MINISH RAMESHBHAI VYAS,MUMBAI V. ASST. CIT 32 (2), MUMBAI

ITA 4262/MUM/2024

AI Insights

The case revolves around the appeal by Manish Rameshchandra Vyas against the order of the National Faceless Appeal Centre (NFAC), which upheld the additions made by the Assessing Officer regarding unexplained credits and expenditures related to transactions in shares of VAS Infrastructure Ltd. The Assessing Officer had initiated reassessment proceedings based on information from the Deputy Director of Income Tax (Investigation) suggesting that the Assessee was involved in trading penny stocks. The Tribunal found that the Assessee had provided sufficient evidence, including broker statements and transaction records, to substantiate regular trading activities and that the additions made were not justified.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126298 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Reassessment proceedings; Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Capital Gains; Assessment record; Benefit of exemption; Bogus
• Section: 147; 148; 143(3); 250; 11; 68; 69; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 4262/MUM/2024 (Assessment Year: 2012-2013) Manish Rameshchandra Vyas C/o. B M Parekh and Co. 203, Navjivan Commercial Premises, Lamingtion Road,Mumbai-400008. Maharashtra [PAN:AACPV0638F] .…………. Appellant The Assistant Commissioner of Income Tax 32(2) Kautilya Bhavan Bandra Kurla Complex, Bandra East, Mumbai- 400051. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Ms. Mona Solanki Shri Rajesh Meshram Date Conclusion of hearing Pronouncement of order : : 04.02.2025 23.04.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 19/07/2024, passed by the National Faceless Appeal Centre (NFAC), New Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘ the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 27/12/2018, passed under Section 143(3) read with Section 147 of the Act for the Assessment Year 2012-2013. 2. The Assessee has raised following grounds of appeal : ITA No.4262/Mum/2024 Assessment Year 2012-2013 2 “1. On the Facts and in the circumstances of the case and in law, the Id CIT (A) has erred in confirming the addition of Rs 1,95,75,356 made by the Ld. AO by taking the entire sale consideration of the shares in the Script of M/s. VAS Infrastructure during the year as Unexplained Credit 2. On the Facts and in the circumstances of the case and in law, the Id CIT (A) has erred in confirming the addition of Rs 1,95,753 i.e. 1% of Rs 1,95,75,356 of addition made as per above ground as unexplained expenditure 3. On the Facts and in the circumstances of the case and in law, Your Honor's are requested to restrict the addition to the extent of Profit or loss as declared by the Appellant instead of the Full sales amount. 4. All the Grounds of Appeal are without prejudice to each other.” 3. The relevant facts are in brief are that the Assessee filed return of income for the Assessment Year 2012-2013 on 29/02/2012 declaring ‘Nil’ income. Subsequently, reassessment proceedings were initiated in the case of the Assessee under Section 147 of the Act by issuance of notice, dated 30/03/2018, under Section 148 of the Act. On the basis of information received from Deputy Director of Income Tax (Investigation) Unit -6(2), Mumbai in relation to transactions undertaken by the Assessee in respect of alleged trading in penny stock scrip - VAS Infrastructure Ltd. [for short ‘VIL’]. The Assessing Officer completed assessment under Section 143(3) read with Section 147 of the Act vide Assessment Order, dated 27/12/2018, assessing the total income of the Assessee at INR.1,97,71,109/- after making addition of (a) INR.1,95,75,356/- under Section 68 of the Act holding the same to be unexplained cash credit and (b) INR.1,95,753/- under Section 69 of the Act holding the same to be unexplained expenditure incurred for obtaining bogus accommodation entry. 4. Being aggrieved, the Assessee preferred the appeal before the ITA No.4262/Mum/2024 Assessment Year 2012-2013 3 CIT(A) challenging the above addition made by the Assessing Officer. The appeal preferred by the Assessee was dismissed by CIT(A) vide order, dated 19/07/2024. 5. Now being aggrieved, the Assessee has preferred the appeal before the Tribunal on the grounds reproduced in paragraph 2 above. 6. We have heard both the sides and have perused the material on record. 7. From the material on record it emerges that Assessee is an individual engaged in the business of trading in shares and securities. The Assessee has placed on record copy of Computation of Income, Profit and Loss Account and Balance Sheet for the relevant previous years along with the Tax Audited Report which shows that Assessee was regularly trading in shares. During the assessment proceedings, the Assessee had filed stock-registers, the ledger account of the brokers [Religare Securities Limited and Emkay Global Finance Services Limited] supporting the contention that the Assessee was trading in stock on regular basis. The case of the Assessee is that the Assessee had purchased shares online through brokers and the payments made to brokers are reflected in the bank account. Similarly, the Assessee has transferred the shares through online platform of stock exchange through broker. We note that the Assessee also placed on record contract notes, ledger accounts of brokers and bank statements to establish that both the purchase and sale of shares of VIL was made through stock exchanges. 8. The Assessee had furnished following details of purchase/sale of shares of VIL before the Assessing Officer. Details of Purchases Date Qty Rate Amount 11/04/20211 35,000 110.62 38,67,611 ITA No.4262/Mum/2024 Assessment Year 2012-2013 4 13/04/2011 30,000 98.03 29,41,010 06/05/2011 84,100 98.29 82,65,960 09/05/2011 10,000 100.12 10,01,200 15/06/2011 25,000 101.68 25,41,993 16/06/2011 40,000 111.83 44,73,396 20/06/2011 10,000 111.83 11,18,349 14/07/2011 44,000 113.29 49,84,760 21/07/2011 40,000 114.13 45,65,200 10/08/2011 100 78.92 7,892 07/09/2011 5,000 77.76 3,88,818 09/09/2011 2,000 79.77 1,59,542 12/09/2011 40,000 90.61 36,24,570 20/03/2012 26,500 37.88 10,03,771 Total 3,91,700 3,89,48,071 Details of Sales Date Qty Rate Amount 05/05/2011 25,000 107.02 26,75,400 09/05/2011 10,000 101.84 10,18,350 09/05/2011 10,000 101.84 10,18,350 13/06/2011 1,14,100 91.87 1,04,82,367 20/06/2011 40,000 108.23 43,29,226 10/08/2011 100 78.92 7,892 Total 1,99,200 1,95,31,306 It is admitted position that during the relevant previous year the Assessee had sold 1,99,200 shares of VIL. As per the above details furnished by the Assessee, the Assessee had booked overall loss of INR.10,29,763/- computed as under: Sale Purchase Short Term Profit/Loss Qty Price Qty Price 149100 1,41,76,117 1,49,100 1,50,78,581 (9,02,464) 50100 54,82,488 50,100 54,82,488 (1,27,299) Total (10,29,763) 9. From the above, it is clear that Assessee had not claimed any exemption under Section 10(38) of the Act as was alleged while recording reasons for reopening the assessment. Further, as per the Trading, Profit & Loss Account for the year ended 31/03/2012 ITA No.4262/Mum/2024 Assessment Year 2012-2013 5 (relevant to Assessment Year 2012-2013), the Assessee has booked Gross Loss of INR.1,12,13,598/- and Net Loss of INR.1,36,83,271/-. 10. The Assessee has also placed on record copy of order dated 30/09/2019 passed by the whole time Member, Securities & Exchange Board of India (SEBI) in the case of VIL whereby action was taken against VIL for failure to comply with the provisions contained in Section 11 and 11B of the Securities and Exchange Board of India Act, 1992 and regulation 44 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘SAST Regulations, 1997). There is nothing on record to show that any action was taken by SEBI against VIL and/or any person acting in concerned in relation manipulation of quoted price of shares of VIL listed on stock exchanges. 11. It is the case of the Assessee that the report of the Investigation Wing did not name VIL as penny stock company. We find that in Paragraph 9.1 of the Assessment Order, the Assessing Officer has recorded that all transactions of purchase/sale of shares of VIL were undertaken by the Assessee through the stock exchange. However, the Assessing Officer returned the finding that aforesaid purchase/sale transaction were in the nature of pre arrange transaction undertaken to evade tax on sale of shares and to root back unaccounted income (without any tax liability in the books of accounts of the Assessee). On perusal of the Assessment Order we find that no specific enquiry was carried out by the Assessing Officer and there is no material record to support the abovesaid findings recorded by the Assessing Officer except for the general observations/facts recorded in the report of the Investigation Wing referred to by the Assessing Officer in Paragraph 5 to 9 of the Assessment Order. On the other hand the material placed on record by the Assessee before the authorities below clearly shows that the Assessee is a regular trader who has undertaken the purchase/sales ITA No.4262/Mum/2024 Assessment Year 2012-2013 6 transaction in the ordinary course of its business of trading in shares. The Assessee has suffered loss during the relevant previous year and the sale of shares of VIL Limited has added to the aforesaid loss. Therefore, no tax benefit in terms of exemption under Section 10(38) of the Act or setting off of other taxable income with the losses suffered on account of sale of shares of VIL has been claimed by the Assessee in the returned of income for the Assessment Year 2012-2013. In our view the Assessing Officer has proceeded on incorrect premise that the Assessee has claimed benefit of exemption contained in Section 10(38) of the Act and/or as benefitted by claiming set off of loss suffered on sale of shares of VIL with other taxable income. We note that in Paragraph 4.1 of the Assessment Order the Assessing Officer has noted that on account of purchase/sale of shares of VIL during the relevant previous year the Assessee has claimed business loss of INR.5,58,087/-. Further, in Paragraph 6.1 of the Assessment Order, the Assessing Officer has recorded that it is seen from the assessment records that the Assessee was, at the relevant time, a trader in shares and securities of listed companies with primary source of income from share of profit from trading. In Paragraph 6.9 the Assessing Officer has noted that from the Dmat statement of the Assessee for the relevant period it can be seen that the Assessee had purchase of “A Group” listed companies except for VIL. The other companies chosen by the Assessee had strong financials whereas financials of VIL showed no signs of improvements. In Paragraph 7, the Assessing Officer concluded that the Assessee had undertaken pre-determined actions for acquiring Long Term Capital Gains by way of dubious methods. 12. The Assessment Order is silent about the role of the brokers of the Assessee and there is no allegation that they were involved in any dubious activity. The details of money trail mentioned in Paragraph 11 of the Assessment Order pertains to Blue Circle Services and has ITA No.4262/Mum/2024 Assessment Year 2012-2013 7 no connection with the Assessee Company. 13. Given the aforesaid facts and circumstances of the present case and keeping in view the material on record, we hold that the preponderance of possibility lies in favour of the Assessee and against the Revenue. 14. Therefore, addition of INR.1,95,75,356/- made by the Assessing Officer under Section 68 of the Act cannot be sustained. Since, we have deleted the addition as abovesaid the addition of INR.1,95,753/- made under Section 69C of the Act also does not survive and is therefore, deleted. As a result, the order passed by the CIT(A) and the Assessing Officer are overturned and aggregate addition of INR,1,97,71,109/- made in the hands of the Assessee is deleted. 15. In result, the appeal preferred by the Assessee is allowed. Order pronounced on 23.04.2025. Sd/- Sd/- (Girish Agrawal) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 23.04.2025 Milan,LDC ITA No.4262/Mum/2024 Assessment Year 2012-2013 8 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai "