SINDHUMATI RAMAVTAR PATHAK,BORIVALI MUMBAI V. ASST COMMISSIONER OF INCOME TAX 32 3 MUMBAI PRESENTLY DY C I T CIRCLE 42 3 1 MUMBAI, MUMBAI

ITA 4914/MUM/2025

AI Insights

The case revolves around the long-term capital gains claimed by the assessee, Sindhumati Ramavtar Pathak, from the sale of shares of Sunrise Asian Ltd., which were originally shares of Conart Trader's Ltd. The shares were acquired through a legitimate purchase and later dematerialized. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) rejected the claim of exemption under section 10(38) of the Income Tax Act, categorizing the transactions as non-genuine and arranged to show unaccounted money. The Tribunal, however, found that the assessee had provided sufficient documentation and evidence to substantiate the genuineness of the transactions, leading to the allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 822872 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 04-08-2025
• Other Referred Cases: Jayesh Sojpar Karnia HUF Vs. Income Tax Officer-Ward 30(1)(5), Smt. Hema Ramesh Jain Vs. Income Tax Officer, Sanjaykumar Damjibhai Gangani Vs. Assistant Commissioner of Income Tax, (OSD), Pr. CIT Vs. Sanjaykumar Damjibhai Gangani, Pr. CIT Vs. Vinod Premjibhai Gangani, Pr. CIT Vs. Divyaben Prafulchandra Parmar, Chief Commissioner of Income Tax (OSD) Vs. Nilesh Jain (HUF), Pr. CIT Vs. Ritu Agarwal Shreeram, Indravadan Jain HUF Vs. PCIT, Bhavin Vaghasia vs. ITO, Yogesh kumar Pravinkumar Shah
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITHA KAUSHIK; LD
• Assessee Lawyers: JITENDRA SINGH; LD; PRODUCING ANY
• Keywords: Set aside; Question of law; Unexplained expenditure; Income from undisclosed sources; Capital Gains; Third party statement; Accommodation entries; Share purchase agreement; Opportunity of cross examination; Bogus
• Section: 68; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “F” Bench, Mumbai Before Shri Narender Kumar Choudhry (JM) & Shri Prabhash Shankar (AM) ITA No. 4914/MUM/2025 (Assessment Year : 2015-16) Sindhumati Ramavtar Pathak 4, Shree Bhalchandra Kripa Building, Daulat Nagar Road No. 3, Borivali East Mumbai-400 066. Vs. ACIT-32(3) Presently CIT, Circle 42(3)(1) Kautilya Bhavan BKC, Mumbai-51. PAN : AGBPP5972D Appellant Respondent Assessee by : Shri Jitendra Singh, Ld. ADV Revenue by : Ms. Kavitha Kaushik, Ld. DR Date of Hearing : 04 /11/2025 Date of pronouncement : 24/12/2025 O R D E R Per Narender Kumar Choudhry (JM) :- 1. This appeal has been preferred by the Assessee against the order dated 10.5.2024 impugned herein passed by the Learned Commissioner of Income Tax (Appeals)/NFAC, (in short Ld. Commissioner) under section 250 of the Income Tax Act, 1961 (in short ‘Act’) for the Assessment Year 2015- 16. Printed from counselvise.com Sindhumati Ramavtar Pathak 2 2. In the instant case, the Assessee on 10.8.2011 had purchased 50,000 shares of M/s. Conart Trader’s Ltd. on consideration of Rs. 1,00,000/- from M/s. Santoshima Tradelinks Ltd. in physical form though cheque no. 977940 drawn on Bank of Maharashtra, Dahisar Branch. Thereafter Conart Trader’s Ltd. amalgamated with Sunrise Asian Ltd. and consequently the Assessee received 50,000/- shares of Sunrise Asian Ltd. in lieu of her shares of Conart Trader’s Ltd. Thereafter the Assessee dematerialized said shares during June, 2013 and thereafter a gap of more than 30 months, sold 27451 shares of Sunrise Asian Ltd. on a consideration of Rs. 1,34,45,414/- and consequently earned long term capital gains of Rs. 1,28,99,889/- and accordingly claimed the same as exempt under section 10(38) of the Income Tax Act, in assessment year under consideration. 3. The Assessing Officer by considering the said claim of the Assessee, held that entire shares transactions carried out by the assessee through set of operator is nothing but accommodation of assessee’s own unaccounted money and long term capital gains is pre-arranged and ultimately made the additions of Rs. 1,34,45,414/- being sale proceeds under section 68 of the Act and of Rs. 5,37,817/- being 4% of the sale price as commission, being unexplained expenditure under section 69C of the Act, mainly on the following reasons. (i) Transactions of shares were not governed by market factors prevalent at relevant time of such trade, but same were product of design and mutual connivance on part of the Assessee and the operator. (ii) The Assessee resorted to a preconceived scheme to procure long term capital gains by way of price difference in share transactions not supported by market factor. Printed from counselvise.com Sindhumati Ramavtar Pathak 3 (iii) Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bonafide and hence impugned long term capital gain is not allowable. (iv) The Assessee failed to discharge his onus. (v) Ignorance of the Assessee about shares and penny stock companies. (vi) Mode of acquisition of shares. (vii) Sale of shares and unusual rise in the price. (viii) The Assessee failed to discharge his onus. (ix) Ignorance of the Assessee about shares and penny stock companies. (x) Financial analysis of the penny stock companies. (xi) Analysis of transaction and end finding of the investigation wing. 4. The Assessee being aggrieved, challenged the said addition by filling first appeal before the Ld. Commissioner, who though affirmed the addition of Rs. 13,445,414/- under section 68 of the Act, however, deleted addition of Rs. 5,37,817/- made under section 69C made by the Assessing Officer, by partly allowing appeal of the assessee. 5. Thus, Assessee being aggrieved has preferred instant appeal. 6. Heard both parties and perused the record available on record. Admittedly, the assessee before the authorities below, has filed relevant documents and also claimed as under: “1. The Appellant before Your Honours is a widow and senior citizen. The Appellant is a regular investor in shares and regularly offers Short Term Capital Gains and Long Term Capital Gains as well as Speculation Profit / Loss in her return of income. Page 4 - 7 of the paper book. 2. The Appellant during the year under consideration had claimed exemption under section 10(38) of the Act on sale of shares of Sunrise Asian Ltd. as under: - Printed from counselvise.com Sindhumati Ramavtar Pathak 4 i. Shares of Conart Trader's Ltd Purchased on 23.08.2011 - Page 6 of the PB ii. Purchase consideration paid through Cheque No. 977940 - Page No. 12 of PB iii. Shares allotted to the Appellant on 01.11.2011-Page 8-10 of PB iv. Conart Trader's Ltd merged with Sunrise Asian Ltd vide order dated 22.03.2013 passed by Hon'ble Bombay High Court - Page 13-18 of PB v. Shares credited in the Demat Account of the Appellant - Page 20 - 25 of PB vi. Shares of Sunrise Asian Ltd sold during the year under consideration - page 6 of PB vii. Contract Note of Sale of shares and payment of STT- Pages 26 - 65 of the PB viii. Sale transaction was subject to Security Transaction Tax ix. Sale consideration received directly in her bank account. x. Part of shares is still in possession of the Appellant - Page 5 of the PB 3. The Appellant being a regular investor in shares has also provided detailed share holdings of shares and also shares sold during the year along with the capital gains working during the year. [Please refer to page no 6-7 of paper book.] 4. The Appellant has held the shares for more than 30 months and therefore, the shares sold by her is genuine. Hence, the disallowance of claim of 10(38) of the Act with respect to the Long Term Capital Gains earned on sale of shares of Sunrise Asian is not justified. (i) Jayesh Sojpar Karnia HUF Vs. Income Tax Officer-Ward 30(1)(5) (ITA No. 4034/Mum/2023 dated 01.05.2025, Mumbai Tribunal) (ii) Smt. Hema Ramesh Jain Vs. Income Tax Officer [2024] 162 taxmann.com 440 (Mumbai -Trib) (iii) Sanjaykumar Damjibhai Gangani Vs. Assistant Commissioner of Income Tax, (OSD). (2024) 161 taxmann.com 606 (Surat Tribunal) (iv) Pr. CIT Vs. Sanjaykumar Damjibhai Gangani (2025) 178 taxmann.com 276(Gujarat) (v) Pr. CIT Vs. Vinod Premjibhai Gangani (2025) 178 taxmann.com 269 (Gujarat) (vi) Pr. CIT Vs. Divyaben Prafulchandra Parmar (2024) 169 taxmann.com 473 (Gujarat) (vii) Chief Commissioner of Income Tax (OSD) Vs. Nilesh Jain (HUF) (2024) 163 taxmann.com 229(Madhya Pradesh) (viii) Pr. CIT Vs. Ritu Agarwal Shreeram (2023) 453 ITR 520 (Rajasthan) 5. There is no allegation of manipulation against the SEBI or department. Hence, Long Term Capital Gains cannot be treated as non genuine, (i) Pr. CIT vs. Indravadan Jain HUF [2023] 156 taaxmann.com 605 (Bom) Printed from counselvise.com Sindhumati Ramavtar Pathak 5 (ii) Bhavin Vaghasia vs. ITO [ITA 2584/Mum/2018, order dated 16.06.2023 7. The assessee before us has claimed that part of shares is still in possession of the assessee and the assessee being a regular investor in shares has also provided details of shareholding of the shares and shares sold during the year alongwith the capital gains working during the assessment year under consideration. Further the assessee held shares for more than 30 months and sold through online platform of stock exchange and no allegation qua manipulation/rigging has ever been levelled or proved against the Assessee, by any of the investigation agencies, including of SEBI or Revenue-Department. Thus, the addition made by the Assessing Officer and affirmed by the Ld. Commissioner, is liable to be deleted. 8. The aforesaid facts are not in denial by the Ld. DR.. 9. Admittedly the Hon'ble Coordinate Bench of the Tribunal in the case of Jayesh Sojpar Karnia HUF Vs. ITO (ITA No. 4034/Mum/2023 dated 1.5.2025) has also considered identical scrip and by considering the Judgement of Hon'ble Gujarat High Court in the case of PCIT Vs. Divyaben Prafulchandra Parmar (R/Tax Appeal No. 812 of 2023 decided on 2.1.2024)(citation 2024(1) TMI 800), wherein identical scrip has also been dealt with, ultimately deleted the identical addition based on the identical facts and circumstances and documents, by observing and holding as under :- 2. In the instant case, the Assessee on dated 11.02.2013 had purchased 10,000 shares at Rs.20 each of M/s. Santoshima Tradelinks Limited by paying a cheque of Rs.2,00,000/- of Central Bank of India, which was encashed on 15.02.2013. Subsequently, M/s. Santoshima Tradelinks Limited amalgamated with M/s. Sunrise Asian Ltd. and consequently 10,000 shares of M/s. Sunrise Asian Ltd. were allotted. Printed from counselvise.com Sindhumati Ramavtar Pathak 6 Subsequently, the Assessee got dematerialized the said shares on dated 11.11.2013 and sold 5120 shares through online platform i.e. Bombay Stock Exchange on a total consideration of Rs.25,15,320/- from 14th March to 25th March 2014 and consequently earned the long term capital gain of Rs.24,04,115/- and claimed the same as exempt u/s 10(38) of the Act. The Assessing Officer (AO), by considering the investigation carried out by Directorate of Investigation, Kolkata and the mode of acquisition of the shares by the Assessee and unusual rise in the prices of share, findings of the investigation wing at Mumbai, analysis of transactions, failure of the Assessee to discharge his onus, ignorance of the Assessee about shares and penny stock companies, financial analysis of the penny stock companies, formality statement of Mr. V.V. Bhat and the modus operandi of arranged transactions, ultimately disallowed the claim of the Assessee and made the additions of Rs. 25,15,320/- u/s 68 of the Act and Rs.1,00,613/- being commission @ 4% of Rs.25,15,320/- as unexplained expenditure u/s 69C of the Act. 3. The Assessee, being aggrieved, challenged the said additions before the Ld. Commissioner, however, of no avail, as the Ld. Commissioner more or less on the same reasoning of the AO, affirmed the aforesaid additions by dismissing the appeal of the Assessee. 