MUSTANSIR MOIZ BORIAWALA,UNITED ARAB EMIRATES V. INCOME TAX OFFICER (INTERNATIONAL TAX), MUMBAI

ITA 1899/MUM/2024

AI Insights

The case involves Mustansir Moiz Boriawala, the Assessee, who appealed against the order of the CIT(A)-55, Mumbai, for the assessment year 2012-2013. The appeal was primarily concerned with the addition of Rs.5,84,259 as unexplained cash credit under section 68 of the Income Tax Act, 1961, due to trading in shares of M/s. VMS Industries Ltd., a penny stock identified as manipulated. The AO initially treated the trading amount as unexplained due to non-compliance with notices. However, the CIT(A) later allowed the deduction of the purchase price from the sale consideration, affirming the remaining STCG. The Assessee contested this, arguing that the STCG was already reflected in Form 26AS and was lower than the tax liability, thus no further addition was warranted.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24149 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINIVAS P.
• Assessee Lawyers: NIKHIL ZAVERI
• Keywords: Opportunity of being heard; Additional evidence; Unexplained cash credit; Income from undisclosed sources; Capital Gains; TDS; FORM 26AS
• Section: 147; 148; 195; 139; 115JB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “SMC” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER आयकर अपील सं./ITA No.1899/MUM/2024 (निर्धारण वर्ा / Assessment Year: 2012-2013) Mustansir Moiz Boriawala, Villa 31, Narjis Phase 3, Al Zahia Community, Muweilah Commercial Sharjah Vs. ITO(Internal Tax), Mumbai स्थायी लेखा सं./PAN No. : AMZPB 2927 L (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) निर्ााररती की ओर से /Assessee by : Shri Nikhil Zaveri, AR राजस्व की ओर से /Revenue by : Shri Srinivas P., Sr.DR सुिवाई की तारीख / Date of Hearing : 25/11/2024 घोषणा की तारीख/Date of Pronouncement : 19/02/2025 आदेश / O R D E R The assessee has preferred this appeal against the order dated 22.03.2024, impugned herein, passed by the CIT(A)-55, Mumbai, for the assessment year 2012-2013, u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). ITA No.1899/Mum/2024 2 2. In this case, an information was received from the office of Dy. Director of Income Tax (Investigation) Wing, Unit-7(3), Mumbai to the effect that the Assessee has done share trading of BSE in the scrip namely M/s. VMS Industries Ltd. (scrip code 533427) to the tune of Rs.5,84,259/-. As per information the scrip is a penny stock and has been used to facilitate introduction of unaccounted income of the members of the beneficiaries in the form of exempt capital gains or Short Term Capital Loss (STCL). M/s. VMS Industries Ltd. is one of the identified scrip’s which have been proved as manipulated on the stock exchange by the group of persons laid by the operator Shri Naresh Jain. The Assessee is one of the beneficiaries having traded in the scrip of M/s. VMS Industries Ltd. for Rs.5,84,259/-. Consequently, the reasons for reopening of the case u/s 147 of the Act were recorded and notice dated 30.03.2019 u/s 148 of the Act was issued to the Assessee. 3. The Assessee in response to the notice u/s 148 of the Act, made no compliance and therefore the Assessing Officer (AO) issued various statutory notices which also remained uncomplied with and therefore it was presumed by the AO that the Assessee has no explanation to make with regard to the sale of such scrip and has also no objection whatsoever to the action proposed in the notice issued. The AO thereafter analyzing the information received and the findings of the investigation wing for analysis of penny stock and at least ITA No.1899/Mum/2024 3 considering the peculiar facts that the Assessee till date of passing the assessment order on dated 30.12.2019 has not filed its return of income, ultimately treated the trading amount of Rs.5,84,259/- on account of trading in shares of the scrip M/s. VMS Industries Ltd. as unexplained cash credit u/s 68 of the Act and consequently added the same in the income of the Assessee. 4. The AO also made other addition which are not in controversy as the Ld. Commissioner deleted the same vide impugned order. 5. The Assessee, being aggrieved, also challenged the said addition before the Ld. Commissioner and claimed that the Assessee had purchased 24000 shares of M/s. VMS Industries Ltd. for an amount of Rs.4,32,745/- and sold the same for an amount of Rs.5,84,259/- and consequently earned the Short Term Capital Gain (STCG) of Rs.1,49,441/- only. The Assessee before the Ld. Commissioner also filed various documents in the form of additional evidence. The Ld. Commissioner, in order to verify the documents filed by the Assessee and the claim made, sought for the remand report from the AO and thereafter considering the case of the Assessee in totality, allowed the purchase price to be deducted from the sale consideration and consequently directed the AO to verify the purchase prices and sale consideration and to compute the quantum of STCG on sales ITA No.1899/Mum/2024 4 of shares accordingly. Thus, the Ld. Commissioner directed the AO to verify the purchase price and sale consideration and by allowing the purchase price from sale consideration, to compute the quantum of STCG and in effect the Ld. Commissioner affirmed the remaining amount of STCG u/s 68 of the Act. 6. The Assessee, being aggrieved, challenged the sustaining the addition of Rs.1,49,441/- before this Court and at the outset has submitted that the Assessee during the assessment year under consideration has earned total STCG on listed securities to the tune of Rs.3,92,139/- which included the amount of capital gain earned to the tune of Rs.1,51,494/- from the sale of scrip of M/s. VMS Industries Ltd. and therefore no addition is warranted. This fact also appears from form 26AS. Even otherwise, as the Assessee’s total income for the AY 2012-13 was Rs.3,92,190/- and TDS on such income u/s 195 was in excess of the tax liability payable and therefore the Assessee was not required to file any return of income u/s 139 of the Act, as section 115JB of the Act expressively exempted the Assessee from filing return of income. The Assessee further claimed that the Ld. Commissioner has given direction to the AO to verify the purchase price and sale consideration and compute the quantum of STCG accordingly. However, if the AO would compute the capital gains, after considering the purchase price then he would derive the figure reflecting in the form 26AS on which TDS has already been deducted and the Assessee has included the said capital gain in the return ITA No.1899/Mum/2024 5 submitted to the AO. Therefore, the addition, if any, to be made on account of capital gains after considering the purchase price, would amount to double taxation i.e. once as per form 26AS and again as per capital gains and therefore the Hon’ble Court is requested to struck off the incorrect addition of Rs.5,84,259/- as made by the AO. 7. The Ld. D.R., on the contrary, refuted the claim of the Assessee and alternatively submitted that in any case the issue may be remanded to the file of the AO to recompute the liability qua addition made on account of sale of scrip M/s. VMS Industries Ltd. 8. Heard the parties and given thoughtful consideration to the rival submission of the parties given thoughtful consideration to the peculiar facts and circumstances of the case. The Ld. Commissioner has passed the order by directing the AO to exclude the purchase price from the sale price and recompute the STCG accordingly, however, the Assessee before this Court has claimed that even otherwise, if any amount qua STCG is to be determined then also the amount reflects in form 26AS on which TDS has already been deducted, is higher than the tax liability. Hence, this Court deem it appropriate to remand the instant issue/claim of the Assessee to the file of the AO with a direction to consider such claim of the Assessee as raised before this Court and to recompute the liability accordingly, suffice to say by affording reasonable opportunity of being heard to the Assessee. ITA No.1899/Mum/2024 6 9. In the result, the appeal filed by the Assessee stands allowed for statistical purposes. Order pronounced in the open court on 19/02/2025. Sd/- (NARENDER KUMAR CHOUDHRY) न्यधनिक सदस्य / JUDICIAL MEMBER म ुंबई/Mumbai; नििांक Dated 19/02/2025 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिनिनि अग्रेनर्ि/Copy of the Order forwarded to : आदेशधि सधर/ BY ORDER, (Assistant Registrar) आिकर अिीिीि अनर्करण, म ुंबई/ ITAT, Mumbai 1. अपीलाथी / The Appellant- . Mustansir Moiz Boriawala, Villa 31, Narjis Phase 3, Al Zahia Community, Muweilah Commercial Sharjah 2. प्रत्यथी / The Respondent- ITO(International Tax), Mumbai 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT 5. नवभागीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, म ुंबई / DR, ITAT, Mumbai 6. गार्ा फाईल / Guard file. सत्यानपत प्रनत //True Copy// "