MANISH DEVENDRAKUMAR SHAH,AHMEDABAD V. THE ITO, WARD-5(3)(1), AHMEDABAD

ITA 918/AHD/2024

AI Insights

The case revolves around the appellant, Manish Devendrakumar Shah, who challenged the addition of Rs.1,07,92,400 as unexplained cash credits under Section 68 of the Income Tax Act, 1961, following the sale of shares of Looks Health Services Ltd. The shares were initially acquired through preferential allotment from the company and later sold, with the gains claimed as exempt under Section 10(38). The Income Tax Officer (ITO) reopened the assessment based on allegations that the shares were part of a penny stock scheme used for generating bogus long-term capital gains. The Commissioner of Income Tax (Appeals) upheld the ITO's decision, leading to the appeal before the Tribunal. The Tribunal's decision highlighted the lack of concrete evidence linking the appellant to any price manipulation or accommodation entry, thus allowing the appeal and deleting the addition made under Section 68.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29727 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Other Referred Cases: Varun Nagjibhai Patel Vs. DCIT, Circle 3(3), Ahmedabad, Ashokbhai Shankerlal Shah Vs. ITO Ward 1(2)(1), Ahmedabad, ITO 1(1)(1), Mumbai Vs. Sohni Dipak Tanna, Jayantilal Panachan Shah Vs. The PCIT-1, Ahmedabad, Rakesh Ramanlal Shah Vs. DCIT Circle 2(1)(1), Ahmedabad, PCIT vs. Swati Bajaj & Ors.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: S.N. DIVATIA; SAMIR VORA
• Keywords: Unexplained cash credit; Income from undisclosed sources; Cost of acquisition; Capital Gains; Principle of natural justice; Accommodation entries; Opportunity of cross examination; Penny stocks; Bogus
• Section: 147; 142(1); 143(2); 250; 143(1); 68; 22; 13; 20

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद Ɋायपीठ “सी“, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD ŵी टी.आर. सेİȺल क ुमार, Ɋाियक सद˟ एवं ŵी मकरंद वसंत महादेवकर, लेखा सद˟ क े समƗ। ] ] BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.918/Ahd/2024 िनधाŊरण वषŊ /Assessment Year : 2014-15 Manish Devendrakumar Shah 206, 2nd Floor, Kalash 1 Navrangpura Ahmedabad – 380 009 बनाम/ v/s. The ITO Ward-5(3)(1) Ahmedabad ̾थायी लेखा सं./PAN: AQJPS 4226 K (अपीलाथŎ/ Appellant) (Ů̝ यथŎ/ Respondent) Assessee by : Shri S.N. Divatia, AR & Shri Samir Vora, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 20 /02/2025 घोषणा की तारीख /Date of Pronouncement: 25/02/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal has been filed by the assessee against the order passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act\"] by the Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], dated 02.04.2024, upholding the addition of Rs.1,07,92,400/- made by the Assessing Officer [hereinafter referred to as \"AO\"] under section 68 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) in respect of Long-Term Capital Gains (\"LTCG\") on the sale of shares of Looks Health Services Ltd. (LHSL). The ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 2 appeal also challenges the reopening of the assessment under section 147 of the Act, for the Assessment Year (AY) 2014-15. Facts of the case: 2. The assessee is an individual, filed his return of income for AY 2014-15 on 27.09.2014 declaring a total income of Rs.6,88,071/-, including LTCG of Rs.1,04,97,687/- on the sale of shares of LHSL, which was claimed as exempt under section 10(38) of the Act. The return was processed under section 143(1) of the Act. Subsequently, the assessment was reopened under Section 147 based on information received from the Investigation Wing of the Income Tax Department, which indicated that LHSL was a penny stock and that the assessee was a beneficiary of a bogus LTCG scheme. The assessee was not furnished with the full text of the reasons recorded for reopening, and only a gist of the reasons was provided with the notice dated 08.02.2022, thereby preventing the assessee from fully and properly filing objections. The AO issued multiple notices under Sections 142(1) and 143(2) of the Act, and the assessee submitted responses along with bank statements, demat account details, purchase and sale invoices, and allotment letters. However, the AO did not accept the submissions and concluded that the transactions were not genuine. The AO disallowed the LTCG claim and made an addition of Rs.1,07,92,400/- under Section 68 on the grounds that LHSL was identified as a penny stock with no significant financial activity and weak fundamentals, Abnormal share price movement, with a sharp rise and fall without any corresponding business growth, Investigation Wing’s report indicated price manipulation and circular trading, Assessee could not explain why he invested in LHSL, a company with no business operations, Absence of due ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 3 diligence before investment. The AO Denied cross-examination request, stating that the Investigation Wing’s report was sufficient evidence. 3. The assessee filed an appeal before CIT(A) challenging the reopening under section 147 and addition under section 68 of the Act. The CIT(A) upheld the reopening, holding that the AO had valid reasons to believe that income had escaped assessment. The CIT(A) also upheld the addition under Section 68 of the Act, concluding that the assessee failed to justify his investment in a company with no business operations, the assessee was aware of price rigging as he purchased shares through preferential allotment, the price spike was unnatural, indicating manipulation. The CIT(A) relied on judicial precedents, such as, Swati Bajaj (Calcutta High Court), Suman Poddar (Supreme Court) and Nand Kishore Agarwala (Calcutta High Court), which held that penny stock transactions are often used for accommodation entries. The CIT(A) also concluded that the investment in the shares of M/S Looks Health Services Ltd. is only a make-believe transaction intended to bring back his black money into his books in a circular route through manipulation of prices of penny stock. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us with following grounds of appeal: 1.1 The order passed u/s. 250 passed on 02.04.2024 by NFAC [CIT(A)] Delhi { for short\" CIT(A)} for A.Y.2014-15 upholding the shares of Looks Health Services Ltd as penny scrip and LTCG on sale thereof as bogus and thereby making addition of Rs. 1,07,92,400/-u/s.68 is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant with regard to the impugned addition. The AO has passed order without ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 4 considering the materials/evidence produced before him and just by relying upon the DDIT information and report. The CIT(A) had also failed to furnish the copy of material collected by DDIT and not allowing the opportunity of cross examination of concerned parties. Therefore, there was gross violation of principles of natural justice and such order is liable to be quashed. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the validity of the proceedings u/s.147 of the Act. Since the condition precedent for valid reopening u/s.147 were not satisfied, the impugned notice u/s.148 is wholly illegal and unlawful. The appellant had raised detailed objection in reply given 14/02/2022 which were not disposed off. Therefore, the impugned assessment is liable to be quashed. 3.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the shares of Looks Health Services Ltd as penny scrip and LTCG on sale thereof as bogus and thereby making addition of Rs. 1,07,92,400/-u/s. 68. 3.2 That in the facts and circumstances of the case as well as in law, the Id. CIT(A) has grievously erred in upholding the shares of Looks Health Services Ltd as penny scrip and LTCG on sale thereof as bogus and thereby making addition of Rs. 1,07,92,400/-u/s.68. 3.3 The observations made and conclusions reached by CIT(A) to uphold scrip of LHSL as penny stock are not admitted by the appellant and the same should be rejected in toto on account of the same being irrelevant and general in nature. 4.1 Without prejudice to above and in the alternative, the Ld. CIT(A) has erred in confirming addition of entire sale price as undisclosed income though the purchase price of RS. 250000/- was paid by cheque from regular bank a/c. It is therefore prayed that the addition of Rs. 1,07,92,400/-/- u/s 68 of Act confirmed by the CIT(A) should be deleted. 5. During the course of hearing before us, the Authorized Representative (AR) of the assessee preferred not to press for the grounds challenging the reopening and cross examination. The AR stated that the shares were allotted by the company itself and not purchased off-market. Since the allotment was direct from the company, there was no question of any manipulative transaction or accommodation entry. The AR also stated that the shares were subject to a lock-in period as per the terms of preferential allotment. The AR ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 5 further stated that the AO's assumption that the market price movement must correlate with the financials of the company is incorrect, as market prices are influenced by multiple factors beyond earnings per share (EPS). 6. The AR submitted that the assessee has explained his rationale for purchase of shares in the reply (dated 29-3-2022) to show cause notice of the AO. In the said reply the assessee stated that – He merely invested in shares of Looks Health Services Ltd. (LHSL) and sold them when the prices were favourable. He was neither a director nor an authorized person of the company, and hence, had no control over its financials or operations. 