MRS. SANJANA ANIL AGARWAL ,MUMBAI V. INCOME TAX OFFICER 18(3)(2), MUMBAI

ITA 4194/MUM/2025

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The case involves Mrs. Sanjana Anil Agarwal, who appealed against the order of the Commissioner of Income-tax (Appeals) at the National Faceless Appeal Centre, which upheld the additions made by the Income-tax Officer under section 68 and section 69C of the Income Tax Act. The additions were related to long-term capital gains and alleged commission for obtaining accommodation entry on the sale of shares of KDJ Holidays Scapes and Resorts Limited. The Tribunal examined the evidence presented by the assessee, including contract notes, bank statements, and Demat account statements, and found them sufficient to prove the genuineness of the transactions. The Tribunal also noted that the additions were primarily based on third-party information and assumptions by the assessing officer, without any direct evidence linking the assessee to any wrongdoing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784614 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 23-06-2025
• Other Referred Cases: Karishma Ajay Agarwal vs ITO, Sangeeta Sanjay Kumar Agarwal vs ITO, Himani M. Vakil vs Income Tax, Parasben Kasturchand Kocher vs Income Tax, PCIT Vs. Indravadan Jain, HUF
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARY
• Assessee Lawyers: NEEL KHANDELWAL; REFERRING VARIOUS EVIDENCES
• Keywords: Capital asset; Unexplained cash credit; Capital Gains; Third party statement; Share purchase agreement; Opportunity of cross examination; Bogus
• Section: 68; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER& SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No. 4194/MUM/2025 (AY: 2014-2015) (Physical hearing) Mrs. Sanjana Anil Agarwal 27/31, Botawala Building, 3rd Floor, Old Hanuman Lane, Kalbadevi Road, Maharashtra - 400002. [PAN: ABGPA3779D] Vs ITO, 18(3)(2), Mumbai Earnest House, Nariman Point, Maharashtra – 400021. Appellant / Assessee Respondent / Revenue Assessee by Shri Neel Khandelwal, Advocate Revenue by Shri Swapnil Choudhary, Sr. DR Date of Institution 23.06.2025 Date of hearing 01.10.2025 Date of pronouncement 14.11.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of ld. CIT(A)/NFAC dated 21.05.2025 for A.Y. 2014-15. The assessee has raised following grounds of appeal: “1. The Commissioner of Income-tax(Appeals) at the National Faceless Appeal Centre (hereinafter referred to as the CIT(A) erred in upholding the action of the Income-tax Officer, Ward – 18(3)(2), Mumbai (hereinafter referred to as the Assessing Officer) in making an addition of Rs. 4,53,76,116/- under section 68 of the Act, holding capital gain arising from sale of long term capital asset, being shares of KDJ Holidays Scapes and Resorts Limited to be non-genuine and thereby not allowing exemption under section 10(38) of the Act. The appellant contends that on the facts and in the circumstances of the cases and in law, the CIT(A) ought not to have upheld the action of Assessing Officer in considering the capital gains on sales of long term capital assets being, shares of KDJ Holidays Scapes and Resorts Limited to be bogus inasmuch as the said shares have been purchased during an earlier year as investments; the same being sold shall necessarily give rise to capital gains Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 2 and the impugned shares being long term capital asset, the gains Rs. 4,53,76,116 shall be long term capital gains, in respect of which the assessing officer ought to haves allowed exemption of section 10(38) of the Act; accordingly the impugned addition under section 68 of the Act is not justified and needs to be deleted. The appellant further, contends that the CIT(A) ought not to have upheld the action of the Assessing Officer in making the impugned addition inasmuch as the Assessing Officer has not proved any wrong-doings committed by the appellant and has further, not proved that the cash has emanated from the coffers of the appellant. 2. \"The CIT(A) erred in upholding the action of the Assessing Officer in making an addition of Rs. 14,27,283/- under section 69C of the Act, being commission at 3% for obtaining the alleged accommodation entry of Rs. 4,75,76,116/- on sale of long term capital asset, being shares of KDJ Holidays Scapes and Resorts Limited. The appellant contends that on the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the assessing officer in making the impugned addition inasmuch as there is no accommodation entry availed by the appellant and the Assessing Officer has failed to bring any evidence on record to make the impugned addition hence, the addition ought to be deleted.” 2. Brief facts of the case are that assessee is an individual filed her return of income for A.Y. 2014-15 declaring total income of Rs. 8,38,860/-. In the computation of income, the assessee has shown long term capital gain of Rs. 4.53 crore and claimed exemption under section 10(38) of Income Tax Act. The case was selected for scrutiny. During the assessment, the assessing officer noted that that the main reason for selection of scrutiny of case was suspicious on capital gain transaction on sale of share scrips of KDJ Holiday Scapes and Resorts Ltd. The assessing officer further noted that he has information about penny stock company operator and exit providers who are involved in proving bogus entities. Sometimes, shares Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 3 are purchased for the beneficiaries of losses and sometime for the purpose of benefit of long term capital gain. Such transactions are carried out through stock exchange. The investigation was carried out about the role of brokers and some of the persons during investigation admitted about the overall affairs of KDJ Holiday Scapes and Resorts Ltd (KDL Holidays). The name of certain person who are involved in share broking and exit providers are mentioned by assessing officer in para 4 of assessment order. The assessing officer also recorded modus operandi of such entry provider and issued show cause notice dated 31.12.2016 as to why the amount of long term capital gain claimed by assessee be not treated as unexplained cash credit and taxed under section 68 of Income Tax Act. The assessing officer has not recorded if any reply was filed or not by the assessee in response to his show cause notice. The assessing officer concluded that generation of long term capital gain through the process of entry provider through different entities is nothing but unexplained cash credit. The assessing officer treated the long term capital gain of Rs. 4.53 Crore as unexplained and added under section 68 of the Act. The assessing officer further added 3.00 % of capital gain as unexplained commission for earning long term capital gain thereby added Rs. 14,27,283/-. 3. Aggrieved by additions in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detail statement of fact. In the statement of fact, the assessee stated that during assessment, the assessee attended the assessment proceeding and furnished Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 4 documentary evidence to justify the genuineness of purchases and sales of shares. The assessee submitted that she purchased share of KDJ Holiday and sold on the floor of recognised stock exchange on which STT was paid. During the holding period, the shares were kept in D-mat account for more than 12 months. Copy of contract note, bills, D-mat statement, bank statement and rate of listed entities and confirmation of broker to justify the genuineness of sales of scrips were furnished. The assessee also furnished letter of allotment of shares on preferential issue, D-mat statement and bank statement to justify the genuineness of purchases. The assessing officer acted on third party information and the statement recorded at the back of assessee which were general in nature. The assessee requested to allow opportunity of cross examination. The assessing officer ignored the written submission. The correctness of documentary evidences was not doubted. The finding of assessing officer is based on doubts, assumption and presumption. The assessee in response to notice issued by ld. CIT(A) also furnished her written submission. The written submissions are recorded in para 4 of impugned order. In the written submission, the assessee submitted that assessing officer made addition of Rs. 4.53 crore under section 68 by disallowing long term capital gain and also added commission @ 3.00 % on such addition. The assessee purchased share of Two-UP Financial Services Limited which were formally Gomti Finlease (India) Ltd. having face value Rs. 10/- per share. The assessee purchased one lacks shares on premium of Rs. 12.00/- Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 5 for Rs. 22,00,000/- on 02.12.2011 on preferential allotment basis. Thereafter, the assessee sold 15500 shares on 24.12.2013. The assessee held total share of 84500. The shares were splitted from Rs. 10.00/- to Rs. 2.00/- per share on 25.12.2013. Thus, the total holding of assessee became 4,22,500 shares. The assessee sold share through SEBI registered broker, B.R. Jalan Securities Pvt. Ltd. During assessment, the assessee furnished allotment of 1,00,000/- equity share at a face value of Rs. 10.00 and a premium of Rs. 12.00 per share. The assessee furnished bank statement, ledger confirmation as well as bank statement of sale proceeds. The assessee sold share in different lots and not in one stroke. The statement of persons which were relied by assessing officer were not provided to the assessee. The connection of assessee is not established with the entry or exit provider. No evidence is brought on record to prove that transaction carried out by assessee is not genuine. The conclusion drawn by assessing officer is based on assumption and presumption. The assessing officer brushed aside all the positive evidence filed by assessee to prove the genuineness of transaction. The assessee submitted that he has discharged his primary onus. The transaction of assessee was genuine. The assessee also relied on certain case law. 4. The ld. CIT(A) on considering the submission of assessee and the contents of assessment order upheld the action of assessing officer by referring various decision and on relying upon the investigation report carried out by Investigation Wing, Kolkata. The ld. CIT(A) held that most of the shares Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 6 sold by assessee were purchased by exit providers which were named by Investigation Wing, Kolkata. The ld. CIT(A) also upheld the addition of brokerage / commission. Further, aggrieved the assessee has filed present appeal before Tribunal. 5. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that assessee is investor in scrip of KDJ Holding. During assessment, the assessee furnished complete evidence to substantiate the genuineness of transaction. The ld. AR of the assessee by referring various evidences furnished during the assessment as well as at the stage of ld. CIT(A) and demonstrated that the transaction of assessee is genuine. Once, the assessee discharged his primary onus in furnishing the complete evidence to prove the genuineness of transaction of shares, it was the duty of assessing officer to bring adverse evidence against the assessee. The assessing officer merely relying upon the third party statement allegedly recorded by Investigation Wing. In the statement, the name of assessee is nowhere mentioned nor the name of share broker of assessee was taken by said person. The assessing officer made addition mere on assumption and presumption basis. The ld. AR of the assessee submits that on identical set of fact in case of Karishma Ajay Agarwal vs ITO in ITA No. 2586/Mum/2022 and Sangeeta Sanjay Kumar Agarwal in ITA No. 4682/Mum/2024 co-ordinate bench of Tribunal while considering the Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 7 similar scrip of KDJ Holding deleted the similar addition. For addition of commission expenses, the ld. AR of the assessee submits that there is no basis or evidence or material before AO for making such addition. The addition is solely based on assumption. The ld. AR of the assessee prayed to delete both the additions. 6. On the other hand, ld. Sr. DR for the revenue supported the order of lower authorities. The ld. CIT-DR for the revenue submits that assessee is a beneficiary of penny scrip shares. The assessee indulged in sale and purchase of scrip of Shreenath which is proved a penny stock company by the investigation carried out by the Investigation Wing of department. The assessing officer has given detail background of penny scrip companies’ modus operandi and method of price rigging. The assessee has shown abnormal benefit on sale of share Shreenath. The ld. CIT(A) allowed relief to the assessee on the basis of written submission furnished by the assessee. The evidence furnished by assessee in the form of contract note Demat account, share purchase agreement to give a colour of non-genuine transaction as a genuine transaction. The benefit shown by assessee in the form of long term capital gain is unusual which is not possible in ordinary circumstances. To support his submission, the ld. Sr DR for the revenue relied upon the decision of Calcutta High Court in case of Swati Bajaj (2022) 446 ITR 56 (Cal)/ 288 Taxman 403 (Kol) 7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that the Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 8 assessing officer treated the capital as unexplained credit only on the basis of information of investigation available with him. The assessing officer has not considered the facts independently. In para 5 of his order the assessing officer recorded that show cause notice was issued to the assessee. And instead of recording the facts that if any reply was filed or not or reply is actable to him or not straightway by refereeing various decisions concluded that generation of long term capital gain through the process of entry provider through different entities is nothing but unexplained cash credit. The assessing officer treated the long term capital gain of Rs. 4.53 Crore as unexplained and added under section 68 of the Act. We find that no independent investigation of facts was carried out by assessing officer. 8. We further find that despite recording the submissions of assessee ld CIT(A) also not considered the facts independently. We find that there is no allegation that assessee is directly or indirectly involved in any irregularities or activities relating to manipulation of alleged share. The shares were sold on public platform this is on Bombay Stock Exchange through registered broker. The shares were kept in Demat account. The bonus share and sales were made through Demat account. There is no allegation of price rigging against the assessee or his share broker. 9. We find that Hon'ble Gujarat High Court in the case of Himani M. Vakil (2014) 41 taxmann.com 425 (Guj) held that where assessee duly proved genuineness of sale transaction by bringing on record contract notes of sale and purchase, bank statement of broker and Demat account showing Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 9 transfer in and out of shares, the assessing officer was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. Gujarat High Court in the case of Parasben Kasturchand Kocher(2021) 130 taxmann.com 176 (Guj), also held that when assessee discharged his onus by establishing that transactions were fair and transparent and all relevant details with regard to transfer furnished to Income Tax Authority and the Tribunal have also took the notice of fact that the shares remained in the account of assessee, the assessee also furnished Demat account and details of bank transaction about the sale and purchase of shares, the addition was deleted. 10. Further, we find of Hon'ble Jurisdictional High Court in the case of PCIT Vs. Indravadan Jain, HUF in Income Tax Appeal No.454 of 2018 dated 12.07.2023 also held that when assessing officer nowhere alleged that transactions made by assessee with a particular broker or share broker was bogus, merely because investigation was done by SEBI against the broker or its activities, the assessee cannot be said to have entered into ingenuine transaction. We find that assessee made sale of shares through BSE and paid security transaction tax and there is no allegation against the share broker through whom assessee has made sales that they were indulging any price manipulation. We also find that coordinate bench of Mumbai Tribunal in Sangeeta Sanjay Kumar Agarwal Vs ITO (supra) and in Karishma Ajay Agarwal Vs ITO (supra) while considering the similar scrips of KDJ Holdings deleted similar addition after detailed discussions and took Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 10 a consistent view that revenue failed to demonstrate that the assessee was involved in any price manipulation or rigging with respect to the shares of KDJ Holdings. Thus, respectfully following the same view, we don not find any justification in making additions solely on the basis of information and report of investigation wing when the assessee has discharged her primary onus. 11. The ld Sr DR for the revenue while making his submissions strongly relied on the decisions of Kolkata High Court in Swati Bajaj (supra), which is non- jurisdictional High Court, though there are contrary decisions of Jurisdictional High Court as referred above, favouring assessee. Hon’ble Apex Court in Union of India Kamalakshi Finance Corporation Ltd (1991) (55) ELT 443-SC held that decision of jurisdictional High Court would have higher precedence value on the Tribunal than the decision of non- jurisdictional High Court. Therefore, we do not any justification for making addition reason to interfere with the order of ld CIT(A), which we affirm with our additional observation. In the result, the grounds of appeal raised by the assessee are allowed. 12. In the result, the appeal filed by the assessee is allowed. Order was pronounced in the open Court on 14/11/2025. Sd/- Sd/- RENU JAUHRI ACCOUNTANT MEMBER PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated:14/11/2025 Biswajit Printed from counselvise.com ITA No. 4194/Mum/2025 Mrs. Sanjana Agarwal 11 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "