MANISHA KAMAL KHETAN ,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(4), MUMBAI, MUMBAI

ITA 2698/MUM/2025

AI Insights

The case revolves around the appeal by Manisha Kamal Khetan against the order of the CIT(A) which confirmed the AO's additions to her income for the Assessment Year 2013-14. The additions were made on account of alleged unexplained cash credits and commission payments related to the sale of shares of M/s ACI Infocom Ltd, which were treated as accommodation entries. The ITAT examined the documentary evidence, including bank statements and transaction records, and compared the case with a similar case involving the assessee's husband, Kamal Khetan, where the Tribunal had ruled in favor of the assessee. The Tribunal concluded that the revenue authorities failed to establish that the transactions were not genuine or that the gains were not long-term capital gains.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775604 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 19-04-2025
• Other Referred Cases: Shri Kamal Khetan Vs. DCIT, Central Circle 3(4), Mumbai
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAN KASURI
• Assessee Lawyers: RAKESH JOSHI
• Keywords: Unexplained cash credit; Capital Gains; Accommodation entries; Earning of tax free income; Penny stocks; Bogus
• Section: 147; 142(1); 68; 131; 69C

Judgement Text

" DIN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI, JM AND SHRI ARUN KHODPIA, AM ITA No. 2698/Mum/2025 (Assessment Year: 2013-14) Manisha Kamal Khetan 4th Floor, 35, Shantideep Building, Andheri Kurla Road, J. B. Nagar, S. O. Mumbai – 400 059. Vs. Deputy Commissioner of Income Tax, Central Circle, 3(4), Mumbai PAN/GIR No. ABTPK3232G (Appellant) : (Respondent) Assessee by : Shri Rakesh Joshi Respondent by : Shri Annavaran Kasuri, SR AR Date of Hearing : 26.08.2025 Date of Pronouncement : 11.09.2025 O R D E R Per Arun Khodpia, AM: The captioned appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals), CIT(A) 51, Mumbai, (in short ‘ld. CIT(A)’), passed u/s.250 of the Income Tax Act, 1961 (in short ‘the Act'), dated 25.02.2025, for the Assessment Year (in short ‘A.Y.’) 2013-14, which in turn arises from the assessment order u/s. 147 passed by Deputy Commissioner of Income Tax, Central Circle 3(4), Mumbai, dated 10.03.2022. 2. The grounds of appeal raised by the assessee are extracted as under: “1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in reopening the case u/s. 147 of the Income Tax Act, 1961, without considering the facts and circumstances of the case. Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 2 2 On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing officer in disallowing the Long-Term Capital Gain claimed as exempt u/s.10(38) of the Income Tax Act, 1961, without considering the fact & circumstances of the case. 3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing officer in making an addition of 3 Rs.1,72,05,856/- u/s 68 of the Income Tax Act, 1961 by treating the entire sale consideration of M/s. ACI Infocom Ltd as alleged unexplained cash credit, without considering the facts and circumstances of the case. 4. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing officer in making an addition of Rs.5,16,176/- u/s.69C of the Income Tax Act, 1961 on account of alleged commission paid (i.e. @3% on Rs.1,72,05,856/-)to the entry provider of script of M/s ACI Infocom Ltd, without considering the facts and circumstances of the case.” 3. At the outset, learned Authorized Representative (in short ‘ld. AR’) representing the assessee opted to not press ground no. 1 of the present appeal, accordingly, the same has been treated to be dismissed as withdrawn. 4. The next contention by the ld. AR was that the ld. CIT(A) has erred in confirming the action of the ld. AO in disallowing the long-term capital gain claimed u/s. 10(38) of the Act. It is submitted that the sale consideration of equity shares of M/s. ACI Infocom Limited has been treated as unexplained cash credit without considering in a justified manner, the facts and circumstances of the case, thus the addition u/s. 68 for Rs. 1,72,05,856/- on account of unexplained cash credit was without any basis. Another grievance pertains to the consequential addition on account of commission u/s. 69C for Rs. 5,16,176/-. It was the request that such additions are liable to be vacated. Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 3 5. Concisely stated, the assessee had filed her return of income for A.Y. 2013-14 on 03.08.2013, declaring total income at Rs. 11,07,360/-. Subsequently, the case was reopened u/s. 147, accordingly statutory notices u/s. 143(2) and 142(1) were issued seeking certain details from the assessee. During the reopening assessment proceedings, the ld. AO doubted the transaction of sale of share and capital gain arising therefrom, treating it as a bogus transaction, managed through the alleged company i.e., M/s. ACI Infocom Limited, on which certain SEBI actions were also initiated. There was some information about the exit providers, certain enquiries u/s. 131 of the Act conducted which were referred in the assessment order and statement of directors of M/s. ACI Infocom Limited’s Shri. Rajesh Babulal Shah and Shri Alok Gupta. After deliberations qua the modus operandi of the transactions giving details of astronomical rise in the price of shares of M/s. ACI Infocom Limited, the ld. AO concluded that the alleged transaction of purchase and sales of shares are not being undertaken for commercial purposes, but only to create artificial gain/loss with a view to evade taxes. Ld. AO also observed that the assessee failed to prove genuineness of unusual rise and fall of share price to be natural and is based on the market factors. He observed that it is evident that such share transactions were closed circuit transaction and clearly structured one. It is also observed that the assessee could not establish having any knowledge about the share traded and having any knowledge about the fundamentals of penny stock companies, therefore, was unable to substantiate her ignorance about shares and penny stocks companies. In terms of aforesaid observations, the ld. AO added the entire transaction value of Rs. 1,72,05,856/- along with 3% commission of Rs. 5,16,176/- on Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 4 the said transaction to the income of the assessee u/s. 68 and u/s. 69C of the Act, respectively. 6. Aggrieved with the aforesaid additions, the assessee preferred an appeal before the ld. CIT(A). However, with no success, the appeal of the assessee has been dismissed by the ld. CIT(A) under the following observation: “6.4 Decision 6.4.1 The findings of the AO, the submission of the appellant and the overall factual matrix of the case has been considered. The appellant has quoted several decisions of different appellate forums. In this connection it is my considered view that the various case laws relied upon by the appellant are specific to the particular case and the ratio decidendi in these cases do not lay down any binding judicial principle that may be applied in a blanket manner. These cases may lay down a guiding principle to follow but the ultimate test of Section 68 shall lie within the facts of the transaction doubted by the AO. It may also be mentioned here that the additions made u/s 68 of the Act are fact specific. It depends upon the details and evidences produced by the appellant to discharge the initial onus and the inquiry and investigation of the AO in the course of assessment proceedings. Thus, carte blanche application of the any judgment to the case would not be justified. While the appellant has quoted decisions that are in favor of the assessee there are several other decisions in which the appellate authorities have dismissed the appeal of the assessee. 6.4.2 The appellant has further emphasised that he has furnished all the relevant documents related to purchase and sale of the shares, none of which has been doubted by the AO. In this connection it would be important to bear in mind that it is not the case that the AO has doubted the transaction but rather the genuinety of the transaction has been doubted. The documents furnished by the appellant in the form of contract notes, bank statement, bhav book etc are therefore not required to be rejected by the AO since in any type of accommodation entry, these documents are always there, though the evidentiary value of the same is questionable. 6.4.3 At this point of time reference may also be made to the observation of the SIT on Black Money constituted by the Apex Court which took note of the money laundering being done through bogus LTCG and made the following recommendations: A company with very poor financial fundaments in terms of past income or terms of past income or turnover is able to raise huge capital allotment of Preferential allotment of shares is made to various entities. There is a shop rise in price of scrip once the preferential allotment is done. This is normally achieved through circulating shares of shares among a select group of Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 5 companies. These groups of companies often have common promoters/directors. The scrips with thus artificially inflated price rise are offloaded through companies whose funding is provided by the same set of people who want to convert black money into white. There is an urgent need for having an effective preventive and punitive action is such matters to prevent recurrence of such instances. This finding of the SIT is an important aspect to be kept in mind while analysing the circumstantial evidences in penny stock cases. 6.4.4 Coming to the facts of the instant case. (i) the appellant has acquired the shares through the preferential allotment route but has not been able to furnish and explain as to how the appellant came to know about this preferential allotment nor did the appellant furnish any invitation letter or offer from the said company. (ii) The share in question, M/s ACI Infocom Ltd was not traded at all prior to the issue of preferential shares with the general public not being interested in it and thus there is no question of any market sentiment, future projections etc influencing the appellant to opt for the preferential allotment. (iii) The share was trading at Rs.2.63/-in August 2011 and it went upto Rs.22/- in February 2013. Thus, there was a whopping profit to the tune of 836% in this period when the general market sentiments were bearish and there was no such reflection in the Sensex. (iv) SEBI took note of the irregular trading pattern and conducted its own enquiry into the alleged rigging of shares of M/s ACI Infocom Ltd and has also imposed penalty for non- compliance with regulatory requirements by M/s ACI Infocom Ltd. While the order does not explicitly label M/s ACI Infocom Ltd. as a penny stock, the non-responsiveness of the company to SEBI notices raises concerns about its credibility. (v) The Directorate of Investigation's report has identified M/s ACI Infocom Ltd. as being used for accommodation entries and tax evasion through artificial price manipulation. The AO has relied on credible data, including analysis of stock market trends, statements of directors, and trading patterns, to conclude that the transactions were pre-arranged. 