SANGEETA KALPESH CHAWALLA,MUMBAI V. ITO WARD 19(3)(2), MUMBAI

ITA 458/MUM/2025

AI Insights

The case involves Ms. Sangeeta Kalpesh Chawala, who appealed against the order of the National Faceless Appeal Center/Commissioner of Income Tax (Appeals) concerning the assessment year 2012-13. The AO had reopened her case based on information that shares of M/s. Regency Trust Limited were used for generating bogus Long Term Capital Gains (LTCG) and Short Term Capital Loss (STCL). The AO made additions to her income under sections 68 and 69C of the Income Tax Act, 1961, treating the sale proceeds of these shares as unexplained cash credit and the commission as unexplained expenditure, respectively. The Tribunal, referencing judgments and precedents, found that the AO's additions were not supported by concrete evidence linking the Assessee to any manipulation or rigging of shares.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713087 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2012-2013
• Other Referred Cases: Sumati Dayal Vs. CIT, CIT Vs Durga Prasad More, Pr. Commissioner of Income Tax vs. Indravadan Jain HUF, Shah Sandeep Anantkumar HUF vs. ITO 32(3)(4)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVAN LIMBASIYA; LD.
• Assessee Lawyers: FILING HER RETURN OF
• Keywords: Unexplained cash credit; Unexplained expenditure; Onus to prove; Capital Gains; Accommodation entries; Penny stocks; Bogus
• Section: 147; 148; 68; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “SMC”, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No.458/M/2025 Assessment Year: 2012-13 Ms. Sangeeta Kalpesh Chawala, (Individual) A 67, Darya Mahal, Behind Walshigaham School, 12th Floor, Napean Sea Road, Mumbai – 400 0006 PAN: ADGPC0339M Vs. Income Tax Officer, Ward 19(3)(2), Matru Mandir Income Tax Office, Mumbai, Maharashtra – 400 007 (Appellant) (Respondent) Present for: Assessee by : None Revenue by : Shri Kavan Limbasiya, Ld. Sr. D.R. Date of Hearing : 12.06.2025 Date of Pronouncement : 28.07.2025 O R D E R Per : Narender Kumar Choudhry, Judicial Member: This appeal has been preferred by the Assessee against the order dated 03.01.2025, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2012-13. 2. In the instant case, the Assessee by filing her return of income on dated 31.03.2014 has declared total income at Rs.2,52,390/-, which was processed u/s 143(1) of the Act. 3. Subsequently, an information was received by the Assessing Officer (AO) from the DDIT (Inv.), Unit 3(2), Kolkata to the effect that M/s. Regency Trust Limited having scrip code 511585, has been used for generating bogus Long Term Capital Gains (in short Printed from counselvise.com ITA No.458/M/2025 Ms. Sangeeta Kalpesh Chawalla 2 “LTCG”)/Short Term Capital Loss (in short “STCL”) and business loss and the Assessee during the assessment year under consideration has made the following transactions in the shares of M/s. Regency Trust Limited: Nature of Transactions Value (Rs.) Purchase 1,06,60,725.75 Sale 28,27,302.35 Total 1,94,34,528.10 4. The AO observed that the Assessee had obtained bogus entries of STCG in penny stocks on sales of shares of M/s. Regency Trust Limited and consequently reopened the case of the Assessee u/s 147 of the Act by issuing notice dated 29.03.2018 u/s 148 of the Act. Thereafter various statutory notices were issued to the Assessee, in response to which the Assessee vide reply dated 20.12.2018 filed before the AO submitted computation of income and statement of holding of shares from Kotak. The Assessee also furnished the details with regard to the transactions carried out with the scrip M/s. Regency Trust Limited as detailed below: Scrip Name Quantity Purchase value Date of purchase Qty. Sold in 2011- 12 Sale value Gain /loss Regency Trust Ltd. 163422 1,06,80,561 F.Y. 11-12 45,513 28.23,181 (1,70,283) 5. The Assessee further claimed that she has sold 45,513 shares of M/s. Regency Trust Limited though broker DK Modi and claimed STCL of Rs.1,70,283/-. The Assessee has also declared a total loss of Rs.16,50,761/- for the current year after setting off and adjusting an income of Rs.1,30,920/- being income from other sources, the net loss of Rs.15,19,841/- was arrived at. Printed from counselvise.com ITA No.458/M/2025 Ms. Sangeeta Kalpesh Chawalla 3 6. The AO though considered the aforesaid facts and circumstances and documents filed by the Assessee, however, by considering the modus operandi for earning LTCG/STCG and financials of the M/s. Regency Trust Limited and modus operandi for rigging of shares, general concept of burden of proof, burden of proof and onus of proof and while relying on judgments passed by the Hon’ble Apex Court in the case of Sumati Dayal Vs. CIT (214) ITR 801 (SC) and CIT Vs Durga Prasad More (82) ITR 540 (SC) ultimately made the addition of Rs.28,27,302/- on account of sale consideration being unexplained cash credit u/s 68 of the Act and added the same in the income of the Assessee. Further, the AO also made the addition of Rs. 56,546/- being 2% of the accommodation entry of Rs. Rs.28,27,302/-, as commission being unexplained expenditure u/s 69C of the Act. 7. The Assessee though challenged the said addition before the Ld. Commissioner, however, could not get any relief. As it appears from the impugned order that the Ld. Commissioner without issuing any notice to the Assessee disposed of the appeal filed by the Assessee and consequently affirmed the aforesaid additions. And therefore the Assessee being aggrieved has preferred this appeal. 8. Having heard the Ld. DR and perused the material available on record, it is observed that from the assessment order it appears that the Assessee during the assessment year under consideration has sold 45,513 shares on a consideration of Rs.28,23,181/- and consequently suffered STCL of Rs.1,70,283/- and debited the said amount in her books of account. The AO in para no.7 of the assessment order duly acknowledged the documents filed by the Assessee such as computation of income and statement of holding of shares and details of the shares purchased and sold as provided Printed from counselvise.com ITA No.458/M/2025 Ms. Sangeeta Kalpesh Chawalla 4 by the Assessee during the assessment proceedings. The AO has not doubted the genuineness of the documents submitted by the Assessee but simply on the assumption and presumption made the addition without establishing any link of rigging of shares and/or manipulating the transaction in connivance with the owner of scrip involved. The Assessee has carried out the transactions on online platform. From the orders passed by the authorities below it, prima- facie, appears that admittedly both the authorities below have not levelled any specific allegations against the Assessee qua rigging of share and/or manipulating the transaction for earning the LTCG or LTCL and also not doubted the documents filed by the Assessee. The findings arrived at by the authorities below for making and sustaining the additions under consideration are more or less on assumption and presumption and without any substantive material/document against the Assessee. Thus, the additions under consideration are unsustainable in the eyes of law, specifically, in view of the judgment passed by the Hon’ble Jurisdictional High Court in the case of Pr. Commissioner of Income Tax vs. Indravadan Jain HUF (2023) 156 taxmann.com 605 (Bombay High Court) wherein it has been held as under: “3. Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long-term capital gain and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs.3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs.155.04/- per share. It was A.O.'s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the Printed from counselvise.com ITA No.458/M/2025 Ms. Sangeeta Kalpesh Chawalla 5 said broker. In view thereof, respondent's case was reopened under section 148 of the Act. 4. The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.” 9. This Court further observe that the Hon’ble co-ordinate Bench of the Tribunal in the case of Shah Sandeep Anantkumar HUF vs. ITO 32(3)(4), Mumbai ITA No.4628/M.2023 decided on 06.08.2024 also dealt with the identical scrip i.e. M/s. Regency Trust Limited as well as the decision of the Hon’ble Apex Court in the case of Sumati Dayal vs. DCIT (1995) 80 taxmann.com 89 (SC) which has also been relied on by the AO in the instant case and ultimately deleted Printed from counselvise.com ITA No.458/M/2025 Ms. Sangeeta Kalpesh Chawalla 6 the identical addition made on the basis of identical scrip as involved in the instant case by observing and holding as under: “10. From all the above evidences forming part of the paper book, it is evident that no cash was paid by the assessee for purchase of 32,000 shares of M/s Regency Trust Ltd, and the entire purchases and sales transaction was carried out on the floor of the stock exchange through a SEBI registered stock-broker. We further find that the BSE vide email dated 06/11/2023 confirmed the aforesaid purchase and sales transaction by the assessee in the shares of M/s Regency Trust Ltd. We find that all the above evidences were furnished by the assessee to prove the genuineness of the share transaction before the AO. However, the AO without commenting on any of the evidence submitted by the assessee placed reliance upon the report of the Investigation Wing, Kolkata, and the price fluctuation of shares of the entities in which the assessee has transacted. The findings of the Investigation Wing, as noted on pages 3-4 of the assessment order, appears to be mere general findings of the investigation without any adverse observation regarding the assessee or the scripts in which the assessee has transacted. Further, the Revenue has failed to prove as to how the said findings have any relevance to the present case in view of the facts and circumstances as noted in the foregoing paragraph. There is also no reference to the any portion of sworn statements, wherein any adverse observation against the assessee has been noted by the Investigation Wing. The price fluctuation of shares of the entities in which the assessee has transacted also does not support the case of the Revenue, as no material has been brought on record to show that the assessee was involved in such price manipulation even after purchasing and selling the shares on the stock exchange through a SEBI registered stock-broker. Therefore, in the present case, it is sufficiently evident that the AO without finding any fault with the evidence submitted by the assessee proceeded to treat the transaction as non-genuine and the long-term capital gains earned by the assessee as bogus. We also find that the AO did not issue any summons to the BSE or examine the broker of the assessee, i.e. Latin Manharlal Securities Private Limited, despite specific request by the assessee vide its letters dated 24/10/2018 and 19/11/2018, forming part of the paper book on pages 81-89. 11. Therefore, in view of the facts and evidence placed on the record by the assessee, we find no merits in the impugned order upholding the addition made under section 68 of the Act and disallowing the exemption of long-term capital gains claimed by the assessee. Similarly, we also do not find any merit in the Printed from counselvise.com ITA No.458/M/2025 Ms. Sangeeta Kalpesh Chawalla 7 disallowance of the investment of Rs.4,17,980 made by the AO under section 69A of the Act. Accordingly, the grounds no.3-6 raised in assessee’s appeal are allowed.” 8. Thus, on the aforesaid analyzation, the additions made by the AO and affirmed by the Ld. Commissioner are liable to be deleted being unstainable, thus, the same are deleted by allowing appeal of the Assessee. 9. In the result, the appeal of the Assessee is allowed. Order pronounced in the open court on 28.07.2025. Sd/- (NARENDER KUMAR CHOUDHRY) JUDICIAL MEMBER * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy// By Order Dy/Asstt. Registrar, ITAT, Mumbai. Printed from counselvise.com "