DEVANG BHUPENDRA SHAH,MUMBAI V. INCOME TAX OFFICER 32(1)(4), MUMBAI

ITA 4218/MUM/2023

AI Insights

The case revolves around the long-term capital gains (LTCG) claimed by the assessee, Devang Bhupendra Shah, from the sale of shares of Moryo Industries Ltd. (MIL), which were initially treated as bogus by the Income Tax Officer (ITO) and upheld by the Commissioner of Income-tax (Appeals). The ITO had added the LTCG to the assessee's income under section 68 of the Income Tax Act, citing it as unexplained cash credit. The Tribunal, however, after considering various judicial precedents and the specific circumstances of the case, ruled in favor of the assessee, emphasizing the lack of concrete evidence linking the assessee to any manipulation or bogus transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779114 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 23-11-2023
• Other Referred Cases: SEBI Vs Rakhi Traders (P) Ltd, McDowell and Company Limited vs. ITO, Abhimanyu Soin vs. ACIT, Sanjay Bimalchand Jain vs. ITO, Yash vs Commissioner Of Income Tax, Mumbai, Principal Commissioner of Income-tax vs. Kuntala Mohapatra, Principal Commissioner of Income-tax vs. Indravadan Jain, HUF, Principal Commissioner of Income-tax vs. Ziauddin A Siddique, Principal Commissioner of Income-tax vs. Mamta Rajivkumar Agarwal, Principal Commissioner of Income-tax vs. Sangitaben Jagdishkumar Shah, Principal Commissioner of Income-tax vs. Genuine Finance P. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAN KASURI
• Assessee Lawyers: RAHUL KAPADIA
• Keywords: Set aside; Speculation loss; Business income; Opportunity of being heard; Revised return; Question of law; Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Bogus purchase; Onus to prove; Reopening of assessment; Capital Gains; Accommodation entries; Assessment record; Penny stocks; Prejudicial to interest; Deduction for capital gain; Bogus
• Section: 143(3); 142(1); 263; 68; 69; 133(6); 69C; 133A

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL“D” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 4218/MUM/2023 (A.Y. 2014-15) Devang Bhupendra Shah, B/9, Neminath Apt., Shimpoli Road, Borivali West, Mumbai – 400 092, Maharashtra v/s. बनाम Income Tax Officer, Ward – 32(1)(4), Kautilya Bhavan, Bandra Kurla Complex, Bandra (East), Mumbai– 400051, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AADPS1211L Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Rahul Kapadia,AR Respondent by : Shri Annavaran Kasuri, (Sr. AR) Date of Hearing 11.08.2025 Date of Pronouncement 13.10.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 18.12.2017 for the Assessment Year [A.Y.] 2014-15. 2. The grounds of appeal are as under:- Printed from counselvise.com P a g e | 2 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 1. Under the facts and circumstances of the case, the Ld. CIT(A) has erred in passing the order ignoring appellant's specific request for providing personal hearing opportunity through video conferencing. 2. Under the facts and circumstances of the case, the Ld. CIT(A) has erred in passing the order, ignoring various submissions made by the appellant and ignoring various judicial judgments. 3. Under the facts and circumstances of the case, the Ld.CIT(A) is not justified in passing the order, ignoring the fact that the appellant has not been provided by the Ld. Assessing officer, the reasons/ documents/ statements from the Director General of Income Tax (Investigation), as alleged by the Ld. Assessing officer. 4. Under the facts and circumstances of the case, the Ld.CIT(A) has not justified and has erred in fact and law, by passing the order considering submission of appellant dated 07.04.2022 and 19.04.2023 only and ignoring the submissions dated 17.01.2022, 02.06.2023, 25.08.2023, 08.09.2023, 11.09.2023 and 29.09.2023 and ignoring all facts and evidences made in those submissions. 5. Under the facts and circumstances of the case, the Ld. CIT(A) is not justified in upholding the addition of Rs. 3,76,70,306/- u/s 68 of the Income Tax Act made by the Ld. Assessing Officer, ignoring the various submissions, details, evidences, Judicial Judgments submitted by the appellant. 6. Under the facts and circumstances of the case, the Ld.CIT(A) is not justified in upholding the addition of Rs. 11,30,109/- u/s 69C of the Income Tax Act made by the Ld. Assessing Officer, ignoring the various submissions, details, evidences, Judicial Judgments submitted by the appellant. 7. Under the facts and circumstances of the case, the Hon. CIT(A) is not justified and has erred in facts and in law in rejecting the Long term capital gain earned by the appellant of Rs. 3,76,70,306/- on sale of shares of Moryo Industries and making addition u/s. 68 of the Income Tax Act, merely on the basis of surmises and conjectures and ignoring the facts and evidences submitted with Ld. CIT(A) and with Ld. Assessing officer and relying on the Hon'ble Apex Court in Civil Appeal No. 1969 of 2011 in the case of SEBI Vs Rakhi Traders (P) Ltd (with Civil Appeal No.3174-3177 of 2011 and Civil Appeal no.3180 of 2011), which is neither related and also facts of that case are very different to that of the appellant. 8. Under the facts and circumstances of the case, the Ld. CIT(A) is not justified and has erred in facts in ignoring that the Hon. SEBI itself has passed the order stating that there are no adverse findings with respect Printed from counselvise.com P a g e | 3 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah of the appellant's role in the price manipulation in the scrip of Moryo Industries. 9. Under the facts and circumstances of the case, the Ld.CIT(A) is not justified in confirming additions of Rs. 11,30,109 u/s 69C of the Act, being unexplained expenditure, made by the Ld. Assessing Officer, without any base and evidence and based on surmises and conjuctures. 10. Under the facts and circumstances of the case, the Ld. CIT(A) has not justified in confirming addition of Rs. 3,76,70,306/- made by the Ld. Assessing Officer who had relied on the statement of third party and on enquiries made on the back of the appellant, without giving proper and sufficient opportunity of being heard and of cross verification by the appellant. 3. Brief facts of the case are that in the present case, Long Term Capital Gains claimed by the assesseeas exempt u/s 10(38) of the Act by the assessee in respect of a pennystock, Moryo Industries Ltd. (MIL) was rejected by the AO and the amount of gains was taxed u/s 68 of the Act as unexplained cash credit. It sold 2,00,000 shares of MIL for Rs.3,76,70,306/-which were purchased for Rs. 25,00,000/-,resulting in LTCG of Rs.3,51,70,306/-.Though the assessee had submitted purchase and sale details, contract notes, bank statements etc. before the lower authorities, both the AO and the ld.CIT(A) based on the Investigation wing report of Kolkata held that there were circumstantial and direct evidences to prove that the LTCG was bogus,manipulated and contrived transaction. It was stated by the AO that the Directorate of Investigation, Kolkata carried out a country wide investigation to unearth the organized racket of generating bogus entries of Long Term Capital Gains which is exempt Printed from counselvise.com P a g e | 4 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah from tax. The modus operandi adopted by the operators was to make the beneficiary buy some shares of a predetermined Penny stock company controlled by them. These shares were transferred to the beneficiary at a very nominal price, mostly off-line transaction through preferential allotment or off-line sale. The beneficiary held the shares for one year, the statutory period after which LTCG is exempt u/s 10(38) of the Act. In the meantime the operators rigged the price of the stock and gradually raise its price many times through low volume transaction indulged in by the dummies of the operator at a pre-determined price through circular trading. Whenthe price reached the desired level, the beneficiary who bought the shares at a nominal price was made to sell it to a dummy paper company of the operator, or exit operator. For this the unaccounted cash is provided by the beneficiary which was routed through a few layers of paper companies by the operator and is finally parked with the dummy paper company that will buy the shares. The AO has explained this modus operandi in his order. The ld.CIT(A) upheld the addition taking into account the above facts. 4. Before us, the ld.AR has made oral and written submission inter alia stating that the payment for the allotment of shares was made through an account payee cheques, the said shares were Printed from counselvise.com P a g e | 5 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah dematerialized on 02.01.2012. Subsequently MIL shares were sub- divided into face value of Rs. 5 each from Rs. 10 each, resulting into increase in number of shares from 1,00,000 to 2,00,000. Copy of Demat Account evidencing receipt of sub-Division of shares was filed. He sold all shares having cost of Rs. 25,00,000/- through his stock broker Anand Rathi Shares and Stock Brokers Ltd and RN Patwa Share Brokers (P) Ltd, who were SEBI registered brokers for Rs. 3,76,70,306/- and earned above LTCG. Payments for sale consideration were also received in banks only. The shares were sold in the month of January/February 2014. The holding period of the said scrip was more than 500 days.The AO merely based on the statement received from any third party and without bringing on record any material evidence to prove that the transactions entered into by the assessee for sale of shares were not genuine, made addition of Rs. 3,76,70,360/- u/s 68 of the Act as unexplained credit treating the sale of shares even though evidences submitted by the assessee were are not controverted by either the AO or the ld.CIT(A). Further, no evidence collected from third parties was confronted to the him nor opportunity of cross-examination of persons, on whose statements the revenue relied were provided to him. Printed from counselvise.com P a g e | 6 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 4.1 It is further submitted that the AO’s reasons for reopening the case and making addition were also that SEBI had passed an order restraining around 98 entities including the assessee from accessing the securities market and had also prohibited them from buying, selling or dealing in securities, either directly or indirectly in any manner whatsoever, till further directions as it was alleged by them that the transaction entered into with MIL were non-genuine, by providing fictitious LTCG to its preferential allottees so as to convert their unaccounted income into accounted one. On the directions of the SEBI, the CDSL had also frozen the Demat account of those entities Including of the assessee.However, the SEBI subsequently passed the order stating that there are no adverse findings against the 85 entities including him with respect of their role in the price manipulation in the scrip of MIL accordingly gave the directions to revoke the earlier order issued by it against him and others. Copy of order of SEBI was filed. Also, the CDSL who had earlier frozen the Demat account of the assessee, has defrozen the accounts making it active for use.Therefore, very basis of reopening and making the additions i.e., SEBI order, itself had found no adverse findings in his case. Printed from counselvise.com P a g e | 7 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 5. Before us, the ld.DR has contended that the said company MIL has also been penalised by SEBI for various offences. As per copy of SEBI order placed on record, it is stated that the broker i.e.Purva Share Registry Ltd was restrained from onboarding new clients for a period of one month by SEBI due to violations in strict compliance of norms (opening of demat account) laid down. Hence, the broker is also a tainted party.The assessee was unable to explain the sharp increase in price or the sharp decrease after he sold the shares. The company's financials were not good. No spectacular activities were carried out by the penny stock company. No prudent businessman would invest in such shares for a high price unless he is a exit operator or a dummy operator who is part of the coterie manipulating the buy and sell of shares to generate artificial capital gains or capital loss for the benefit of the beneficiaries involved. The circumstantial evidence and preponderance of probabilities has to be considered.Reliance was placed on the decision of the Hon'ble Supreme Court in the case of McDowell and Company Limited, 154 ITR 148 MK. Rajeshwari vs. ITO in ITA No.17231 Bangl 2018, order dated 12.10.2018, Abhimanyu Soin vs. ACIT in ITA No. 9511/Chd/2016, order dated 18.04.2018,Sanjay Bimalchand Jain vs. ITO 89 taxmann.com 196 etc.stating that in the case the penny stock modus operandi was Printed from counselvise.com P a g e | 8 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah examined minutely and concluded that these are sham/bogus transactions and such outstanding profit in penny stock was against the human probability. The Hon'ble Apex Court in Civil Appeal No. 1060 of 2011 in the case of SEBI Vs. Rakhi Traders (P) Ltd(with Civil Appeal No 3174-3177 of 2011 and Civil Appeal No.3180 of 2011) vide its order dated 08.02.18 was also stated to be squarely applicable in all penny stock cases. 6. We have carefully considered the rival submissions and have also perused the records. It is noticed that the coordinate benches of ITAT have in several of its decisions have considered identical issue involving the same scrip of MIL and after taking into account the orders of authorities below have deleted the addition in those cases. In this connection, we place reliance on the case Pratap Uttam Purohit in ITA No.2042/MUM/2025 on 16 June, 2025 (ITAT, Mumbai). Relevant parts of the order are extracted as below for the sake of clarity and brevity: “77. As far as M/s. Moryo Industries Ltd. (MIL) is concerned. In this regard, with regard to the additions on account of long term capital gain on script M/s. Moryo Industries Ltd. (MIL) it was submitted that the assessee had purchased the 1,00,000 shares @25 per share through preferential allotment scheme from the company and he had paid Rs. 25.00,000- from its bank account on 16.10.2012 maintaining in ING Vysya bank by RTGS and said share allotted to assessee on 09.11.2012. Printed from counselvise.com P a g e | 9 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 78. M/s. Moryo Industries Ltd. share was split into 1:2 hence the assessee got 2.00.000/-shares of M/s. Moryo Industries Ltd. (MIL). 79. During the year under consideration, the assessee sold 82,451 shares out of total of 2,00,000/-shares allotted to him. 80. Our attention was also drawn upon the fact that the assessee was a regular investor in shares and securities as evident from past assessment records. Assessee purchased share under preferential allotment and made payment through banking channels. The Share sold based on the prevailing market condition through registered broker \"Sanghvi Savla Stock Brokering Limited. The sale of shares is supported by contract notes issued by broker. The payments were received through proper banking channel. The sale transactions were subjected to Security Transaction Tax. Service Tax, Brokerage charges and Stamp duty. The share purchase and sale transactions are reflected in the d-mat account. The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange. 81. The Bombay Stock Exchange reported that assessee's share were under lock in period for one years and status was also showing in shareholding 09 November 2012. December 2012, March 2013, June 2013, Sep 2013 and assessee had enclosed copy of shareholding status for ready reference and records. 82. It is a fact on record that the said company's shares were traded up to 20 June 2022 and the said information was also available on the Bombay Stock Exchange website. 83. Further our attention was draw upon the facts that in case of Moryo Industries SEBI have been passed order on and given following finding as under: \"Upon completion of the investigation by SEBI, it is noted that the investigation did not find any adverse evidence/findings against 85 entities in respect of their role in price manipulation in the scrip of Moryo, warranting the continuation of action under Sections 11B and 11(4) of the SEBI Act. Hence, violation ofprovisions of SEBI Act and PFUTP Regulations, etc., were not observed in respect of the following entities, including assessee Considering the fact that there are no adverse findings against the aforementioned entities with respect to their role in the price manipulation in the scrip of Moryo warranting continuation of action under Sections 11B and 11(4) of the SEBI Act, I am of the considered view that the directions issued against them vide interim order dated December 04, 2014 which were confirmed vide Orders dated March 18, 2016 and August 22, 2016, are liable to be revoked.\" 84. It was also submitted that the Hon'ble Mumbai Income Tax Appellant Tribunal already deal with same script in case of Jagdish B. Prajapati (HUF) No.548/Mum 2019 for the A Y 2014-15. 85. We noticed that the Assessing officer used the statement of Shri Sunil Dekania. Shri Alok Harlalka and Sanajy Vora. However, the assessee had no connection Printed from counselvise.com P a g e | 10 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah with the said persons. In this regard objections were also filed by the assessee during its reply of show cause notice mentioned at page 84 of assessment order. 86. Whereas, the A.O. referred the survey action u/s 133 in the case of Anand Rathi Shares and brokers limited, whereas the said M/s Anand Rathi Shares are not brokers of the assessee. 87. No statement was provided to the assessee, and none of the persons whose statements were relied upon were produced for cross-examination. Even the extract of the statement mentioned in the assessment order does not indicate the name of the assessee. 91. We are also of the view that when there was no evidence of manipulation of share prices, ultimately found by the SEBI upon completion of the investigation, then the entire basis of the statement of Shri Pratap Purohit recorded in the course of the survey of the Act. Considering the totality of facts, the admission taken in the survey and which is retracted, had no evidentiary value. 92. In this regard, reliance is being placed upon the decision of decision on Hon'ble Apex Court decision in case of S. Khader Khan Son reported in [2012] 25 taxmann.com 413 (SC), wherein the Hon'ble Apex Court held as under: Section 133A of the Income Act. 1961-Survey Whether Section 133A does not empower any ITO to examine any person on oath; so statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition Held. yes [In favour of assessee] This above decision is originated from Hon'ble Madras High Court [2008] 300 ITR 157 (Madras) 93. Further, reliance is being placed upon the decision of the Hon'ble Kerala High Court in case of Paul Mathews & Sons Vis. Commissioner of Income-tax reported in [2003] 129 Taxman 416 (Kerala) held as under: \"Section 133A of the Income-tax Act, 1961-Survey - Whether section 133A empowers any ITO to examine any person on oath and, statement recorded under section 133A has evidentiary value - Held, no Section 263, read with section 133A, of the Income-tax Act, 1961 - Revision -Of orders prejudicial to interests of revenue - After completion of assessments for relevant assessment years, a survey operation was conducted under section 133A in course of which assessee admitted that there were irregularities and discrepancies in books of account and offered additional income of Rs. 43 lakhs Assessing Officer, however, without considering that aspect, determined business income taking net profit at 8 per cent of total receipts -Commissioner being of view that income offered at survey was income in addition to income already assessed, set aside assessment under section 263-Whether since Assessing Officer had not accepted income declared by assessee in mechanical way, but applied his mind to various aspects of matter before completing assessment and on basis of accounts and offer made before him, came to conclusion that what was offered in written offer by assessee was reasonable, view taken by Assessing Officer could be said to be unsustainable in law so as to call it an order passed erroneously Held, no Whether, on facts, Commissioner was justified in law in invoking powers under section 263 - Held, no\" Printed from counselvise.com P a g e | 11 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 94. In our considered view, Ld. CIT (A) had correctly deleted the additions made by A.O. and the relevant paras are reproduced as under: 6.8 Decision on Ground No. 8 & 9: Appellant has also contested addition u/s. 68 of Rs. 5,30.47.379 as bogus LTCG and Rs. 26,52,368/- paid as commission on such LTCG, claimed during the relevant year. It is noted that appellant has sold shares of M/s. Moryo Industries Ltd. (MIL) and M/s. Kailash Auto Finance Ltd. (KAFL). AO has based his finding on report shared by investigation division w.r.t.searches/surveys conducted by various investigation units across India. Based on the findings in such investigations. AO has disallowed Capital Gain of Rs.1,36,87,655/- and Rs. 3,17.63,500/- in cases of M/s. Moryo Industries Ltd. and M/s. Kailash Auto Finance Ltd. respectively. 6.8.1 AO has noted that the shares of these two companies are penny stocks and such stocks were managed by operators through rigging and artificially inflating the price of the shares. AO has also analysed share purchase and financials of these two companies and concluded that the price movement of these two companies were not commensurate to their underlying finance of business performance. AO has also referred to statements of certain operators like Shri Sunil Bopania, Shri. Alok Harlalka as well as issued letters u/s. 133(6) to certain exit providers also. After analysing the report of the Investigation Wing. Financials of these two companies. Statements of operators and exit providers. AO concluded that the total claim of the LTCG in these two scrips of Rs. 5,30.47.379/- is nothing but unexplained credit in the garb of LTCG in the books of accounts. 6.8.2 On the other hand, appellant has contested that he purchased shares of these two companies through his bank account in ING Vyasya Bank. With respect to scrip of M/s. Kailash Auto Finance Ltd.. it is submitted that appellant has purchased | lakh shares of Careful Projects Advisory Ltd. which was split in the ratio of 1:10. thereafter, this company was merged with other companies and as a result, he was allotted 10 lakh shares of M/s. Kailash Auto Finance. These shares were dematerialized on 02.01.2013 and thereafter he sold these shares between February and March of 2014. Similarly, investment in M/s. Moryo Industries Ltd. was made through preferential allotment scheme wherein he paid Rs. 25 Lakhs for 1 Lakh shares. After split he sold these shares between December 2023 and January of 2024. 6.8.3 Appellant has submitted broker's contractor note, payments proof. copy of Demat account, security transaction tax, brokerage charges and stamp duty. Appellant has also mentioned that M/s. Kailash Auto Finance, was listed in Bombay Stock Exchange as Group A company and between 01.04.2014 το 31.03.2015. foreign institutional investor was also a shareholder in the company. Whereas the initial investigation as referred in assessment order was initiated in case of M/s. Moryo Industries Ltd. but nothing adverse was noted against the company and it keeps on trading on Bombay Stock Exchange up to 28.06.2022. 6.8.4 I have considered the investigation report referred by assessing officer wherein these two entities were treated as penny stock for price manipulation leading to huge capital gains. At the same time the Printed from counselvise.com P a g e | 12 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah suspicion which was raised w.r.t. these two entities being under preliminary investigation of SEBI.However, later these two scrips have been subject matter of various judicial pronouncements made by various benches of Hon'ble ITAT...... 6.8.12 It is further noted that appellant was subjected to survey on 22.08.2016 wherein his statement was recorded. AO has placed reliance on his admission of bogus LTCG claim in this statement. I have gone through the statement relied upon by the AO. It is noted that appellant has made his position very clear that he had invested the said amount on advice of his share broker and agent. Further, he pleaded his ignorance about the process of investment and evaluation of companies' financial. He was also ignorant about the entire scheme of claiming bogus or artificial hike of share price for claiming LTCG. The main plank of questions 97 to 102 were enquiries conducted by SEBI with appellant has pleaded his ignorance about this.respect to these two scrips and He explained his position categorically that he has done these deals through a registered broker on recognised stock exchanges. He paid STT and was not party to any price rigging. He offered to withdraw his claim of LTCG just to buy peace of mind and to end protracted litigation in the light of the fact that SEBI has initiated inquiries in these scrips. This statement recorded during survey proceeding on 22.08.2016 and confirmed through another statement dated 30.08.2016 were retracted immediately through affidavit filed on 01.09.2016. 6.8.13 I have considered the entire sequence of events as well as facts brought on records by AO as well as appellant. It is noted that entire emphasis for making addition of bogus LTCG was the initial inquiries conducted by the SEBI and the investigation report received through the investigation wing. The judgements and findings cited above from various benches of the Hon'ble ITAT clearly depicts that LTCG claims from these two scrips cannot be held as bogus. Further, the statement of appellant recorded during survey which itself is based on preliminary inquiry conducted by SEBI cannot be relied upon specially when the same is retracted immediately. The presumption available in statement u/s 132(4) is not with AO as far as statement recorded during survey proceeding is concerned. I therefore find no merit in the conclusion drawn by the AO based on investigation report of wing and preliminary inquiries conducted by SEBI. I inclined to follow orders delivered by Hon'ble ITAT bench on these scrips. The addition made on account of LTCG of Rs. 5,30,46,379/- as well as the alleged commission paid of Rs. 26,52,368/- for such LTCG are deleted, and grounds of appeal are allowed. 95. Further, reliance was also placed in the case of Principal Commissioner of Income-tax V/s. Kuntala Mohapatra reported [2024] 160 taxmann.com 608 (SC), wherein Hon'ble Apex Court dismissed SLP filed by the department and decision of Hon'ble Delhi High Court was confirmed and finding of said decision is reproduced as under: \"Section 10(38), read with sections 68 and 69, of the Income-tax Act, 1961-Capital gains Income arising from transfer of long term securities (Illustrations) - Assessment year 2014-15 Assessee filed its return for Printed from counselvise.com P a g e | 13 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah relevant year - Subsequently, pursuant to a survey assessee filed revised return and claimed exemption in respect of long-term capital gains on shores under section 10(38) - Assessing Officer P a g e | 47 A.Y. 2014-15 Pratap Uttam Purohit rejected assessee's plea and made additions under sections 68 and 69 by relying on statements from 'entry operators' - On appeal. Commissioner (Appeals) accepted assessee's claim, noting that shares were purchased via Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax Tribunal upheld Commissioner (Appeal)'s decision. emphasizing assessee's right to correct mistakes and criticized Assessing Officer's reliance on statements from 'entry operators to support additions under sections 68 and 69 as those statements were recorded in unrelated proceedings before survey on assessee. and assessee was not afforded an opportunity to challenge or cross-examine providers of those statements on revenue's appeal, High Court confirmed order of Tribunal -Whether there was no reason to interfere with order passed by High Court and therefore. SLP was to be dismissed-Held. yes [Para 31 [In favour of assessee]\" 96. Reliance is being placed on the decision of the Hon'ble jurisdictional high court in the case of Principal Commissioner of Income-tax,which was Indravadan Jain. HUF reported in [2023]156 taxmann.com 605 (Bombay) wherein it was held as under: While allowing the appeal filed by respondent, the Commissioner (Appeals)deleted the addition made under section 68. The Commissioner (Appeals) has observed that the Assessing Officer himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price ofthe said scrip in RFL. The Commissioner (Appeals) also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The Commissioner (Appeals) came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes-cum-bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the Commissioner (Appeals) found there was no reason to add the capital gains as unexplained cash credit under section 68. The Tribunal while dismissing the appeals filed by the revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were Printed from counselvise.com P a g e | 14 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah also sold on the floor of Stock Exchange.The Tribunal, therefore had rightly concluded that there was no merit in the appeal. [Para 4] 97. We are placing reliance upon the decision of the Hon'ble Bombay High Court in case of Commissioner of Income-tax-13 Vis. Shyam R. Pawar reported in [2015] 54 taxmann.com 108 (Bombay) held as under: \"Section 68 of the Income-tax Act, 1961 Cash credit (Share dealings) Assessment years 2003-04 to 2006-07 - Assessee declared capital gain on sale of shares of two companies - Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; and that revenue had stoppedinquiry at particular point and did not carry forward it to discharge basic onus - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted - Held, yes [Para 7] [In favour of assessee] 98. Further, in the case of PCIT vs. Smt Krishna Devi Reported [2021] 126 taxmann.com 80 (Delhi) in the Hon'ble Delhi High Court has noticed that the reasoning given by the AO to disbelieve the capital gains declared by the assessee. viz., astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures.Accordingly, the Hon'ble Delhi High Court affirmed the decision rendered by ITAT in deleting the addition of capital gains. 99. We further place reliance on the decision of Hon'ble Gujrat High Court in case of Principal Commissioner of Income-tax (Central) v/s. Affluence Commodities (P.) Ltd reported [2024] 161 taxmann.com 476 (Gujarat) whereas held as under: Section 28(i) of the Income-Tax Act, 1961 Business loss/deduction Allowable as (Bogus purchases) - Assessment year 2015-16 - Assessee was engaged in trading penny stocks, specifically shares of AIGL and KPL, during relevant period Assessing Officer alleged that purchases were made at artificially high prices and sold at significantly lower rates to create business losses, possibly to offset profits from commodities transactions - Despite transactions occurring on recognized stock exchanges. Assessing Officer disallowed claimed losses However, both Commissioner (Appeals) and Tribunal overturned Assessing Officer's decision, concluding that assessee had demonstrated authenticity of transactions They found evidence on online trading platforms indicating that assessee had no control over share prices and had genuinely incurred losses, particularly with AIGL shares where only a portien were sold. and rest were held into subsequent assessment year Regarding shares of KPL. Tribunal reasoned that market rate being lower justified business loss, even though shares were not sold Whether in view of above concurrent findings of fact. no questions of law much less any substantial question of law would arise and accordingly, appeal. being devoid of any merits, was to be dismissed - Held, yes [Paras 8 and 9] [In favour of assessee] Printed from counselvise.com P a g e | 15 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 100. And also in the case of Principal Commissioner of Income-tax Vis. Sangitaben Jagdishkumar Shah reported in [2023] 156 taxmann.com 147 (Gujarat) whereas held as under: Section 28(1) of the Income-tax Act, 1961 Business loss deduction Allowable as (Bogus loss Sale of shares) Assessment year 2011-12 - An information was received from Deputy Director (Inv.) wherein, it was intimated that VIL was a pennystock which was used to provide accommodation entry of bogus LTCG/loss to beneficiaries - It was further intimated that assessee was one of beneficiaries/member of this accommodation entry syndicate On basis of same, addition was made to income of assessee on account of begus loss on sale of serip of VII. by it - It was noted that Commissioner (Appeals) and Tribunal had observed that as per SEBI report, script VIL was not blacklisted and was not termed as pennystockAssessee produced relevant documents such as contract note of transactions from stock broker, copy of trading bills - Assessee had also paid STT, and that all transaction were through banking channels - Moreover. Assessing Officer had not pointed out any discrepancy in evidences produced by assessee - Thus, Tribunal upheld order of Commissioner (Appeals) in deleting addition on account of bogus loss on sale of scrip of VIL Whether there were concurrent findings of fact by Commissioner (Appeals) and Tribunal, and thus, no substantial question of law arose against same Held, yes [Para 4] [In favour of assessee] 101. In the case of Principal Commissioner of Income-tax V/s..Genuine Finance P. Ltd. reported in [2023] 152 taxmann.com 330 (Gujarat) held as under: Section 28(i) of the Income-tax Act, 1961 Business loss/deduction Allowable as (Bogus purchases) - Assessment year 2012-13 Additions were made to income of assessee on account of bogus loss incurred in pennystock which were deleted by Tribunal Revenue submitted that order of Tribunal was ex-facie erroneous, illegal and perverse because Tribunal deleted additions without appreciating that transaction was pre- arranged as well as sham and was carried out through penny scrip company However, Tribunal had observed in impugned order that assessee was continuously dealing in share trading of various shares/scrips and said fact was not disputed - Further,Tribunal had observed that scrip of VAS was not black listed by SEBI at relevant point of time Tribunal had also considered order passed by SEBI and nowhere in said order, scrip of VAS was blacklisted or was pennystock or sham and bogus scrips/shares Tribunal had also observed that entire transaction of purchase and sale of scrips was through Stock Exchanges. through authorized brokers and payments made to brokers were reflected in bank account - Tribunal had therefore opined that merely on conjecture and surmises. Assessing Officer could not make disallowance - V. whether in view of above observations made by Tribunal. issue involved was purely a question of fact, and no question of law. much less, substantial question of law for consideration was found - Held. yes [Paras 5 to 7] [In favour of assessee] 102. We also refer a decision of Gujrat High Court in case of Principal Commissioner of Income-tax V/s. Mamta Rajivkumar Agarwal reported in [2023]155 taxmann.com 549 (Gujarat), wherein held as under: Printed from counselvise.com P a g e | 16 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah Section 10(38) of the Income-tax Act, 1961 Capital gains Income arising from transfer of long term securities (Share dealings) - Assessment year 2013-14- Assessee had sold shares of SNCFL and earned long-term capital gains -Assessing Officer issued a show cause notice alleging that transaction was a penny stock deal aimed at illegitimately claiming long- term capital gain exemption under section 10(38) - Assessing Officer treated purchase as bogus and added it to total income Commissioner (Appeals) examined all relevant documents provided by assessee, including bills of purchases, broker account copies, bills for sales, and bank statements and held that purchases were made through a recognized broker via cheque, establishing their genuineness and. thus, he directed Assessing Officer to delete addition of LTCG claimed as exempt under section 10(38) Tribunal upheld Commissioner (Appeals) decision stating that there was no evidence implicating assessee or broker in any wrongdoing related to SNCFL script Whether in view of concurrent findings of fact that there was no evidence available on record suggesting that assessee or his broker was involved in rigging up of price of script of SNCFL. addition on account of LTCG claimed as exempt under section 10(38) had rightly been deleted - Held, yes [Paras 4 and 5] [In favour of assessee] 103. In case of Ramprasad Agarwal reported in [2018] 100 taxmann.com 172 (Mumbai - Trib.) wherein held as under: \"Section 68, read with section 10(38) of the Income-tax Act, 1961- Cash credit (Share Transaction) - Assessment year 2014-15-On basis of information from DGIT (Inv.). Kolkata that some companies were engaged in business of issuing pennystocks for which there were large number of beneficiaries claiming bogus long-term capital gain/short- term capital loss/business loss/speculation loss, Assessing Officer found that assessee was one of beneficiaries of said racket and had earned profit on sale of investments in equity shares of a company, (Rutron) and claimed same as exempt under section 10(38) - Assessee had produced relevant records to show allotment of shares by company on payment of consideration by cheque and he dematerialized shares in D-mat account which was also an independent material and said evidence could not be manipulated Further. Assessing Officer had not brought any material on record to show that assessee had paid over and above purchase consideration - Whether in absence of any evidence. it could not be held that assessee had introduced his own unaccounted money by way of bogus long-term capital gain Held. yes [Paras 9 and 10] [In favour of assessee]\" 104. In the case of Pavankumar Bachhraj Chandan reported in [2024] 161 taxmann.com 674 (Mumbai - Trib.), wherein held as under: Section 68, read with section 10(38), of the Income-Tax Act, 1961 Cash credits (Share dealings) Assessment year 2014-15 Assessee had claimed long-term capital gain on sale of shares of STL Assessing Officer observing that financials of STL were weak and that shares of STL had been used for providing bogus accommodation entry in form of LTCG/STCG, disallowed claim of long-term capital gain and added entire sale proceed of shares under section 68 Whether since all transactions were carried out through regular bank accounts of assessee, allotment of Printed from counselvise.com P a g e | 17 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah shares and then holding of shares were proved by demat statement and sale of shares was made through BSE after remitting STT, assessee had discharged burden to prove purchase and sale of shares Held, yes Whether therefore, addition made by Assessing Officerwas to be deleted and exemption claimed by assessee under section 10(38) was to be allowed - Held, yes [Paras 7 and 15] [In favour of assessee] 105. In the case of Farzad Sheriar Jehani reported in [2024] 159 taxmann.com 9 (Mumbai - Trib.) wherein held as under: Section 68 of the Income-tax Act. 1961-Cash credit (Bogus LTCG on sale of shares) - Assessment year 2014-15-Assessee had sold shares of a company held by it and claimed exemption under section 10(38) on account of long-term capital gain (LTCG) arose on such sale of shares Assessing Officer. being of view that said trading transactions of purchase and sale of shares were not been effected for commercial purpose but to create artificial gains with a view to evade taxes, made an addition under section 68 It was observed that assessee had purchased shares from open market. D-mated scrips and subsequently sold same in stock exchange Further, there was no discrepancies in documents filed by assessee claiming deductions under section 10(38) and revenue had not brought on record any materials linking assessee in any dubious transactions relating to entry, price rigging or exit providers Even in SEBI report, there was no mention or reference to involvement of assessee Whether, therefore, impugned addition was to be deleted -Held, yes [Para 16] [In favour of assessee] 106. In the case of Gopal Nihchaldas Pariani reported in [2023] 152 taxmann.com 252 (Mumbai - Trib.), wherein held as under: Section 68. read with section 10(38), of the Income-tax Act, 1961 Cash credits (Share transactions) Assessment years 2014-15 and 2015-16 Assessee had sold shares of 'P'ltd and earned a Leng Term Capital Gain therein which was claimed as exempt in relevant assessment years - Assessing Officer noted that statement of some persons were recordes DDIT. Kolkata to show that 'P' Itd was a company engaged in providing bogus accommodation entries Assessing Officer held that long term capital Gain earned by assessee was bogus for reason that there was an unusual rise in price of script and further investigation wing had investigated trading of this company and found that accommodation entry providers were rigging price - Accordingly, he made addition under section 68 Whether since assessee had submitted details of purchase of shares. payment for purchase of shares through banking channel, and had produced order of SEBI where assesseealong with others had been exonerated in any manipulation, it clearly proved genuineness of transaction Held, yes Whether further since Assessing Officer had not made any inquiry about genuineness of these transaction on documents submitted by assessee and relied only on evidences collected by DDIT Kolkata which were good only for reopening of assessment and for making an addition holding that transaction were bogus. Assessing Officer should have made inquiries on documents submitted by assessee - Held, yes -Whether thus, in view of categorical finding of regulator SEBI exonerating assessee, and absence of any Printed from counselvise.com P a g e | 18 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah inquiry by Assessing Officer. impugned addition deserved to be deleted - Held, yes [Paras 33, 34 and 36] [In favour of assessee] 107. After having gone through the entire facts and circumstances, and also keeping in view our above discussions and taking into consideration that no new facts have been brought to controvert or rebut the findings of the Ld. CIT(A). Therefore, we upheld the findings of the Ld. CIT(A) on this ground and dismiss the ground raised by the revenue. 108. In the result, the appeal of the of the revenue is dismissed.” 6.1 In another case of Yash, Mumbai vs Commissioner Of Income Tax, Mumbai dated 23.10.2024 in ITA No.4293/Mum/2023, the same issue has been decided in favour of the assessee which also involved the same scrip MIL and similar facts and circumstances as discussed in paras below: “ In this case, the Assessee had purchased 1,00,000 shares of Moryo Industries Ltd. on a consideration of Rs.25,00,000/- @ Rs.25/- each on 10.11.2012 and thereafter sold the same in the month of February 2014 on a consideration of Rs.1,92,52,500/- and consequently earned the capital gain of Rs.1,67,52,500/- and claimed the same as exempt u/s 10(38) of the Act by filing its return of income on 27.02.2015 declaring total income at Rs.7,99,480/-. 2.1 The return filed by the Assessee was selected for scrutiny and the Assessee was show caused to justify the share transactions. 2.2 Though the Assessee in order to establish the genuineness of the transactions, before the AO submitted the relevant documents such as allotment letter of shares from the companies from which shares were purchased, extract of bank statement highlighting the purchase, ledger of the Assessee in the books of the broker, copy of Dmat account statement highlighting the holding of shares, copy of contract note of the share broker and in order to discharge his onus cast u/s 68 of the Act. 2.3 However, the AO by considering the findings of the investigation wing and facts and circumstances of the case, disallowed the claim of exemption as claimed by the Assessee u/s 10(38) of the Act and consequently added the amount of Rs.1,67,52,500/- in the taxable income of the Assessee u/s 68 of the Act by observing and holding mainly as under: \"Shares of some penny stock companies were used for providing accommodation entry of bogus loss. The case of the Assessee was scrutinized and data was obtained from various sources and thoroughly verified and analysis was done as Printed from counselvise.com P a g e | 19 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah per share market fundamentals wherefrom it was found that Long Term Capital Gain (LTCG) of Rs.1,67,52,500/- shown in the return as sale of shares of Moryo Industries Ltd. was prearranged method employed by the Assessee in connivance with operators to evade taxes. The Assessing Officer (AO) also observed that SEBI has made the investigation in the case of operators and by passing an order u/s 11(1) & 11(4) of the Act restrained 99 entities from accessing the secondary stock market and further in buying, selling and dealing in securities in any manner whatsoever till further order. Whole transactions and a series of steps were taken to accomplish such share transactions in an integrated manner and with a view to ascertaining the true nature and character of such purchase and sale of shares and considering the findings of the search/survey, enquiries conducted in the case of Assessee, brokers, operators and the entry providers and the nature of transaction entered into by the Assessee, the claim of exemption as claimed by the Assessee u/s 10(38) of the Act is disallowed and the amount of Rs.1,67,52,500/- is added in the taxable income of the Assessee u/s 68 of the Act\". 3. The Assessee, being aggrieved, challenged the said addition before the Ld. Commissioner, however, could not get succeeded as the Ld. Commissioner more or less on the similar reasons as given by the AO for making the addition, ultimately affirmed the addition. 4. The Assessee, being aggrieved, is in appeal before us. 5. We have heard the parties and perused the material available on record. It is not in controversy that the Assessee had purchased the aforesaid shares on 10.11.2012 by making the payment through banking channel/cheque and subsequently got dematerialized the same in the month of January 2013 and sold the same in the month of February 2014 through recognized stock exchange. The Assessee in response to the notice dated 06.05.2016 u/s 142(1) r.w.s. 129 of the Act and in order to establish the genuineness of its claim, has submitted the copy of allotment letter of shares, bank statements highlighting the payment made for purchase of shares and received on sale of shares, copy of broker ledger, copy of contract notes and copy of Dmat statement etc. Admittedly the AO has not doubted the such relevant documents filed by the Assessee in support of his transaction qua shares, which goes to show that the Assessee has discharged his initial onus cast as cast upon him as per section 68 of the Act to prove the transaction and to substantiate his claim. 5.1 We further observe that the AO doubted the transaction mainly on the basis of investigation carried out by the investigation wing as well as SEBI report/action. Whereas it is a fact as highlighted by the Ld. Counsel Ms. Hema Sharma, CA by drawing our attention to pages No.41-50 of the factual paper book filed before us that the SEBI vide order dated 21.09.2017 has revoked ad-interim order dated 04.12.2014 wherein certain entities were restrained from carrying out activities of the shares, purchases etc. It is an admitted fact as not refuted by the Ld. D.R. that Shri Yash no action has either been taken by the SEBI against the Assessee and no incriminating material was found against the Assessee. Even otherwise directly or indirectly, no role has been assigned to the Assessee qua rigging of the shares and/or any manipulation in the scrip under consideration. Printed from counselvise.com P a g e | 20 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 5.2 We further observe that the Hon'ble Jurisdictional High Court in the case of Pr. CIT vs. Indravadan Jain HUF 454 of 2018 (Bom-HC) dated 12.07.2023 has also dealt with almost identical addition as involved in the instant case and by considered certain facts and circumstances, laid down certain principles by observing and holding as under: \"JUDGEMENT 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 demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs. 1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 19617\" 2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (\"RFL\") is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (\"STT\") has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL 3. Therefore, we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd. 2019 (103) taxmann.com 48 (SC). 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.\" 5.3 We further observe that the Hon'ble Jurisdictional High Court in the case of Pr. CIT vs. Ziauddin A Siddique (ITA No.2012 of 2017 decided on 04.03.2022) has also dealt with the identical addition. 5.4 We also observe that the co-ordinate Bench of the Tribunal at Mumbai in the cases of ITO-19(2)(4) vs. Prakashmal Malraj Jain (ITA No.3271/M/2023 decided on 12.08.2024) and Jagdish B. Prajapati (HUF) vs. ACIT-24(2) (ITA No.548/M/2019 decided on 17.06.2021) also Printed from counselvise.com P a g e | 21 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah considered the identical scrip as involved in the instant case and ultimately on the identical facts, deleted the addition laid down certain principles/confirmed the deletion of the addition. 5.5 On the aforesaid analyzations, in our considered view, the Assessee has been able to discharge his prima-facie onus as cast u/s 68 of the Act by producing the relevant documents. The Assessee was also not involved in any rigging of the shares/scrip under consideration and even otherwise no adverse order as on date is against the Assessee by any of the investigation authority or SEBI and therefore, considering the peculiar facts and circumstances referred above in totality, we are inclined to allow the claim of the Assessee u/s 10(38) of the Act by deleting the addition under consideration. Thus, the claim of the Assessee u/s 10(38) of the Act is allowed and addition is in hand is deleted. 6. In the result, the appeal filed by the Assessee stands allowed. 7. On careful consideration of all the relevant facts of the case and we notice that the assessee had purchased the shares from the market in physical form, got it transferred to his name and later dematerialised the same. The payment for purchase of shares was made through banking channels. Later, the assessee had sold the shares in the stock exchange platform through a registered broker and received the sale consideration through banking channels after holding the same for more than 500 days. The assessee has furnished copy of demat statement, which shows entry and exit of the shares. Neither the ld.CIT(A) nor the AO have not found fault with any of the documents furnished by the assessee evidencing the purchase and sale of shares. Further, the AO has also not carried out any independent enquiry with regard to the transactions carried on by the assessee, i.e., he has simply relied upon the generalised report given Printed from counselvise.com P a g e | 22 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah by the Investigation wing. The SEBI report which was also one of the important evidence of price rigging etc. subsequently gave a clean chit to the assessee. Therefore, it also lost its evidentiary value.We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkata in order to arrive at the conclusion that the Long Term Capital Gain reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation Wing, Kolkata is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report, without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people, who were involved in the alleged rigging of prices. 8. Considering the above discussion, the facts on record and the legal position emerging out of catena of decisions of Hon’ble Supreme Court, jurisdictional High Court and direct decisions rendered by the co-ordinate benches of Mumbai, ITAT order, we hold that the addition made by the AO u/s 68 of the Act in the year under Printed from counselvise.com P a g e | 23 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah consideration is devoid of any merit. The claim of the assessee u/s 10(38) of the Act has been made based on facts which could not be rebutted by the AO. The documentary evidences could not be rejected without bringing on record any substantial piece of evidence and just on the basis of certain individuals who also were not produced for cross examination of their stated stands. Moreover, the jurisdictional High Court decisions cited supra are on identical facts as also the co- ordinate benches of Mumbai tribunal have a binding precedence. None of them could be distinguished by the ld.CIT(A) anywhere in the appellate order. Apparently,he has in a preconceived manner dittoed the assessment order rather than by way of independent application of mind. We have no hesitation in deleting the addition. The AO is, therefore, directed to delete the additions made u/s 68 of the Act. The addition on account of alleged payment of commission u/s 69C of the Act would consequently stand deleted. Thus, we allow all the grounds of appeal of the assessee. Printed from counselvise.com P a g e | 24 ITA No. 4218/Mum/2023 A.Y. 2014-15 Devang Bhupendra Shah 9. In the result, the appeal of the assessee is allowed Order pronounced in the open court on 13/10/2025 Sd/- Sd/- SANDEEP GOSAIN PRABHASH SHANKAR (न्याययकसदस्य /JUDICIAL MEMBER) (लेखाकारसदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai दिनाुंक /Date 13.10.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. Printed from counselvise.com "