6.4.5 In view of the detailed investigation and enquiry done by the Investigation Wing which has clearly established the modus operandi of bogus LTCG, I am of the considered view that the peculiar facts stated in para 6.4.4 above and in particular, the fact that the acquisition of shares was through the preferential allotment route and without any business/investment logic and prudence, make it apparent that the transaction being disguised as LTCG is nothing but a colorable device. Although the appellant has submitted certain documents, merely providing demat and bank statements does not establish the genuineness of the transaction. The AO has noted the unusual rise and fall in share prices, which suggests price rigging. The appellant has not provided any satisfactory explanation regarding this volatility. The absence of direct evidence linking the appellant to entry Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 6 operators does not negate the possibility of involvement in the broader scheme of tax evasion. The burden of proving the legitimacy of transactions lies with the appellant. Given the findings of the investigation wing and the SEBI order, the AO's conclusion that the LTCG claim is not genuine is justified. Courts have held that tax authorities can disregard transactions if they are found to be dubious, even if they are executed through formal banking channels. The appellant has failed to provide sufficient and conclusive evidence to rebut the findings of the AO. In view of the above findings, it is determined that the AO has correctly made additions under Section 68 of the Income Tax Act by treating the alleged sale proceeds of M/s ACI Infocom Ltd. as unexplained cash credits. Therefore, the addition of 1,72,05,856/- is hereby confirmed, and these grounds of appeal stands dismissed. 7. Ground No 4 pertains to the addition of commission payment of Rs.5,16,176/-on account of arranging the long-term capital gain accommodation entry. This ground of appeal is consequential in nature and since the LTCG itself is bogus, there is no infirmity in the action of the AO in attributing commission payment to arrange it. The rate of 3% applied by the AO is also reasonable and in line with the market realities. In view of the same, the addition of Rs.5,16,176/- done to the income of the appellant U/s 69C on account of payment of commission for arranging the accommodation entry is confirmed and the ground of appeal is dismissed.” 7. Dissatisfied with the aforesaid observations of the ld. CIT(A), assessee preferred the appeal before the ITAT, which is under consideration before us. 8. At the outset, the ld. AR reiterated the facts from the orders of authorities below and has submitted that the assessee indulged into the present transaction under the normal course of her investment along with certain other investments, the transaction should not be treated as tented transaction. It was the submission that the long-term capital gain arises from the alleged transaction has been duly shown as exempt income u/s. 10(38) of the Act, fully supported with the documentary evidence for purchase and sale of shares before the revenue authorities. However, the revenue authorities have relied on the investigation report and have described the modus operandi adopted in such transactions, without any independent enquiries to the subjected transaction. The ld. Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 7 AR further took us to the order of Adjudicating Authority of SEBI in the case of assessee having certain violations for which the assessee had been penalized and the amount of penalty were duly paid in order to comply with the mandate under the order of SEBI dated 27.03.2018. The default committed by the assessee were related to non- filing of aAction Taken Report (ATR) under SEBI Compliance Redress System (SCORES) towards the compliance made by the investors, but that does not prove that the assessee was anyhow involved in the issues of price rigging. Regarding the exit providers, it is submitted by the ld. AR that there was no information about existence of exit providers in the case of assessee, which could have been brought on record by the revenue authorities, they have only described the modus operandi in such cases which cannot be taken as a precise fact that could have been applied in the case of assessee. The ld. AR also drew our attention to the reply of the assessee before the ld. AO, wherein the assessee had clearly made her submission that the said shares were dematerialized in her account on 15.02.2011, which were purchased by the assessee by making payment through regular bank account. The assessee has sold the said shares after more than one and half year in the month of September and October, 2012 through registered broker of the recognized stock exchange. It is the submission that the share consideration of sale was also received by cheque in the assessee’s bank account. The long-term capital gain earned from the sale of said shares was Rs. 1,37,97,306/-, which has been claimed as exempt under the provisions of long-term capital gain u/s. 10(38) of the Act. It is also clarified before the ld. AO that M/s. ACI Infocom Limited is still in trade for the stock exchange. The assessee also furnished documentary evidence to Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 8 substantiate the aforesaid contentions placed before the ld. AO. It is the submission by ld. AR that the apprehensions of the ld. AO that the alleged transactions of share were not governed by market factors, that the assessee resorted to preconceived scheme to procure loss by way of price difference in shares transactions were not supported by market factors. The ld. AO referred to cumulative events of such transaction of shares to reveal that the same are devoid of any commercial nature and fell in realm of not being bonafide and hence impugned trading loss is not allowable. The ld. AO also referred to the order of SEBI referred above and has arrived at similar finding that the price of shares was determined artificial by manipulations and cannot be a product of market factors and commercial principles. To the aforesaid findings of ld. AO, it was the submission by the Counsel of assessee that nothing could be proved by the ld. AO which is further relied upon by the ld. CIT(A) in his order. Therefore, the action of revenue authorities in making the addition and confirming the same is not in accordance with facts on records and the mandate of the law. The entire addition u/s. 68 as well as u/s. 69C, therefore, are liable to be deleted. Ld. AR further drew our attention the recent decision of ITAT, Mumbai “E” bench in the case of assessee’s husband Shri Kamal Khetan Vs. DCIT, Central Circle 3(4), Mumbai in ITA No. 2702/MUM/2025 for the AY 2013-14 dated 14.08.2025, wherein on similar facts and circumstances, having involvement of identical section in the shares of M/s ACI Infocom Limited being taken up for addition under section 68 of the Act and commission there on u/s 69C of the Act has been vacated by the Tribunal after deliberations on the issue, therefore the present matter is squarely covered by the order of Tribunal in the aforesaid case. Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 9 9. Per contra, ld. Senior DR representing the revenue submitted that the statements of directors of M/s. ACI Infocom Limited is clearly showing that these directors are dummy directors, they do not have any knowledge about the business of the company, even they are unable to explain about the astronomical rise in the price of share, which was dropped down substantially after the sale of shares by the assessee. It is further submitted by the ld. Senior DR that as per ld. AO’s observation at page 18 of the assessment order, M/s. ACI Infocom Limited’s gross total income in F.Y. 2011-12, 2012-13, 2013-14 and 2014-15 was zero as stated by Mr. Omprakash Mohanlal Bohra, director of M/s. ACI Infocom Limited vide his statement recorded u/s. 131 on 11.03.2019. Such facts shows that the company is not even involved in activities of business during the relevant period. Ld. Senior DR further placed his reliance on the lower authorities and have submitted that the transaction is a preconceived and planned transaction, there was sudden growth in the price of shares of the company and the assessee has sold her entire shares holding in the company, thereafter, the price got dropped down. Under such circumstances, if the assessee placed the reliance that the ld. AO has not made any independent enquiries then either the addition should have confirmed or the matter should be restored back to the file of ld. AO for fresh examination. 10. We have considered the rival submissions, perused the material on record and case laws relied upon by the parties. After going through the facts and circumstances of the present case we find that the issue involved herein is identical to the issue decided by Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 10 ITAT Mumbai ‘E’ Bench in the case of Shri Kamal Khetan (supra), wherein the decision of ITAT, while allowing the appeal of having equal applicability in the present case is reproduced here under for the sake of reference: 10. We have carefully considered the rival submissions and perused the relevant finding given in the impugned orders and material available on record and also the case laws cited have also been taken into account. As pointed out on behalf of the assessee, the transaction of existence of purchase and sale of M/s ACI Infocom Ltd. giving rise to LTCG claimed to be exempt under section 10(38) of the Act was fully corroborated by the documentary evidences, which is not in dispute. The shares have been credited in the demat account and transferred out of demat account at the time of sale. Both purchase and sale transactions are carried out through banking channel and by transfer of shares. The prima facie bonafides of existence of transaction executed cannot thus be doubted. It is not the case of the revenue that the capital gain arising to Assessee in not in the nature of LTCG as the shares were held by the assessee more than one & half years. The case of revenue is that such transactions is an accommodation entry and thus it is a sham, which is based on report of Investigation wing in many scrips. The abnormal increase in prices of share has led to suspicion on bonafides of transaction and was treated as accommodation entry of sham nature. Ld. AO has relied upon the modus operandi as described by the Investigation wing without carrying out any independent investigation. To discard the