DCIT (CC)-8(4), MUMBAI V. REENA RATNESH JAIN , MUMBAI

ITA 3888/MUM/2025

AI Insights

The case revolves around an appeal by the department against the order of the learned Commissioner of Income Tax (Appeals), which pertained to the assessment year 2016-17. The primary dispute was regarding the deletion of an addition of Rs.80,23,019, which was initially added as bogus Long Term Capital Gain (LTCG) under section 68 of the Income Tax Act, 1961. The Assessing Officer had reopened the assessment based on information from the Investigation Wing that the LTCG and Short Term Capital Gain (STCG) from the sale of shares of M/s Goenka Business and Finance Ltd. were non-genuine. However, the first appellate authority found the transactions to be genuine, leading to the deletion of the additions. The Tribunal, after considering the submissions and the precedents cited, upheld the decision of the first appellate authority.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 833551 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 30-05-2025
• Other Referred Cases: Dilipkumar Hazarimal Ahuja vs. CIT(A), PCIT vs. Krishna Devi, CIT vs. Jamnadevi Agrawal, PCIT vs. Indravadan Jain HUF, CIT vs. Shyam R. Pawar, Pr. CIT vs. Ziauddin A Siddique
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHADRESH DOSHI
• Assessee Lawyers: ANNAVARAMKOSURI
• Keywords: Question of law; Corroborative evidences; Unexplained cash credit; Income from undisclosed sources; Capital Gains; Accommodation entries; Bogus
• Section: 147; 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 3888/Mum/2025 (Assessment Year: 2016-17) DCIT(CC)-8(4) Room No. 659, 6th Floor, Aayakar Bhavan, M. K. Road, Mumbai-400 020 Vs. Reena Ratnesh Jain 902/903, A Wing, Kalinga Tower, Nirmal Nagar, Near D-Mart, Mulund (W), Mumbai-400 080 PAN/GIR No. AEAPJ 6605 C (Appellant) : (Respondent) Appellant by : Shri Bhadresh Doshi Respondent by : Shri Annavaram Kosuri (Sr. AR) Date of Hearing : 03.02.2026 Date of Pronouncement : 06.02.2026 O R D E R Per Saktijit Dey, Vice President: This is an appeal by the department, against order dated 26.03.2025 of learned Commissioner of Income Tax (Appeals), Mumbai (‘ld.CIT(A) for short), pertaining to the assessment year (A.Y.) 2016-17. 2. Though, the department has raised multiple grounds, however, the dispute in short is in relation to deletion of addition made of Rs.80,23,019/-, being bogus Long Term Capital Gain (‘LTCG’ for short) added u/s. 68 of the Income Tax Act, 1961 (‘the Act’ for short) and addition of an amount of Rs.80,230/-, being commission paid by the assessee for arranging the accommodation entry of bogus LTCG. Printed from counselvise.com 2 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain 3. Briefly, the facts relating to the issue are, the assessee is a resident individual, deriving income from share transactions. For the assessment year under dispute, the assessee had filed her return of income on 16.10.2016, declaring income of Rs.9,15,160/-. Subsequently, the Assessing Officer received information from the Investigation Wing of the department that the LTCG and Short Term Capital Gain (STCG for short) offered by the assessee from sale of shares M/s Goenka Business and Finance Ltd. are non-genuine as M/s Goenka Business and Finance Ltd. is in the nature of penny stock scrip utilized for providing accommodation entries. Based on such information, the A.O. reopened the assessment u/s. 147 of the Act. In course of the reassessment proceeding, the A.O. called upon the assessee to explain as to why the capital gain offered of Rs.80,23,019/-, being non genuine, should not be treated as unexplained cash credit u/s. 68 of the Act. In response to the show cause notice, the assessee furnished supporting documentary evidences to establish her claim that the share transaction was genuine and she had not availed accommodation entries. 4. However, the A.O. apparently was not convinced with the submissions of the assessee. He took note of the management structure of M/s Goenka Business and Finance Ltd., financial position in different years, analysis of increase/decrease of share value of other companies, pattern of increase in share price of M/s Goenka Business and Finance Ltd, etc. After analyzing the data available with him, the A.O. ultimately concluded that the exponential increase in the share price is as a result of manipulation to generate artificial gain/loss for providing accommodation entries to beneficiaries. He observed that the trading pattern in shares indicated that specific group of people were trading in high volume during close price computation period, thereby, influencing price derivation for the day. Printed from counselvise.com 3 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain Further, he observed, verification of counter-party details of various clients, indicated that very few counter-party have picked up major shares of M/s Goenka Business and Finance Ltd., against which huge profits/losses were generated. Thus, based on the aforesaid analysis of facts, the A.O. ultimately concluded that the transactions relating to purchase and sale of shares of M/s Goenka Business and Finance Ltd. is non-genuine and is only meant for creating artificial gain/loss to provide accommodation entries. Thus, he treated the capital gain derived by the assessee from sale of shares of M/s Goenka Business and Finance Ltd. as unexplained cash credit u/s. 68 of the Act and added back to the income of the assessee. Further, alleging that the assessee is a beneficiary of accommodation entries, through bogus capital gain, the A.O. computed commission @ 1% and added back an amount of Rs.80,213/-. 5. Contesting the aforesaid additions, the assessee preferred an appeal before ld. first appellate authority. 6. After considering the submissions of the assessee, in the context of the facts and materials on record, ld. first appellate authority, being convinced with the submissions of the assessee held that the transactions relating to purchase and sale of shares of M/s Goenka Business and Finance Ltd. is genuine and the resultant capital gain cannot be treated as unexplained cash credit u/s. 68 of the Act. Accordingly, he deleted both the additions made by the A.O. 7. Before us, ld. Departmental Representative (ld. DR for short) submitted that the assessee had acquired preferential shares on a premium of Rs.15/- per share over the face value. He submitted, whereas, there was astronomical increase in the price of shares over Printed from counselvise.com 4 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain a short period, which is not commensurate with the financial position and reputation of the company. He submitted, in course of assessment proceeding, the assessee was unable to furnish any valid reason for such astronomical increase in the price of shares. He submitted, the A.O. has reached his conclusion after a thorough analysis and study of the pattern of share transactions of this particular scrip and the parties involved in such transaction. He submitted, the A.O. has discussed in detail the suspicious nature of the transaction. Thus, he submitted, the addition made by the A.O., being based on sound reasoning, should be upheld. 8. Per contra, ld. Counsel appearing for the assessee strongly supported the reasoning of ld. first appellate authority. He submitted, the assessee is a regular investor in shares and it is not the case of the department that the assessee had only invested in the scrip of M/s Goenka Business and Finance Ltd. He submitted, since the assessee is a qualified person and has fair bit of experience in share market, she takes investment decisions based on her personal knowledge. He submitted, the assessee has invested in the scrip of many companies including both quoted and unquoted equity shares. He submitted, merely because the price of the share increased substantially, it cannot lead to the conclusion that the share transaction is bogus and through such means the assessee has availed accommodation entries. He submitted, the A.O. has not brought any material on record to establish that the assessee is a beneficiary of accommodation entries by routing her own money. He submitted, in the year under consideration, the assessee had sold shares of Mapro Industries Ltd., the price of which increased by 31 times. A ratio of increase is substantially more than the shares of M/s Goenka Business and Finance Ltd. However, he submitted, the A.O. did not doubt genuineness of capital gain arising out of such share Printed from counselvise.com 5 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain transaction. Thus, he submitted, the A.O. cannot adopt selective approach merely on the basis of price increase. He submitted, the assessee cannot be expected to explain the increase in share price through any supporting evidence. 9. He submitted, the report of the Investigation Wing is primarily based on the order passed by the Security Exchange Board of India (SEBI) suspending trading in scrip of M/s Goenka Business and Finance Ltd. for a limited period. However, SEBI lifted the restrictions and trading in shares of M/s Goenka Business and Finance Ltd. resumed in 2016. Thus, he submitted, when shares of M/s Goenka Business and Finance Ltd. were traded in Bombay Stock Exchange, the transaction in such shares cannot be doubted. More so, when the share transactions were done through demat account and banking channel. He submitted, while deciding identical nature of dispute in case of another assessee involving sale of shares of the very same company, i.e., M/s Goenka Business and Finance Ltd. in the very same assessment year, the co-ordinate bench has deleted identical addition made by the A.O. In this context, he placed on record the order of the co-ordinate bench in case of Dilipkumar Hazarimal Ahuja vs. CIT(A) (in ITA No. 2452/Mum/2024 vide order dated 04.04.2025). He submitted, a reading of the assessment order would reveal that the A.O. has reached his conclusion purely based on the report of the Investigation Wing and has not made any independent inquiry to ascertain the genuineness of the share transaction. Thus, he submitted, the addition made was rightly deleted. 10. We have considered rival submissions and perused the materials on record. We have also taken note of the judicial precedent cited before us. Undoubtedly, the dispute between the assessee and the A.O. was in relation to the capital gain offered on account of sale of shares of M/s Goenka Business and Finance Ltd. On 31.03.2014, 21000 preferential shares Printed from counselvise.com 6 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain of M/s Goenka Business and Finance Ltd. were allotted to the assessee having face value of Rs.10/- with premium of Rs.15/- per share. In other words, the assessee acquired the shares at Rs.25/- per share. The shares were acquired through a broker namely M/s Master Capital Services Limited. While buying the shares, the assessee paid an amount of Rs.5,25,000/- through banking channel and shares were duly credited in demat account. Subsequently, in the assessment year under dispute, the assessee sold the shares for a total consideration of Rs.80,23,019/- and claimed LTCG to be exempt u/s. 10(38) of the Act. A reading of the assessment order would reveal that based on a report of the Investigation Wing that the scrip of M/s Goenka Business and Finance Ltd. are penny stock and meant for providing accommodation entry, the A.O. reopened the assessment and ultimately treated the consideration received from sale of shares as unexplained cash credit. The material on record reveal that in course of assessment proceeding, the assessee furnished supporting documentary evidences to demonstrate the purchase and sale of shares. The A.O. has not pointed any deficiency in the documentary evidences. However, merely because of the increase in price of shares, the A.O. has drawn the conclusion that the price increase is because of fraudulent activities and manipulation. 11. On a careful reading of the assessment order, it appears that the conclusion reached by the A.O. is influenced by the report of the Investigation Wing and nothing else. Prima facie, it appears, the A.O. has not conducted any independent enquiry at the assessment stage to corroborate the allegations made in the report of the Investigation Wing. No independent enquiry has been taken up by the A.O. with the counter parties involved in the share transaction to establish on record that assessee’s own money was routed back through the share transaction. The facts and materials placed on record, on the contrary, suggest Printed from counselvise.com 7 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain that the report of the Investigation Wing was the outcome of the restriction imposed by SEBI on trading in shares of certain companies including that of M/s Goenka Business and Finance Ltd. However, it is a fact on record that though the trading in shares of M/s Goenka Business and Finance Ltd. were restricted for a limited period, however, such restriction was lifted by SEBI in the later part of the year 2016 and shares of the company were regularly traded on BSE. 12. It is also relevant to observe, in course of proceedings before the departmental authorities, the assessee had furnished all supporting documentary evidences to prove the genuineness of the share transaction. Apparently, no deficiency has been found in the documentary evidences furnished by the assessee. At least, there is no adverse observation of the A.O. on that aspect. Therefore, merely because in the opinion of the A.O., the share price of the company increased substantially, which is not commensurate with the financial position of the company, it cannot be said that the transaction is bogus. The conclusion drawn by the A.O. is more on conjectures and surmises, rather than, on cogent evidence. We find merit in the submission of the assessee that the A.O. had adopted a selective approach by treating the share transaction of M/s Goenka Business and Finance Ltd. as bogus merely due to increase in price, whereas, he has accepted the capital gain arising out of sale of shares of Mapro Industries Ltd., which experience 31 times increase in the price. Notably in case of Dilipkumar Hazarimal Ahuja (supra), the co-ordinate bench, while dealing with identical nature of dispute involving the sale of shares of the very same company has held as under: 6. We note that transactions were undertaken through the SEBI registered broker Joindre Capital Services Ltd. on the stock exchange platform on which STT was levied and the consideration was routed through normal banking channel. The entire flow of these transactions is corroborated by relevant documentary evidences placed on record. While making the addition, there are no discrepancies pointed out by the Assessing Officer in the documents and the details Printed from counselvise.com 8 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain furnished by the assessee. Ld. AO has not bothered to discuss or point out any defect or deficiency in the documents furnished by the assessee. These evidences furnished have been neither controverted by the Ld. AO during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. At any stage of the present case, Revenue has not brought on record any material about participation of the assessee with any such dubious transactions relating to accommodation entry, price rigging or exit providers. To our mind, Ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details furnished in his office. Once the assessee has produced documentary evidence to establish the veracity of his claim, the burden would shift on the Revenue to establish its case. 6.1. On the perusal of records, it is discernible that ld. Assessing Officer had proceeded on the basis of analysis of the financials of the company. According to him, sharp movement in the share prices of the aforesaid scrip is not justified. He has relied upon the search and survey operations conducted by the investigation wing of the Department at various locations in respect of alleged penny stock which sets out the modus operandi adopted in the business of providing entries for bogus capital gains. The conclusion drawn by the ld. Assessing Officer of implicating the assessee is un-supported by any cogent material on record. It is also a fact on record that assessee is a regular investor, holding shares in large number of scrips and has earned capital gains in subsequent year which has been offered by him in his regular income-tax returns. The finding arrived at by the ld. Assessing Officer is thus purely an assumption based on conjectures and surmises. In our thoughtful considerations to the facts and circumstances of the case, it is not in controversy that assessee has discharged his burden by submitting the relevant documents, details of which are already noted above, forming part of the paper book. 7. For our observations and findings, we place reliance on the decision in the case of CIT vs. Jamnadevi Agrawal [2012] 20 taxmann.com 529 (Bom), wherein it was held that 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. We also draw our force from the decision of Hon’ble High Court of Delhi in the case of PCIT v. Krishna Devi [2021] 126 taxmann.com 80 (Del) wherein the Hon’ble Court noticed that the reasoning given by the Assessing Officer to disbelieve the capital gain declared by the assessee, viz. astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. 8. Reliance placed by the ld. Assessing Officer on the report of investigation wing without further corroboration based on cogent material does not justify the conclusion that the impugned transaction is bogus, sham and part of racket of accommodation entries. It does not prove that the assessee has carried out the impugned transactions of purchase and sale of shares in connivance with the people who were involved in the alleged rigging of share prices. In absence of any such material, enquiry and examination, the addition made pertaining to receipt of sale consideration of the impugned transaction cannot be sustained. In our considered view, ld. Assessing Officer has not established that the assessee was involved in price rigging. 8.1 For our observations and to arrive at the findings, we find force of binding nature from the decisions of Hon'ble High Court of Bombay being a jurisdictional High Court: i) Pr. CIT v. Ziauddin A Siddique [Income-tax Appeal No. 2012 of 2017, dated 4-3-2022] held as under:- \"1. The following question of law is proposed: \"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 DMATed and registered in stock exchange and increase in share Printed from counselvise.com 9 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain 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?\" 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 v. 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. 6. The appeal is devoid of merits and it is dismissed with no order as to costs.\" ii) PCIT vs. Indravadan Jain HUF [2023] 156 taxmann.com 605 (Bom) wherein it was held: “Where shares were purchased by assessee on floor of stock exchange and not from broker, payment was made through banking channel, deliveries were taken in DMAT account where shares remained for more than one year, contract notes were issued and shares were also sold on stock exchange, there was no reason to add capital gains as unexplained cash credit under section 68” iii) CIT vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bom) wherein it was held: “Where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income under section 68” 9. Considering the totality of facts and circumstances of the case, factual matrix and submissions of parties narrated as well as discussion and observations made herein above, we delete the addition made u/s 68 towards proceeds of sale of listed shares of Goenka Business and Finance Ltd. which gave rise to Long Term Capital Gain on the said sale, claimed exempt by the assessee u/s 10(38). Accordingly, grounds taken by the assessee in this respect are allowed. 13. The reasoning of the co-ordinate bench in the decision cited supra clearly applies to assessee’s case. In view of the aforesaid, we do not find any infirmity in the decision of ld. first appellate authority in deleting the addition. Grounds are dismissed. Printed from counselvise.com 10 ITA No. 3888/Mum/2025 (A.Y.2016-17) DCIT(CC) vs. Reena Ratnesh Jain 14. In the result, the appeal is dismissed. Order pronounced in the open court on 06.02.2026 Sd/- Sd/- (Makarand Vasant Mahadeokar) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 06.02.2026 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "