SHEETAL RAJEEV GADRE,MUMBAI V. ITO WARD 34(3)(2), MUMBAI

ITA 8534/MUM/2025

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The case involves Sheetal Rajeev Gardre, the Appellant, who appealed against the order of the National Faceless Appeal Centre (NFAC) which had confirmed the addition of INR 17,64,635 as unexplained cash credit related to transactions in penny stocks. The Income Tax Officer had initially made this addition during reassessment proceedings under Section 147 read with Section 144 and Section 144B of the Income Tax Act, 1961, based on information from the Investigation Wing about manipulative trades in the stock market. The Tribunal found that while the Assessee did not provide sufficient evidence to fully substantiate the genuineness of all transactions, a portion of the addition related to genuine short-term capital gains was acknowledged, leading to a partial allowance of the appeal.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841997 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2018-2019
• Appeal Filed On: 11-12-2025
• Other Referred Cases: TKS Builders (P) Ltd. v. ITO, Sumati Dayal v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Reassessment proceedings; Unexplained cash credit; Income from undisclosed sources; Capital Gains; Accommodation entries; Tangible material; Penny stocks; Bogus
• Section: 147; 144; 143(3); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “K (SMC)” BENCH, MUMBAI SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.8534/MUM/2025 (Assessment Year:2018-2019) Sheetal Rajeev Gardre F-4/502, Vijaynagar Society, swami Nityanand Marg, Andheri East, Mumbai - 400069. Maharashtra [PAN: AECPG4591A] …………. Appellant Income Tax Officer 34(3)(2), Mumbai Kautilya Bhavan, C-41 to C-43, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051. Maharashtra. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Ashish Thakurdesai Shri Bhagirath Ramawat Date Conclusion of hearing Pronouncement of order : : 16.02.2026 26.02.2026 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 17/10/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 21/12/2023, passed under Section 147 read with Section 144 read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2018- 2019. 2. The Assessee has raised following grounds of appeal in ITA No.8534/Mum/2025: “1. On facts, On facts, in circumstances of the case and in law Printed from counselvise.com ITA No.8534/Mum/2025 Assessment Year 2018-2019 2 the learned ITO Ward 34(3)(2) i.e. Jurisdictional Assessing Officer, Mumbai, erred in reopening the assessment of the appellant and the reopening of the assessment of the appellant is bad in law. 2. On facts, in circumstances of the case and in law, the National Faceless Appeal Centre erred in confirming addition of Rs. 17,64,635/-by National Faceless Assessment Centre under section 68 read with section 115BBE of the Income Tax Act, 1961.” 3. The relevant facts in brief are that that Assessee, an individual, filed return of income on 31/08/2018 for the Assessment Year 2018-2019 declaring total income of INR.9,83,960/-. Later information was received from Investigation Wing, Mumbai that in the course of search and survey operation on a syndicate of persons it was found that various share brokers and other related entities were suspected to be involved in misusing the stock market platform for generating manipulative trades in derivative segment for providing bogus loss and profit. The said syndicate was found to be involved in misusing the stock market platform for generating manipulative trades in derivative segment for providing bogus loss and profit in the form of Long term Capital Gains in several scripts to various beneficiaries across the country. Shri Naresh Jain operating as the lynchpin of the syndicate had been instrumental in manipulating the prices of several penny stocks scripts on the stock exchange. During the search operation, all these penny stocks scripts were analysed. Shri Naresh Jain was discovered to be operating with his several associates to rig the stock market and to provide accommodation entries in the form of bogus LTCG, bogus short term loss/ gain to various beneficiaries who intended to bring their unaccounted income into their books of account without paying taxes. It was found that the assessee was one of the beneficiaries who took accommodation entries and earned bogus Long Term Capital Gain/ Short Term Capital Loss in trading of penny script. OASIS TRADELINK LTD. During the reassessment proceedings the Printed from counselvise.com ITA No.8534/Mum/2025 Assessment Year 2018-2019 3 Asessee didn't offer any explanation for the bogus LTCG/STCL made by her. Since the Assessee did not come forward during the re- assessment proceedings with proper explanation, the Assessing Office concluded that the Assessee had nothing to explain. Thus, the Assessing Officer made addition of INR.17,64,635/-, being sale consideration related to transactions undertaken in the alleged bogus penny stock script namely OASIS Tradelink Ltd, as unexplained cash credit in the hand of the Assessee as income for the Assessment Year 2018-2019 invoking the provisions contained in Section 68 of the Act and brought the same to tax at the rate specified in Section 115BBE of the Act. 4. Being aggrieved Assessee has preferred appeal before Learned CIT(A) which was dismissed the appeal holding as under: “6. Decision I have considered the assessment order, grounds of appeal, written submissions. and all material available on record. 6.1 Challenging the jurisdiction of the AO 6.1.1 The assessee has challenged the validity of reassessment proceedings mainly on the grounds that the notice u/s 148A(b) and 148 was issued by the jurisdictional AO and not under the faceless mechanism u/s 151A, and that reasons were not properly furnished. 6.1.2 From the record, it is observed that the notice u/s 148A(b) was issued on 27.03.2022, followed by the order u/s 148A(d) dated 26.04.2022, after considering the material available and granting opportunity to the assessee. Thus, the preconditions of section 148A were complied with. 6.1.3 The argument that the reassessment is invalid merely because the notice was issued by the jurisdictional officer instead of the Faceless Unit cannot be accepted. The Hon'ble Delhi High Court in TKS Builders (P) Ltd. v. ITO 167 taxmann.com 759 has held that where the Assessing Officer having jurisdiction issues notice under section 148A and follows due procedure, minor procedural deviations relating to the faceless regime cannot invalidate Printed from counselvise.com ITA No.8534/Mum/2025 Assessment Year 2018-2019 4 reassessment if there is substantive compliance with statutory requirements and no prejudice is caused to the assessee. 6.1.4 Applying the ratio of TKS Builders (P) Ltd. (supra), the reassessment in this case cannot be treated as invalid. The AO had jurisdiction, tangible material from the Investigation Wing, due sanction u/s 151, and the procedure prescribed u/s 148A was duly followed. 6.1.5 Therefore, the reassessment proceedings u/s 147 are held to be valid in law. The objections of the assessee are rejected. 6.2 Addition under Section 68 Penny Stock Transaction in Oasis Tradelink Ltd. 6.2.1 The AO made an addition of Rs. 17,64,635/- treating the same as unexplained cash credit u/s 68 based on information that the assessee had indulged in penny stock trading in Oasis Tradelink Ltd., which was part of the accommodation entry network of Naresh Jain Group. 6.2.2 The assessee, in appeal, has claimed that all transactions were genuine and routed through the stock exchange with proper banking trail. However, the assessee has not produced any evidence to prove the identity of the buyers, genuineness of transactions, or justification for abnormal price movements in the scrip. 6.2.3 The Investigation Wing's findings show that Oasis Tradelink Ltd. was a shell company used for providing artificial gains and losses through synchronized trades. The assessee's name figures among the beneficiaries of this network. 6.2.4 Merely producing contract notes or demat statements does not discharge the burden under section 68. The Hon'ble Supreme Court in Sumati Dayal v. CIT (214) ITR 801) have held that when transactions are found to be pre-arranged and devoid of commercial substance, the apparent cannot be accepted as real. 6.2.5 The assessee has also not filed any credible explanation regarding the identity of counterparties or the rationale for the extraordinary gain of Rs.17.64 lakh from a virtually defunct company. The AO, therefore, rightly treated the same as unexplained cash credit u/s 68 r.w.s. 115BBE. Printed from counselvise.com ITA No.8534/Mum/2025 Assessment Year 2018-2019 5 6.2.6 The contention regarding year of transaction is also unfounded, as the relevant trading occurred during FY 2017-18 corresponding to AY 2018-19. Accordingly, the addition of Rs. 17,64,635/-is confirmed.” 5. 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. As regards Ground No. 1 raised by the Assessee is concerned, we find merit in the submission advanced by the Learned Departmental Representative that the same is devoid of any merit. It is admitted position that the capital gains earned by the Assessee were not offered to tax in the return of income. No assessment under Section 143(3) of the Act was framed on the Assessee for the relevant assessment year. Further, we are of the view that the Assessing Officer had sufficient tangible material (being information/report from the investigation wing) to form a belief that income liable to tax had escaped assessment. Therefore, we hold that in the facts and circumstances of the present case it cannot be said that the Assessing Officer did not have jurisdiction to initiate reassessment proceedings or that the exercise of such jurisdiction was bad in law. Accordingly, Ground No. 1 raised by the Assessee is dismissed. 8. Next, we will take up Ground No. 2 directed against the order of CIT(A) confirming the addition of INR.17,64,635/- made by the Assessing Officer under Section 68 read with Section 115BBE of the Act. 9. While making the above addition, the Assessing Officer had reasoned that the Assessee was a beneficiary of bogus long term capital gains transactions and had taken accommodation entries to reintroduce Printed from counselvise.com ITA No.8534/Mum/2025 Assessment Year 2018-2019 6 unaccounted cash into the books of accounts by way of bogus penny stock transaction. The Learned CIT(A) confirmed the addition and dismissed the appeal preferred by the Assessee. Before us, the Learned Authorised Representative for the Assessee submitted that despite furnishing relevant documents, the Learned CIT(A) confirmed the addition made by the Assessing Officer. It was submitted that the Assessee had not claimed benefit of Long Term Capital Gains exemption during the relevant previous year. All the transactions under consideration were undertaken within a period of 3 months. However, the Learned CIT(A) failed to consider the same. In response, the Learned Departmental Representative submitted that before the Assessing Officer the Assessee was non-compliant and did not furnish any document/details. On perusal of record, we find that the Assessee did not file any documents/details before the Assessing Officer. However, before the Learned CIT(A), the Assessee had filed (a) Profit and Loss Account Statement for Financial Year 2017-2018 from sale of equity shares from Motilal Oswal, Broker of the Assessee, (b) Profit and Loss Account in Oasis Tradelink Ltd. Shares prepared from the above statement from Motilal Oswal, (c) Bank Statement of the Assessee with Indian Overseas Bank for the period 01/04/2017 to 31/03/2018 and (d) Bank Statement of the Assessee with Bank of Maharashtra for the period 01/04/2017/ to 31/03/2018. The aforesaid documents show that the alleged penny stock transactions were undertaken between January, 2018 and March, 2018. Therefore, the question of claiming long term capital gains exemption does not arise. Further, the Assessee has undertaken transaction in other scripts over short period. It is not the case of Revenue that the other transactions were also in penny stocks. The purchase as well as sale transactions were undertaken through the stock exchange. The Assessee was salaried employee at the relevant time and had placed before the Learned CIT(A) her bank statement. On perusal of the same no adverse inference can be drawn. There are no cash deposits and Printed from counselvise.com ITA No.8534/Mum/2025 Assessment Year 2018-2019 7 withdrawals. There is no material on record to even suggest that the Assessee had any source of income other than those disclosed in the return of income from which unaccounted cash/income was generated. As per the computation furnished by the Assessee, the aggregate purchases cost of shares of the alleged penny stock script was INR.16,25,210/- against which the Assessee received aggregate Sale Consideration of INR.17,60,264/-. The Assessee had earned short- term capital gains and has also suffered short-term capital loss while transacting in the alleged penny stock script. Thus, making net short term capital gains of INR.1,35,054/-. Therefore, given the aforesaid, we restrict the addition made by the Assessing Officer to INR.1,35,054/- to be brought to tax in the hands of the Assessee as Short-Term Capital Gains. Accordingly, the balance addition and differential tax demand stands deleted. 10. In view of the aforesaid, Ground No. 2 raised by the Assessee is partly allowed. 11. In terms of above, the present appeal preferred by the Assessee is partly allowed. Order pronounced on 26.02.2026. Sd/- Sd/- (Bijayananda Pruseth) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 26.02.2026 Milan, LDC Printed from counselvise.com ITA No.8534/Mum/2025 Assessment Year 2018-2019 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 Printed from counselvise.com "