documentary evidences filed by the assessee and to corroborate the findings or report of the investigation, there has to be either concrete information impinging assessee; or there is information about exit providers who have specifically confirmed the purchase of shares to facilitate the accommodation entry; or SEBI has found some discrepancy in manipulation of price in stock exchange or found something irregular leading to inference that this scrip was used for the benefit of person indulging in buying and selling of the shares and banning the trade of the scrip; or the company itself has been investigated and found to be indulged in such activity; or some direct evidence or material is found implicating assessee. Then preponderance of probability goes against the assessee that documents filed by the assessee cannot be conclusive. Presumption can be based against the assessee if all such factors are brought on record and not on some general report of Investigation Wing. Such report can be triggering point but not conclusive unless some inquiry has been done by the AO or something specific has been brought on record. That is the reason in all the judgments of Hon’ble High Court have held in favour of the assessee under these circumstances. 11. The Hon'ble Bombay High Court in case of Indravadan Jain HUF and Hon’ble Delhi High Court in the case of KarunaGarg as well as Krishna Devi has held that an astronomical increase in the share price of a company in itself is not a justifiable ground for holding the LTCG to be an accommodation entry. Here in this case it is not even astronomical increase of price. There has to be other materials to dislodge the claim of the assessee, when existence of purchase of shares and sale is through stock exchange on line is not disputed, then other factors have to brought on record to treat that it was an accommodation entry. 12. The whole basis of making the addition is standard modus operandi without there being any linkage with the assessee or any inquiry of the scrip or any adverse finding by agency like SEBI, which regulates the trading in stock exchange. It is trite law that additions merely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law as held by Hon’ble Supreme Court in Omar Salay Mohamed Sait V /s CIT (1959 37 ITR 151). The suspicion however strong could not partake the character of legal evidence as held by Hon’ble Supreme Court in Umacharan Shaw & Bros. V/s CIT (1959 37 ITR 271). Therefore, we find that onus as cast upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and various entities as stated by AO being exit providers. 13. In this backdrop and facts and circumstances of the facts on record and lack of inquiry by the AO, we are of the view that the addition is not justified based on conjecture and surmise and the assessee is discharged primary onus which lay upon it. The Revenue, on the other hand, could not dislodge the perception that apparent is not real. On the contrary the type of error in the assessment order as pointed Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 11 out by the counsel of the assessee indicates that there is no application of mind at the end of the assessing officer and he is not even verifying before concluding whether the assessee has booked losses or offered LTCG in the shares of ACI Infocom. AO referred SEBI order on the issue which was not even subject matter of the said order. Huge addition made on the basis of borrowed finding can not be sustained. 14. In the light of factual matrix and case laws referred to before us, we see substance in the plea of the assessee that such capital gains arising on sale of shares cannot be regarded as sham profit and consequently, additions under made u/s 68 of the Act is not justified. The ld.AO has not provided anything on record to justify additions under section 69C of the Act either. As held above, modus operandi spelt by itself is not an adequate ground to impeach the transactions. 15. Therefore, considering the entirety of facts and circumstances, we are not inclined to accept the stand of Ld. CIT (A) in sustaining the impugned additions in the hands of the assessee. Resultantly, the addition on account of alleged Long Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed. 11. Since issue pertaining Capital Gain, its eligibility for exception u/s 10(38), sustainability of addition under section 68 on account of unexplained cash credit and u/s 69C for commission on the alleged transaction of purchase and sale of shares of M/s ACI Infocom Ltd. has been decided by the Tribunal in favour of assessee’s spouse in the case of Kamal Khetan (supra), dehors any new fact, argument, evidence or decision brought on record by the revenue, contradicting the aforesaid decision of Tribunal, we find force in the alike contention raised by the ld. AR in the instant matter, therefore, we without hesitation concur with the same, accordingly, the additions made by the AO and confirmed by the Ld.CIT(A) u/s 68 and 69C (supra) are directed to be deleted. Consequently, the assessee succeeds in her grounds of appeal no. 2, 3 & 4. Printed from counselvise.com ITA No. 2698/Mum/2025 (A.Y. 2013-14) Manisha Kamal Khetan 12 12. In the result, the captioned appeal filed by the assessee is allowed, in terms of our aforesaid observations. Order pronounced in the open court on 11.09.2025 Sd/- Sd/- (BEENA PILLAI) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 11.09.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "