence he is not aware about the details of the purchase of these shares. The appellant has nowhere stated that the alleged transactions are non-genuine. From this statement also no adverse finding can be drawn against the appellant.” 9. Thereafter, he has referred to various judgments of this Tribunal and Hon’ble High Courts and finally deleted the addition in the following manner: “15.5 In the above-mentioned decisions, the Hon'ble ITAT Mumbai has held that if the transactions are made through banking channels and on stock exchanges, which are duly supported by the broker's note and there is no adverse finding against such assesses in the order passed by SEBI, the transactions cannot be held as bogus merely by relying on the probability angle and third-party statements. 16. In this case, as already discussed, the appellant has furnished all the documentary evidence to substantiate the transactions. The AO has not pointed out any discrepancies in the documents furnished by the appellant. The addition is based mainly on the findings of the Investigation Unit that the scrip of M/s Banas Finance Ltd. has been manipulated by entry operators and that the price rise is not backed by the financials of the company. However, as discussed above, M/s Banas Finance Ltd. was a listed entity and the appellant had acquired preferential shares which are duly recorded in the books of accounts. The payment made for these purchases was made through banking channels. All these shares were dematerialized and are reflected in the demat account. The sales are made on the stock exchange and the transactions are duly supported by the broker's note. The appellant's name is not mentioned in the order passed by SEBI. The appellant has also justified that the price rise of this scrip is influenced by the growth of the company and future potential. Further, there is no evidence available on record which indicates that either the appellant is involved in the process of manipulation or is connected with any person Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 12 involved in the manipulation. There is no finding that indicates that cash has been exchanged for such transactions. Further, the Hon'ble ITAT has already held that amount received by the Banas Financial from the various investors on account of preferential allotment of shares can be held as unexplained cash credits. Therefore, in my considered view, the human probability angle is not applicable in the facts of this case. Therefore, the decision of the AO in holding the purchase and sale of shares of M/s Banas Financial Ltd as bogus cannot be sustained. Accordingly, the AO is directed to delete the addition made of Rs. 4,00,69,644/-. Appeal on these grounds is thus ALLOWED.” 10. Before us, the Ld. DR submitted that the Ld.CIT(A) while deciding the issue has overlooked a critical evidence from the Investigation Wing and assessee has failed to discharge the burden of proof regarding the source of genuineness of the investment. In his written submissions, he has referred to various judgments also. For the sake of ready reference, his written submissions are reproduced as under: “Ground 1: Addition under Section 69A for Unexplained Money Invested in Penny Stocks The CIT(A) erred in deleting the addition without appreciating that the Appellant failed to substantiate the source of funds for investments in M/s Banas Finance Ltd., a penny stock identified by the Investigation Wing as part of a syndicate manipulating prices to generate bogus LTCG. Section 69A deems unexplained money as income where the assessee cannot satisfactorily explain its nature and source. The AO's action, based on BSE trade data under Section 133(6) and analysis showing artificial price rigging (e.g., shares purchased at low values and sold at inflated prices within a short period), is justified. The CIT(A) ignored the AO's findings of pre-arranged transactions in connivance with operators, Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 13 rendering the claimed LTCG exempt under Section 10(38) a sham. Logically, penny stocks like M/s Banas Finance Ltd. exhibit hallmarks of evasion: negligible financial fundamentals, suspension of trading on BSE (Scrip Code 509053), and statements from entry operators implicating beneficiaries. The Appellant's reliance on banking channels, demat accounts, and broker notes is insufficient, as these can mask collusive arrangements. The burden of proof lies squarely on the Appellant, as per the Supreme Court's seminal ruling in CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), where it was held that apparent must not be treated as real without probing the surrounding circumstances, and unexplained investments justify additions under unexplained income provisions. This principle was reaffirmed by the Supreme Court in Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC), emphasizing that human probabilities and circumstantial evidence must guide assessments in suspicious transactions. Kailash Chandra Gupta HUF v/s ITO (L.T.A. No. 4013/Mum/2023 (Α.Υ. 2012-13) (26.07.2024): held that \"the contention of Ld. AR of the assessee that the transaction is through cheque, banking channels come to the rescue of assessee in terms of addition by AO. Moreover, the existence of Exit Providers and shell companies give rise to the thought of sham transaction\". The ITAT Mumbai Bench has consistently upheld such additions in similar penny stock cases: In Shanno Mohammed Yusuf Warsi vs. ITO (ITAT Mumbai, 2024), the Tribunal sustained taxation of LTCG from penny stocks lacking genuine substance, stressing the need for credible evidence beyond formal documents. Similarly, in Manju Hiralal Bafna vs. ITO (ITAT Mumbai, ITA No. 576/Mum/2022, dated 24.06.2024), additions under Section 69A were confirmed for bogus LTCG from manipulated penny stocks, noting suspension of trading and operator statements as probative. Sanjay Bimalchand Jain, 89 Taxman.com 196 (Bom), Hon'ble Bombay High Court: \"In this case, the assessee had purchased shares from the penny stock companies for a Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 14 lower amount and within a year, sold such shares at higher amount and the assessee has not tendered cogent evidence to explain as to why shares in unknown company jumped to such a higher amount in no time and also failed to provide details of persons, who purchased the said shares, the transaction was held to be an attempt to hedge the undisclosed income as LTCG. It was also held that the assessee had indulged in a dubious share transaction meant to account for undisclosed income in the garb of long term capital gains and thus, exemption u/s. 10(38) could not be granted to the assessee\". Ground 2: Deletion of Addition for Alleged Share Price Manipulation The CIT(A) overlooked the probative value of statements recorded under Section 132/133A during investigations, which directly implicate the Appellant in manipulating M/s Banas Finance Ltd.'s share prices for tax benefits. These statements, corroborated by circumstantial evidence like abnormal price surges unsupported by company financials, indicate non-genuine transactions. The AO's reliance on such evidence is standard in penny stock probes, and the CIT(A)'s failure to evaluate this, dismissing it without rebuttal. Rebutting the Appellant's claim of genuine transactions: mere demat entries or banking trails do not prove legitimacy when investigations reveal orchestration by entry providers. The Supreme Court in CIT vs. P. Mohanakala (2007) 291 ITR 278 (SC) upheld additions based on search statements and circumstantial evidence in evasion schemes. Rebuttal to Appellant's Grounds The Appellant's grounds lack merit: (i) The CIT(A)'s deletion under Section 69A ignores the burden of proof (Durga Prasad More, supra); (ii) Manipulation additions are evidenced by statements (Parwani, supra), not adequately rebutted. Conclusion: In conclusion, the Revenue submits that the Appellant has not discharged the onus to refute the AO's Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 15 findings, and the scrutiny report's recommendation for appeal underscores the need to uphold tax integrity. The ITAT is requested to reverse the CIT(A)'s deletions, ensuring compliance with the Act and deterring penny stock abuses.” 11. On the other hand, the Learned counsel for the assessee relied upon the order of the Ld.CIT(A) and also drew our attention to various documents filed in the Paper Book, which have also been referred to by the Ld.CIT(A). 12. We have carefully considered the rival submissions advanced by the learned representatives of both sides, and have also perused the relevant findings recorded in the impugned order as well as the material placed before us in the paper book. It emerges from the record that the assessee had invested a sum of ₹20 lakhs in the shares of M/s. Banas Finance Limited. The source of this investment has been explained as withdrawal of capital from Mehta Emporium, a partnership concern in which the assessee was a partner. The said investment was made entirely through regular banking channels, as is evident from the copy of the bank statement as well as the cheque placed on record. Against this payment, the assessee was allotted one lakh equity shares of face value of ₹10/– each, issued at a premium of ₹10/– per share. Subsequently, upon a stock split carried out by the company in the ratio of 1:10 on 12th September, 2011, the assessee’s holding in the demat account increased from one lakh shares to ten lakh shares. These shares were thereafter sold in the months of February and March, 2012, through the recognised stock exchange in the following manner: Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 16 13. The sales were carried out through a registered broker of the Stock Exchange and were executed entirely in the online platform. To substantiate these transactions, the assessee has furnished copies of broker contract notes, statements of purchase and sale, settlement accounts maintained with the broker, as well as copies of the demat account reflecting complete details of each purchase and sale transaction, such as contract note number, date, scrip name, quantity, price per unit, and total consideration. These evidences, which are undisputed, clearly demonstrate that the transactions were executed in the ordinary course of trading in the Stock Exchange. Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 17 14. On the other hand, the case of the Assessing Officer rests almost wholly on the general findings of the Investigation Wing and on certain financial parameters of the company. It is noteworthy that the turnover of M/s. Banas Finance Limited, which was only about ₹2 lakhs in A.Y. 2010–11, had increased nearly 350 times by A.Ys. 2011–12 and 2012–13, reflecting a turnover of over ₹7 crores. Such growth in business fundamentals does lend some support to the contemporaneous increase in the scrip’s valuation. In fact, as seen from the record, the listed price of the shares on 4th November, 2011, was ₹9.83, which subsequently rose to ₹281/–. The increase in price was gradual and consistent, falling largely within the permissible circuit filter norms prescribed by the BSE and SEBI. The daily increase in price was in the range of 1.8% to 1.95%, barring on rare occasions when it touched 4.9%, still below the 5% upper limit of circuit filter. Thus, the price movement cannot, by itself, be branded as artificial or manipulated. 15. It is further a matter of record that in the case of M/s. Banas Finance Limited itself, this Tribunal has previously returned findings favourable to the genuineness of the preferential allotment of shares. The relevant portion of the judgment is already quoted in the appellate order. The reliance placed by the Assessing Officer on the SEBI order dated 27th April, 2018, is equally misplaced. A perusal of the said order, which is also on record, reveals that the penalty was levied upon M/s. Banas Finance Limited for certain violations of SEBI regulations, but nowhere does the assessee’s name appear in the said order, nor Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 18 is there any reference to his transactions. More importantly, the period of trading examined by SEBI in that order is distinct from the period during which the assessee had effected purchase and sale of the shares. The order, in fact, refers to the conduct of another entity, Anmol Finance Co., which was found to have exercised control over trading to hit the upper circuit limit for 116 trading sessions. However, such trading activity does not overlap with the assessee’s period of purchase or sale. This fact has also been duly taken note of by the Ld. CIT(A). 16. In these circumstances, where the assessee has produced unimpeachable evidences of purchase and sale through recognised channels; where the payments and receipts stand routed through normal banking channels; where the shares were duly dematerialised and recorded in the assessee’s demat account; and where there is no specific material brought on record by the Revenue to establish that the assessee was either a participant in, or a beneficiary of, any price manipulation mere reliance on generic investigation reports or third-party statements without affording cross-examination cannot justify the impugned addition. In the absence of any live nexus linking the assessee with alleged operators or so-called exit providers, the transactions cannot be brushed aside as sham. We thus find ourselves in full agreement with the well-reasoned order of the Ld. CIT(A), deleting the addition of ₹4,00,69,645/–. 17. In the result, the appeal filed by the Revenue in ITA No. 3726/Mum/2025 stands dismissed. Printed from counselvise.com ITA Nos. 3726 & 3777/Mum/2025 19 18. To sum up, both the appeals preferred by the Revenue, ITA Nos. 3726 and 3777/Mum/2025 are dismissed, the latter being infructuous and the former being devoid of merit. Order pronounced in the open court on 25-08-2025 Sd/- Sd/- [GIRISH AGRAWAL] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 25-08-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai Printed from counselvise.com "