6.1. The AR pointed out that in the said reply the assessee further stated that stock prices in the secondary market do not necessarily depend on EPS or business health but various external factors influence stock price movements, including Market speculation, Market perception, Market rumours, Buyer-seller behaviour and Greed and fear of investors. To illustrate this, the assessee cited the case of Tata Teleservices (Maharashtra) Ltd. (TTML), where despite continuous losses and declining revenue, Negative book value per share, Stock price surged from Rs.1.80 (on 01-04-2020) to Rs.291.05 (on 11-01-2022), reflecting a rise of 16,169.44% in just 22 months. Further, the assessee emphasized that there was no cash involvement in these transactions, as all payments were made through banking channels using account payee cheques and RTGS. Since there was no cash transaction, the allegation of accommodation entry had no basis. The assessee also stated, in the reply to show cause notice, that addition could not be made merely on suspicion, assumptions, or without tangible evidence. The assessee had furnished all necessary documents, including bank statements, ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 6 allotment letters, demat account details, and sales invoices. Since these documents were not disputed by the AO, there was no valid basis to invoke Section 68 of the Act. 6.2. The AR also pointed out from the order of AO that the AO has not taken into consideration very important financial parameters like Net Worth and EPS of the Company. The AR also pointed out that the increase in the following financial parameters of the Company as given in the order of AO which can be termed as Turnaround – Particulars March 2012 March 2016 Net worth (Rs. Cr) 3.07 14.53 Book Value (Rs.) 9.30 13.83 EPS (Rs.) -4.97 0.08 6.3. The AR further stated that such turnaround may also be a reason to believe that the share of the company may perform good in the stock market. The AR also placed reliance on the following judicial precedents where the relief was given to assessee in case of capital gains on account of sale of shares of Look Health Services Ltd. : 1. Varun Nagjibhai Patel Vs. DCIT, Circle 3(3), Ahmedabad – ITA No. 41/Ahd/2019. 2. Ashokbhai Shankerlal Shah Vs. ITO Ward 1(2)(1), Ahmedabad – ITA No.1262/Ahd/2024. ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 7 3. ITO 1(1)(1), Mumbai Vs. Sohni Dipak Tanna – ITA No. 2245/MUM/2022. 4. Jayantilal Panachan Shah Vs. The PCIT-1, Ahmedabad – ITA No.627/Ahd/2024. 5. Rakesh Ramanlal Shah Vs. DCIT Circle 2(1)(1), Ahmedabad – Special Civil Application No. 4840 of 2022. 7. The Departmental Representative (DR), on the other hand, relied on the order of CIT(A) and stated that the CIT(A) in his order has distinguished the decision of Varun Nagijibhai Patel. The DR also pointed out that the assessee has dealt with only this share and very few shares of other companies which shows that the assessee is not a regular investor and has taken benefit the bogus share as concluded by the CIT(A). 8. We have carefully considered the rival submissions, perused the orders of the lower authorities, and examined the material placed on record. The appeal pertains to the addition of Rs.1,07,92,400/- made under Section 68 of the Act, on account of alleged bogus Long-Term Capital Gains (LTCG) from the sale of shares of Looks Health Services Ltd. (LHSL). 8.1. At the outset, it is noted that the assessee has not pressed the grounds relating to the validity of reopening under Section 147 of the Act. Accordingly, those grounds are dismissed as not pressed. We now proceed to examine the merits of the addition under Section 68 of the Act in light of the documentary evidence, judicial precedents, and legal principles governing such cases. ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 8 8.2. The AO disallowed the assessee's claim of LTCG exemption under Section 10(38) and treated the sale proceeds of Rs. 1,07,92,400/- as unexplained cash credits under Section 68, citing the following reasons: - The shares of LHSL were identified as penny stocks by the Investigation Wing, allegedly used for generating accommodation entries. - The financial statements of LHSL showed negligible business activity, no substantial profits, and abnormal price fluctuations. - The price of LHSL shares increased exponentially in a short span without any corresponding financial growth in the company. - The assessee’s transactions were part of a larger scheme designed to create artificial LTCG claims to evade tax. 8.3. The CIT(A) upheld the addition, primarily relying on judicial precedents dealing with penny stock transactions and holding that the investment in LHSL shares was a make-believe transaction intended to launder unaccounted money. 8.4. We note that the assessee has furnished substantial documentary evidence in support of the transactions, including bank statements, demat account statements, share allotment letters, and sale invoices. The transactions were executed through recognized stock exchanges, and payments were made via banking channels. The AO has not disputed the authenticity of these documents nor produced any direct evidence to show that the transactions were manipulated or prearranged. The CIT(A), while upholding the addition, has relied on judicial precedents emphasizing the principle of human probabilities and preponderance of probabilities in tax ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 9 matters. The DR, during the course of hearing, also agreed that CIT(A)’s conclusion that - “the assessee’s investment in the shares of M/S Looks Health Services Ltd. is only a make believe transaction intended to bring back his black money into his books in a circular route through manipulation of prices of penny stock” - was not supported by evidence. This admission significantly weakens the revenue’s case, as it highlights that the addition made by the AO and upheld by CIT(A) was based solely on suspicion and general assumptions rather than on concrete material evidence. 8.5. The primary contention of the assessee is that the shares were acquired through preferential allotment from the company itself and not through off- market transactions, thereby ruling out the possibility of price rigging by the assessee. The shares were subject to a mandatory lock-in period, further reinforcing the claim that the transaction was genuine. The assessee has demonstrated that all payments were made through banking channels, thereby eliminating any possibility of cash involvement or accommodation entries. Many courts have categorically held that once an assessee furnishes documentary proof, the burden shifts to the department to rebut the evidence with substantive material. In the present case, the AO has failed to bring any cogent evidence that the assessee’s transactions were non-genuine or/and the assessee was having any role in price manipulation. 8.6. The AO has solely relied on abnormal stock price movements to conclude that the transactions were prearranged. However, as rightly argued by the AR, stock prices are subject to market speculation, investor sentiment, and external factors beyond financial performance. To substantiate this, the assessee cited Tata Teleservices (Maharashtra) Ltd. (TTML), where despite ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 10 continuous losses and a negative book value, the stock price rose by 16,169.44% in just 22 months. This is a valid example illustrating that share price fluctuations alone cannot be a ground to treat transactions as bogus. Furthermore, the financial turnaround of LHSL, as evidenced from the AO’s own findings, shows an increase in net worth, book value, and EPS, which indicates that the company had improving financial fundamentals. The AO failed to appreciate these positive indicators, which weakens the conclusion that LHSL was a penny stock with no intrinsic value. 8.7. The assessee has relied on multiple judicial precedents where similar additions were deleted by various ITATs and High Courts. In the case of Varun Nagjibhai Patel Vs. DCIT, ITAT Ahmedabad – ITA No. 417/Ahd/2019, the Co-ordinate Bench held that merely relying on Investigation Wing reports without conducting an independent inquiry was not a valid ground to make an addition under Section 68. The ruling emphasized that if the assessee furnishes valid documentation, the burden shifts to the department to disprove the claim, which was not discharged in this case. This decision directly supports the assessee’s case, as the AO has failed to provide independent evidence to rebut the transaction. 8.8. Similarly, in Rakesh Ramanlal Shah Vs. DCIT, Gujarat High Court – Special Civil Application No. 4840 of 2022, the Hon’ble Gujarat High Court ruled that if shares were acquired through legitimate preferential allotment and later sold through recognized exchanges with Securities Transaction Tax (STT) paid, the gains could not be treated as bogus. This judgment applies directly to the present case since the shares were allotted directly by the ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 11 company and subsequently traded through stock exchanges, reinforcing the assessee’s claim of a genuine transaction. 8.9. In the case of Jayantilal Panachan Shah Vs. PCIT, ITAT Ahmedabad – ITA No. 627/Ahd/2024, the Co-ordinate Bench held that stock price movements alone could not be a ground to hold transactions as accommodation entries. The department was required to establish a direct nexus between the assessee and the alleged price manipulation, which was absent in this case. This decision is directly applicable to the present case, as the AO has not shown any link between the assessee and any alleged price rigging or artificial trading activity. 8.10. Further, in the case of Sohni Dipak Tanna Vs. ITO, ITAT Mumbai – ITA No. 2245/MUM/2022, the Tribunal held that merely because a stock is flagged as a penny stock does not automatically render every transaction in that stock non-genuine. The AO must establish that the assessee was involved in the price rigging scheme, which was not proven in the case at hand. This precedent further strengthens the assessee’s position, as the AO has failed to provide any substantive evidence linking the assessee to any artificial price manipulation or accommodation entry. 8.11. The CIT(A), while upholding the addition made by the AO under Section 68, has placed heavy reliance on the decision of the Hon’ble Calcutta High Court in the case of PCIT vs. Swati Bajaj & Ors. (2022) 446 ITR 56 (Cal). However, upon careful analysis, we find that the facts of the present case are significantly different from those in Swati Bajaj, and therefore, the said decision cannot be applied as a blanket precedent. The modus operandi ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 12 involved in the case of Swati Bajaj was based on an extensive investigation report by the Directorate of Income Tax (Investigation), which provided detailed findings of price rigging and artificial inflation of share prices. The investigation established a cash trail linking the beneficiaries with entry providers, thus demonstrating the circular nature of the transactions. The shares in question were found to be thinly traded penny stocks with little or no intrinsic value, and there was evidence of pre-arranged transactions between known entities. The assessee had a direct nexus with the stockbrokers and entry operators, who were instrumental in manipulating the share prices to create fictitious long-term capital gains (LTCG). In the present case, the AO has not brought any direct evidence to link the assessee’s transactions with any price manipulation or accommodation entry provider. The DR has also admitted that the CIT(A)’s conclusion was not supported by any material evidence. Unlike Swati Bajaj, where the investigation traced cash deposits leading to share purchase, in the present case, all transactions were done through banking channels via account payee cheques and RTGS, and there was no cash involvement. In Swati Bajaj, shares were typically purchased through off-market transactions and then sold after price inflation. In contrast, the assessee in the present case acquired shares through direct preferential allotment from the company itself, which had a lock-in period as per SEBI regulations. This negates the possibility of price manipulation through circular trading in the initial acquisition. In Swati Bajaj, the shares were traded in a manner that followed a \"bell curve\" pattern, where prices were artificially rigged before being offloaded at a peak. In the present case, the assessee’s transactions took place through the recognized stock exchange, with STT paid, and there is no evidence that the prices were manipulated before sale. The AR has pointed out that Looks Health Services Ltd. (LHSL) ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 13 was not merely a paper company; instead, its financials showed significant growth in net worth and EPS over the relevant period. The financial turnaround was ignored by the AO and CIT(A), whereas in Swati Bajaj, the companies involved had no genuine business activity. In Swati Bajaj, the AO relied on detailed statements from entry operators, brokers, and promoters, confirming the manipulation of stock prices. In contrast, in the present case, the assessee was not provided with the investigation report or given an opportunity for cross-examination of any such statements, violating principles of natural justice. 8.12. The CIT(A) attempted to distinguish the case of Varun Nagjibhai Patel (supra) from the present case by arguing that the decision in Varun Patel was rendered in a case where the AO had not conducted a proper inquiry. The CIT(A) contended that in the present case, the AO had conducted sufficient inquiries and relied on the findings of the Investigation Wing. This distinction is incorrect as in Varun Nagjibhai Patel, the co-ordinate bench deleted the addition under Section 68, holding that merely relying on the Investigation Wing’s report without an independent inquiry was insufficient to make an addition. Similarly, in the present case, the AO has not conducted any independent inquiry beyond citing generic investigation reports, without bringing any assessee-specific evidence. The AO has failed to establish any nexus between the assessee and the alleged price manipulation, which was also the key reason why the addition was deleted in Varun Patel. 8.13. Accordingly, the CIT(A)’s reliance on Swati Bajaj is misplaced, and the distinction drawn regarding Varun Nagjibhai Patel is flawed. The assessee’s ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 14 case is supported by multiple ITAT and High Court decisions where such additions were deleted for lack of conclusive evidence. 8.14. The issue of penny stock transactions and their taxability under section 68 of the Act requires a comprehensive and well-founded approach. The mere fact that a stock has exhibited significant price fluctuations or has been categorized as a penny stock does not by itself, render transactions in such shares non-genuine. The stock market operates under a regulatory framework where shares, irrespective of their financial fundamentals, are allowed to be traded on stock exchanges. Once such share is permitted to be listed and traded, any investor or trader – whether a regular market participant or a one-time investor- is free to take advantage of price movements and seek potential profits. Price volatility in shares can arise due to various market forces, including speculative trading, demand supply dynamics, market sentiments and external economic factors. The mere fact that a share has witnessed unusual price movements does not automatically lead to the conclusion that all transactions in that share are sham or that an assessee’s trading activities lack genuineness. However, in cases where there is an allegation of share price manipulation, the AO must conduct a detailed investigation to establish whether the assessee was merely an investor availing market opportunities or an active participant in a scheme of manipulation designed to launder unaccounted income. The investigation must go beyond analyzing share price patterns and financial statements of the concerned company and should establish a direct link between the assessee’s transactions and an alleged larger scheme of price rigging. If the revenue seeks to treat a transaction bogus, it must be supported by concrete evidence that the purchase or sale of share was a sham. This would require ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 15 proving that the transaction lacked actual transfer of ownership, that the contract notes, Demat entries were mere paper transactions, or that the corresponding money flow was circular in nature, involving accommodation entries. Additionally, if the sale or purchase is alleged to be non-genuine, the revenue must demonstrate that the entire money trail, from the purchase to the final realization of sale proceeds, was a façade used to introduce unaccounted income. It is settled principle of law that the primary onus lies on the assessee to substantiate the genuineness of the transaction by furnishing documentary evidence. If the fundamental aspects are satisfied, the burden then shifts to the revenue to bring on record specific material evidence proving that the transactions were merely a colourable device aimed at tax evasion. The mere fact that a share has been subject to price manipulation does not automatically lead to addition under section 68 of the act unless it is conclusively demonstrated that the assessee was part of the scheme, and the transactions were structured to generate artificial gains or losses. In the present case such detailed investigation by AO is absent. 8.15. Considering the discussion hereinabove, the assessee’s grounds challenging the addition of Rs.1,07,92,400/- under Section 68 on account of bogus LTCG and penny stock transactions (Grounds 1.1, 3.1, 3.2, and 3.3) are allowed. Accordingly, the addition of Rs.1,07,92,400/- under Section 68 of the Act is deleted. 9. The assessee also raised a ground regarding violation of natural justice due to non-supply of investigation reports and denial of cross-examination (Ground 1.2). However, the assessee has not pressed this ground during the hearing, and therefore, it does not require adjudication and is dismissed. ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 16 Similarly, the assessee had also challenged the validity of the reopening under Section 147 (Ground 2.1), but since this ground was not pressed during the hearing, it is dismissed as not pressed. 10. With regard to the ground that the AO erred in treating the entire sale consideration as undisclosed income without allowing the purchase cost (Ground 4.1), we find merit in the assessee’s contention. Even if the transaction was to be doubted, the entire sale consideration cannot be taxed as undisclosed income. Taxing the full sale value without allowing for the cost of acquisition is contrary to established judicial principles. Since the AO’s approach in making the addition is against settled legal principles, the addition of the entire sale consideration is deleted. 11. In conclusion, the grounds 1.1, 3.1, 3.2, 3.3, and 4.1 are allowed, and the addition under Section 68 is deleted. Grounds 1.2 and 2.1 are dismissed as not pressed. 12. Accordingly, the appeal of the assessee is allowed in full. pronounced in the Open Court on 25th February, 2025 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 25/02/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS ITA No.918/Ahd/2024 Manish Devendrakumar Shah vs. ITO Asst. Year : 2014-15 17 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय Ůितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad "