GRACEUNITED DEVELOPERS PRIVATE LIMITED ,MUMBAI V. INCOME TAX OFFICER 12(2)(1), MUMBAI

ITA 2047/MUM/2024

AI Insights

The case involves Graceunited Developers Private Limited, which appealed against the orders of the National Faceless Assessment Centre (NFAC), Delhi, for the assessment years 2015-16 and 2016-17. The appeals were heard together due to the identical nature of the underlying facts and issues. The primary contention was regarding the additions made under section 68 of the Income Tax Act, which pertained to alleged bogus long-term capital gains linked to a syndicate involved in manipulating stock prices. The tribunal examined the business activities of the assessee, which included trading in shares, and found that the additions made were not justified as the assessee did not claim any exempt income under section 10(38) of the Act, nor did the trading activities result in any long-term capital gains.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472746 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHANGEPATIL PUSHKARAJ RAMESH; DR
• Assessee Lawyers: SUCHEK ANCHALIYA; VAISHALI MORE
• Keywords: Reopening of assessment; Capital Gains; Search and seizure; Accommodation entries; Earning of tax free income; Bogus
• Section: 68; 10

Judgement Text

" | आयकर अपीलीय अिधकरण \fा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 2046 & 2047/Mum/2024 Assessment Years: 2015-16 & 2016-17 Graceunited Developers Private Limited 704, Building No. 13A Siddharth Nagar, Khatau Mill Compound WE Highway, Borivali East Mumbai - 400066 [PAN: AACCG6261E] Vs Income Tax Officer, Ward – (12)(2)(1), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Suchek Anchaliya, C.A. & Vaishali More, C.A. Revenue by : Shri Bhangepatil Pushkaraj Ramesh, Sr. D/R सुनवाई की तारीख/Date of Hearing : 05/03/2025 घोषणा की तारीख /Date of Pronouncement: 12/03/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 2046 & 2047/Mum/2024 are two separate appeals preferred against two separate orders of the NFAC, Delhi, dated 12/03/2024 pertaining to AYs 2015-16 & 2016-17. 2. Both these appeals were heard together and are disposed off by this common order for the sake of convenience and brevity. 3. The underlying facts in the issues are identical, therefore, we adjudicate the appeals on facts of AY 2015-16. 4. Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules, 1963. I.T.A. No. 2046 & 2047/Mum/2024 2 5. In both the appeals, the assessee has challenged the reopening of the assessment and also the additions made u/s 68 of the Act on merits of the case. 6. The ld. Counsel for the assessee did not press the ground relating to the reopening of assessment, therefore, the only grievance surviving relates to the merits of the addition made u/s 68 of the Act, though quantum may differ. 7. Briefly stated the facts of the case are that the assessee is engaged in the business of trading in shares and had filed its audited statement of accounts along with the return of income. 8. On the basis of information available with the AO, he came to know that search and survey action was conducted on a syndicate of Shri Naresh Jain & Associates. During the course of search and seizure action, several incriminating documents and digital data has been found which led to unearth the operations of the syndicate, establishing clearly the modus operandi of providing bogus long-term capital gains/losses and rigging the price of various scrips on stock exchange for providing bogus long-term capital gains/loss. 8.1. Taking a leaf out of such information, the AO discussed in detail general modus operandi in penny stock cases and came to the conclusion that a scheme had been hatched by various players to obtain/provide accommodation entries of bogus long-term capital gains through manipulation of stock market and the assessee is one of the beneficiaries of long-term capital gains and went on to make addition of Rs.7,01,61,033/- u/s 68 of the Act in AY 2015-16 and Rs. 9,05,98,704/- u/s 68 of the Act in AY 2016-17. I.T.A. No. 2046 & 2047/Mum/2024 3 8.2. The assessee challenged the addition before the ld. CIT(A) but without any success. 9. We have carefully perused the orders of the authorities below. A perusal of the assessment order shows that nowhere the AO has discussed the business of the assessee, its financial statements but has simply discussed the general modus operandi in penny stock cases. We are pained to find that nowhere the assessee has claimed any exempt income u/s 10(38) of the Act, meaning thereby that the assessee has not claimed any long-term capital gain/loss in its return of income. 9.1. As mentioned elsewhere, the assessee is trading in shares and engaged in the business of purchase and sale of shares which is evident from the financial statements furnished before the lower authorities and brought to our knowledge. Even in the computation of income there is no claim of any exempt income. The purchase and sale of shares are supported by contract notes, copies of the ledgers of brokers, D-mat statements and the bank statements. The books of accounts are audited. The assessee has shown turnover of Rs.50.29 Crores for the year ending March, 2015 and Rs.28.97 Crores, for the year ending March, 2016. A perusal of the profit and loss account shows that the revenue from operations depicting gross sales do not have any long-term capital gains. In fact, the revenue from operations simply contained sale of shares. 10. We are of the considered view that the entire assessment has been framed on the basis of the information and the general prevailing practice where a section of brokers/entry providers are engaged in rigging the market for providing bogus long-term capital gains so that I.T.A. No. 2046 & 2047/Mum/2024 4 the beneficiaries can claim the same u/s 10(38) of the Act as exempt from tax and bring their unaccounted money in the books without paying any tax. 10.1. The facts on record show that since the assessee is engaged in the business of trading in shares, any profit arising out of its business as shown under the head profits and gains of illness which is taxable as per the rates applicable and there is no claim of any exemption u/s 10 (38) of the Act. 11. Considering the facts of the case in totality, we are of the considered view that the entire assessment has been based upon wrong facts since the entire trading in shares has been absorbed in the sale of shares, making addition u/s 68 of the Act of few chosen scrips would amount to double addition of the same transactions. On the given facts of the case, the additions do not survive. The AO is directed to delete the same for both the assessment years. 12. In the result, appeals of the assessee are allowed. Order pronounced in the Court on 12th March, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE-PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 12/03/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs I.T.A. No. 2046 & 2047/Mum/2024 5 आदेश की \u0015ितिलिप अ\u001aेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001c / The Appellant 2. \u0015\u001dथ\u001c / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "