INCOME TAX OFFICER, WARD 3(1), KALYAN, KALYAN V. KUMARPAL MAHENDRAKUMAR SHAH, KALYAN

ITA 5030/MUM/2024

AI Insights

The case revolves around an appeal by the Revenue Department against the order of the Commissioner of Income Tax (Appeals), which had deleted an addition made by the Assessing Officer regarding the sale of shares by Mr. Kumarpal Mahendrakumar Shah. The Assessing Officer had reopened the case based on information suggesting that the assessee was involved in transactions with penny stocks, which were allegedly rigged to evade tax. However, the Commissioner found that the Assessing Officer had not conducted a proper investigation specific to the assessee and that the transactions were carried out through legitimate channels, resulting in a loss for the assessee. The Tribunal, referencing similar cases and the lack of evidence of manipulation, upheld the Commissioner's decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33845 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Other Referred Cases: Komal Kumarpal Shah vs. ITO, ward-3(2), ITO-24(3)(1) vs. Nilesh Malshi Savla HUF, Pr. Commissioner of Income Tax vs. Genuine Finance Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINIVAS P.; LD.
• Assessee Lawyers: RITU PUNJABI; LD.
• Keywords: Set aside; Accommodation entries; Bogus
• Section: 147; 148; 144; 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No.5030/M/2024 Assessment Year: 2012-13 Income Tax Officer-(2)(1), Ward 3(1), 2nd Floor, Rani Mansion, Murbad Road, Kalyan West, Maharashtra – 421 301 Vs. Mr. Kumarpal Mahendrakumar Shah, 304, 4th Floor, Zozwala Shopping Complex, Agra Road, Kalyan West, Dist- Thane, Maharashtra – 421 301 PAN: ALZPS8291D (Appellant) (Respondent) Present for: Assessee by : Ms. Ritu Punjabi, Ld. Adv./AR (Ld. Amicus Curiae) Revenue by : Shri Srinivas P., Ld. Sr. D.R. Date of Hearing : 28.11.2024 Date of Pronouncement : 31.01.2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Revenue Department against the order dated 29.11.2019, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2012-13. ITA No.5030/M/2024 Mr. Kumarpal Mahendrakumar Shah 2 2. In the instant case, the Assessee had purchased 600 shares of M/s. Vas Infrastructure Ltd. on a consideration of Rs.65,713/- approximately and as per the Assessing Officer (in short, “AO”) subsequently sold the same for a consideration of Rs.1,19,359/-. The AO subsequently received the information communicated on 28.02.2018 in respect of beneficiaries of the penny script forwarded by DDIT (investigation wing), 6 Mumbai, wherein it was mentioned that the Assessee during the financial year 2011-12 {Assessment Year 2012-13} had sold shares of M/s. Vas Infrastructure Ltd. 3. Consequently, the case of the Assessee was reopened by issuing a notice dated 30.03.2019 u/s 148 of the Act, in response to which the Assessee made no compliance. Thereafter various statutory notices were issued to the Assessee, which also remained un-complied with. Therefore, the AO in the constrained circumstances completed the assessment u/s 144 of the Act and vide assessment order dated 29.11.2019 u/s 144 r.w.s. 147 of the Act, ultimately made the addition of Rs.1,19,359/- u/s 68 r.w.s. 115BBE of the Act. 4. The Assessee, being aggrieved challenged the said addition by filling 1st appeal before the Ld. Commissioner, who by considering the submissions filed by the Assessee and the assessment order, analysed the findings of the AO specifically to the effect that the AO concluded the assessment by assigning following reasons: • Assessee failed to discharge onus of explaining unusual growth in trading volumes of shares of VAS Infrastructure Ltd. • Assessee was having knowledge about penny stock ITA No.5030/M/2024 Mr. Kumarpal Mahendrakumar Shah 3 • Assessee was ignorant about financial health of penny stock company and artificially rigged prices. • The investigations in the fund flow analysed that cash was routed through many layers of companies • The transactions were entered with pre-conceived series of steps and true nature of transaction was not present and being artificially structured with intent to evade tax. • Revenue cannot accept this make-believe arrangement” 5. The Ld. Commissioner also taken into consideration the claim of the Assessee that the Assessee at the time of assessment proceedings had filed the following documents such as broker note for sale and purchase of shares, bank statement debiting payments made for purchase of shares and receipt of money after sale of shares etc.. 6. The Ld. Commissioner by taking into consideration the aforesaid facts and circumstances of the case ultimately deleted the addition by holding “that the AO has not carried out any investigation in the facts specific to the Assessee. Moreover, the Assessee had incurred loss in the short-term dealing of shares of M/s. Vas Infrastructure Ltd. and the AO has not brought on record any finding that the Assessee was engaged in the price rigging of said scrips on software driven portal and therefore the addition made by the AO for a sum of Rs.1,19,359/- on account of sale of shares is deleted”. 7. The Ld. D.R. has claimed that the Ld. CIT(A) has erred in ignoring the fact that the Assessee had entered into sham transactions only to give colour of genuineness and therefore losses arising out of the transactions cannot be believed as genuine. ITA No.5030/M/2024 Mr. Kumarpal Mahendrakumar Shah 4 Further the Ld. Commissioner also erred in not appreciating the fact that the prices of the scrip of M/s. Vas Infrastructure Ltd., increased inspite of poor financial background and no real credential of such scrip and such rise in share prices were rigged artificially to provide accommodation entries to various clients and the Assessee being one of the beneficiaries of such scrip and therefore the order passed by the Ld. Commissioner is liable to be set aside. 8. The Assessee was represented by none due to financial crunches and therefore this Court has appointed Ms. Ritu Punjabi Ld. Advocate, as Amicus Curiae to assist the Court. Ld. Amicus Curiae has submitted that it clearly appears from the documents filed by the Assessee that the Assessee had opening balance of shares of M/s. Vas Infrastructure Ltd. and thereafter during the year under consideration the Assessee had also purchased and sold share of such scrip and in fact incurred a loss of Rs.3338/- as it appears from the contract notes for purchase and sales of shares through broker Angel Broking Ltd. (Annexure 2 & 3). It is a fact that aforesaid loss of Rs.3328/- inter-alia has not been set off against any other income and has been carried forward for set off in the subsequent years. Even otherwise, the above transactions of purchase and sale of shares of M/s. Vas Infrastructure Ltd. were carried out through online platform and registered broker. All the payments to the brokers and receipts from the broker were made and received respectively through banking channels and therefore aforesaid facts goes to show that the transactions carried out by the Assessee were genuine and the Assessee has not earned any bogus loss/gain and therefore the addition of Rs.1,19,359/- made by the AO u/s 68 of the Act has rightly been deleted by the Ld. Commissioner the Ld. Amicus Curiae in support of Assessee’s case also relied on various judgements. ITA No.5030/M/2024 Mr. Kumarpal Mahendrakumar Shah 5 9. This Court has given thoughtful considerations to the peculiar facts and circumstances and perused the material available on record including purchase and sale invoices/contract notes cum bills provided by Angel Broking Ltd. and the chart prepared by the Ld. Amicus Curiae and the income tax return for the A.Y. under consideration. Admittedly, the Assessee as held by the Ld. Commissioner and not disputed by the Revenue that during the AY under consideration in fact had incurred loss of Rs. 3328/- in the short-term dealing of shares of M/s. Vas Infrastructure Ltd. The addition of Rs.1,19,359/- made by the AO is even otherwise does not pertain to the AY under consideration and having no base to sustain. 10. The Ld. Amicus Curiae also drew the attention of this Court to the order dated 22.08.2024 passed by the Hon’ble Co-ordinate Bench of the Tribunal in Assessee's wife’s case titled as Komal Kumarpal Shah vs. ITO, ward-3(2) (ITA no.2856/M/2023) wherein the identical scrip of M/s. Vas Infrastructure Ltd. was in controversy and the co-ordinate Bench of the Tribunal ultimately deleted the addition made on account of trading in M/s. Vas Infrastructure Ltd. by holding “that transactions of said scrip of M/s. Vas Infrastructure Ltd. cannot be termed as fictitious in the absence of any evidence of manipulation of that scrip”. 11. This Court further observe that co-ordinate Bench of the Tribunal in the case of ITO-24(3)(1) vs. Nilesh Malshi Savla HUF (ITA no.1110/M/2024 decided on 23.08.2024) has also taken into ITA No.5030/M/2024 Mr. Kumarpal Mahendrakumar Shah 6 consideration the fact and issue to the effect that the Assessee in that case has not claimed any alleged bogus long term capital gain from the trading of penny stock but in fact incurred the loss and therefore the Ld. CIT(A) deleted the addition and thus the decision of the then CIT(A) was found as correct and consequently affirmed by the co-ordinate Bench of the Tribunal. 12. The Hon’ble Gujarat High Court in the case of Pr. Commissioner of Income Tax vs. Genuine Finance Pvt. Ltd. (2023) 152 taxmann.com 330 (Guj) tested the genuineness of the scrip namely M/s. Vas Infrastructure Ltd. and ultimately affirmed the deletion of the addition made on account of transaction carried out qua such scrip. 13. To summing up the case, as the Assessee has not claimed any capital gain and in fact incurred the loss of Rs.3328/- in the transactions of sale and purchase of scrip M/s. Vas Infrastructure Ltd. and submitted the relevant documents before the authorities below and has discharged prima face onus case u/s 68 of the Act. The identical addition made by the AO in the hands of the Assessee’s wife, concerning the same scrip as involved in this case has already been deleted by the Hon’ble Co-ordinate Bench of the Tribunal in the case referred to above. Thus, on the aforesaid reasons, the addition in any case is unsustainable and therefore in the considered opinion of this Court has rightly been deleted by the Ld. Commsionwer. Hence the decision of the Ld. Commissioner needs no interference, as the same is neither suffering from any perversity or impropriety nor illegality. ITA No.5030/M/2024 Mr. Kumarpal Mahendrakumar Shah 7 14. This Court appreciate and endorse the active and able assistance provided voluntarily by Ms. Ritu Punjabi {Ld. Advocate}, Ld. Amicus Curiae, for proper adjudication of this case. 15. In the result, the appeal filed by the Revenue Department stands dismissed. Order pronounced in the open court on 31.01.2025. Sd/- (NARENDER KUMAR CHOUDHRY) JUDICIAL MEMBER * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai. "