INCOME TAX OFFICER 58(3), VIKAS BHAWAN V. PRITHVI RAJ KANDOI (HUF), DELHI

ITA 1606/DEL/2025

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted the additions made by the Assessing Officer (AO) on account of alleged bogus/unaccounted income and commission charges related to trading in penny stocks of M/s Global Capital Markets Ltd. The AO had reopened the assessment based on information from the Investigation Wing, treating the trade value as unaccounted income under section 68 and adding a commission charge under section 69C. The CIT(A) found the additions unjustified, leading to the Revenue's appeal to the Tribunal. The Tribunal upheld the CIT(A)'s decision, referencing several precedents and noting the lack of independent verification by the AO.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793315 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 18-03-2025
• Other Referred Cases: Sunita Sarda vs. ACIT Circle 17(1), New Delhi, Vishal Aggarwal vs. ITO Ward. 23(3), Delhi, ITO vs. Sanjay Mahabir Maheshka
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR
• Assessee Lawyers: MANISHA GUPTA; LALIT KUMAR GUPTA
• Keywords: Income from undisclosed sources; Capital Gains; Penny stocks; Bogus
• Section: 148; 143(3); 68; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC’ NEW DELHI BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT ITA No. 1606/DEL/2025 (AY 2012-13) INCOME TAX OFFICER 58(3), VS. PRITHVI RAJ KANDOI (HUF) ROOM NO. 317-D, 175, RAM VIHAR, VIKAS BHAWAN, I.P. ESTATE, VIKAS MARG EXTN, NEW DELHI – 110 002 SURAJMAL VIHAR, EAST DELHI (PAN: AAAHP3425Q) (APPELLANT) (RESPONDENT) Assessee by : Ms. Manisha Gupta, CA & Sh. Lalit Kumar Gupta, CA Department by : Sh. Manoj Kumar, Sr. DR Date of Hearing 04.09.2025 Date of Pronouncement 24.09.2025 ORDER This appeal by the Revenue is directed against the order of the ADDL/JCIT(A)-5, New Delhi passed relating to assessment year 2012-13. The Revenue has raised the following grounds:- 1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made on account of bogus / unaccounted income of the assessee u/s. 68 of the Act to the tune of Rs. 8,05,127/-. 2. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 8,05,127/- which is nothing but accommodation entry manipulated by the entry operators to route the unaccounted bogus money of the assesse by trading in the scrip of M/s Global Markets Ltd. Which is a penny stock company. 3. Whether Ld. CIT(A) is justified in deleting the addition made on account of commission charged @ 3% of the traded value of the Printed from counselvise.com 2 arranging the capital gain / loss assessed u/s. 69C of the Act to the tune of Rs. 24,153/-. 2. Briefly stated, facts are that in this case, the assessee filed its ITR for A.Y. 2012- 13 on 25.2.2013 on a total income of Rs. 3,09,028/-. The income returned was accepted u/s. 143(1) of the Act, however assessment u/s. 143(3) was made. Subsequently, the information was received from his Investigation Wing that the assessee had traded in penny stock name m/s Global Capital Markets ltd. The total trade value was Rs. 8,05,127/- on account of purchase of subject shares during FY 2011-12. The AO therefore reopened the assessment by issuing notice u/s. 148 on 26.3.2019. In response, the assesse had filed its return on 20.9.2019 declaring total income of Rs. 3,09,030/-/ Not being satisfied with the explanation of trading in epnny stock M/s Global Capital Markets Ltd., the AO had treated the total value of trade of Rs. 8,05,127/- as unaccounted / bogus u/s. 68 of the Act. Further the AO also made na addition u/s. 69C of Rs. 24,153/- being 3% of the trade value of for providing arranged capital gain / loss. In appeal, Ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved, the Revenue is in appeal before the Tribunal. 3. At the time of hearing, Ld. DR submitted that the Ld. CIT(A) erred in deleting the addition of Rs. 8,05,127/- which is nothing but accommodation entry manipulated by the entry operators to route the unaccounted / bogus money of the assessee by trading in the scrip of M/s Global Capital Markets Ltd., which is a penny stock company. He further submitted that Ld. CIT(A) was not justified in deleting the addition made on account of commission charged @ 3% of the traded value for arranging the capital gain/loss assessed u/s. 69C of the Act to the tune of Rs. 24,153/-. 3. Per contra, Ld. AR for the assessee submitted that the assesse has purchased shares of Global Capital Market Limited of Rs. 8,05,127/- for which SEBI has neither issued any guidelines nor passed any orders designating the shares as penny stocks. Furthermore, the shares continue to be actively traded on the Bombay Stock Exchange (BSE). Since the assessee purchased shares of Global Capital Market Limited through a recognized stock exchange, with applicable Securities Transaction Tax (STT) duly Printed from counselvise.com 3 paid. The total investment amounted to Rs. 8,05,127/-, and the payments were made via account payee cheques, ensuring compliance with prescribed financial norms,. However, no sale transactions were undertaken either during the year under assessment or in the subsequent year. As a result, no long term capital gain was earned, nor any capital loss incurred. It was further submitted by the Ld. AR that the appeal filed by the Department exceeds the monetary limit of Rs. 50 lacs as prescribed under CBDT Circular No. 5/2024 dated 15.3.2024. It was further submitted the following are the recent case laws where the issue is covered directly for the same scrip of Global Capital Market Limited, in favour of the assessee. i) Sunita Sarda vs. ACIT Circle 17(1), New Delhi (ITA No. 2215/Del/2013) dated 14.5.2025. ii) Vishal Aggarwal vs. ITO Ward. 23(3), Delhi (ITA No. 125/Del/2020) dated 14.9.2022.. iii) ITO vs. Sanjay Mahabir Maheshka (ITA No. 6168 & 6169/Mum/2019) dated 22.7.2013. 4. I have heard the rival contentions and gone through the facts of the case. I note that it is an undisputed fact that the assessee during the year had purchased the shares of Global Capital Markets Ltd. In August, 2011 which was subsequently transferred on 07.05.2015 i.e. after nearly 4 years from the date of purchase. The purchases made through stock exchange were supported by demat account, account holding statement, broker contract notes, ledger account of broker and bank statement. Assessee has also traded in other shares. However, the AO had merely relied upon the report of Investigation Wing and had not made any independent verification. The law settled by the Supreme Court in the case of CIT vs. Odeon Builders Pvt. Ltd. Reported in 110 taxmann.com 64 (SC) is that the addition cannot be made on the basis of third party information without making any independent verification by the AO. AO has merely discussed the general characteristics of a sham penny stock transaction without giving any specific details of the modus operandi adopted by the assessee and its similarity to the modus operandi unearthed by the Investigation Printed from counselvise.com 4 Wing, which establishes that the AO is not justified in holding that the subject transaction is not genuine. 4.1 I note that ITAT, Kolkata Bench in the case of Uttam Das vs. ITO dated 19.11.2024 in ITA No. 1589/Kolkata/2024 for AY 2011-12 has dealt the similar issue and decided the same in favour of the assessee wherein, the addition was made by the AO by treating the consideration paid for purchase of shares of Global Capital Markets Ltd. As unexplained, where shares of M/s Global Capital Markets Ltd. were purchased in year 2010-11 and transferred / sold during the year 2014-15. 4.2 It is further noted that Hon’ble Delhi High Court in the case of PCIT vs. Vipin Jain in ITA No. 95/2021 dated 12.3.2024 has dealt the identical and similar issue and dismissed appeal of the Revenue. 4.3 Also, the ITAT, Delhi in its recent decision dated 14.5.2025 in the matter of Sunita Sarda vs. ACIT passed in ITA No. 2215/Del/2023 (AY 2011-12) has dealt the exactly identical issue and decided the same in favour of the assesseee by holding as under:- “….Therefore, we respectfully follow the ratio of the above decisions. In this case also, the Assessing Officer and Ld. CIT(A) has applied the concept of Human probabilities and held the above said scrip to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider as observed by the Hon'ble Bombay High Court in the case of Ziauddin A Siddique (supra). Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. Therefore, we are inclined to allow the grounds raised by the assessee. Accordingly the grounds raised by the assessee are allowed. 14 In the result, appeal filed by the assessee is allowed.” 4.4 Besides above, it was the contention of the Ld. AR that the appeal filed by the Department exceeds the monetary limit as prescribed under the latest CBDT Circular, which has not been controverted by the Ld. DR. Printed from counselvise.com 5 5. In the background of the aforesaid discussions and upon careful perusing the finding of the Ld. CIT(A) and respectfully following the case laws as discussed above, I am of the considered view that Ld. CIT(A) has rightly held that the AO was not correct in treating the purchase consideration paid of Rs. 8,05,127/- as unaccounted / bogus income of the assessee u/s. 68 of the Act and thus directed to delete the addition, which does not need any interference on our part, accordingly, we affirm the action of the Ld. CIT(A) on this issue and reject the ground raised by the Revenue. 6. As regards, addition made u/s. 69C of Rs. 24,153/- towards the expenditure incurred for arranging such capital gains/loss is concerned, this being consequential in nature, hence, the same was also rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on this issue and accordingly reject the ground raised by the revenue. 7. In the result, the Revenue’s appeal stands dismissed. Order pronounced on 24.09.2025. Sd/- (MAHAVIR SINGH) VICE PRESIDENT Date: 24-09-2025 SR Bhatnaggar Copy forwarded to: - 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT ASSTT. REGISTRAR, ITAT Printed from counselvise.com "