4. The Assessee, being aggrieved, challenged the said additions before this Tribunal by filing instant appeal. Admittedly, the Assessee, during the assessment proceedings as well as appellate proceedings before the Ld. Commissioner and before us, has submitted the computation of income, documents pertaining to the purchase of shares – contract cum sale of 10,000 shares of M/s. Santoshima Tradelinks Limited and debit note issued by Silver Rise Multi Trading Pvt. Ltd., on spot basis, share transfer application along with share certificates of M/s. Santoshima Tradelinks Limited in the name of Assessee, letter dated 21.06.2013 issued by Sunrise Asian Ltd. for allotting shares in pursuance to amalgamation scheme, bank statement of Central Bank of India reflecting payment made for purchase of shares, contract notes for sale of shares, bank statement reflecting receipts from sale of shares and demat statement for the period from 01.04.2013 to 31.03.2014, in order to demonstrate the genuineness of the transaction and to discharge the prima-facie onus cast u/s 68 and 69C of the Act. 5. Recently, the Co- ordinate Bench of the Tribunal, in the case of Mr. Rambilas S Agarwal in ITA No.3238/M/2023 decided on 08.04.2025, has also dealt with the identical share/scrip of Sunrise Asian Ltd. and by respectfully following the judgment of the Hon’ble Gujarat High Court, in the case of PCIT-1 Vs Divyaben Prafulchandra Parmar {R/TAX Appeal no. 812 of 2023 decided on 02-01-2024} (Citation 2024(1) TMI 800), wherein also the identical scrip was dealt with, allowed the identical claim lodged by the Assessee, by observing and holding as under: Printed from counselvise.com Sindhumati Ramavtar Pathak 7 “7. We further observe that Hon’ble Gujarat High Court in PCIT-1 Vs Divyaben Prafulchandra Parmar {R/TAX Appeal no. 812 of 2023 decided on 02-01-2024} (Citation 2024(1) TMI 800) has also dealt with same scrip i.e. M/s. Sunrise Asian Limited as involved in this case and ultimately affirmed the decision of the Hon’ble Tribunal in deletion of the identical addition, by observing and holding as under: [13] Feeling aggrieved by the order passed by the Tribunal, the appellant - Revenue has preferred this Tax Appeal on the proposed substantial questions of law narrated hereinabove. [14] Learned Senior Standing Counsel Mr. Karan Sanghani for the appellant reiterated the submissions made before the Tribunal and submitted that the Assessing Officer, after analyzing the data made available from the Bombay Stock Exchange, came to the conclusion that the price of script, which the assessee sold, was fluctuating by 24 times and after sale of shares made by the assessee, the price has reduced to Rs.0.49. It was, therefore, submitted that the Assessing Officer, taking into consideration the volatility of the share price of the script sold by the assessee, was justified in relying upon the report of the Investigation Wing of Kolkata as well as the fact that the SEBI has suspended the transaction of the said script for some time and accordingly, the Assessing Officer was justified in making addition of unaccounted income of the assessee on the ground of accommodation entries availed by the assessee. [15] It was further submitted that the CIT(A), after considering the documents available on record, has upheld the view taken by the Assessing Officer. It was submitted that the Tribunal, after considering the submissions made by the assessee and the Departmental Representative, allowed the appeal. It was submitted that the Tribunal, therefore, contrary to the facts and evidence on record, has allowed the appeal without considering the findings of the Assessing Officer and the CIT(A) in its true perspective. [16] Considering the contentions raised on behalf of the Revenue, the Tribunal has arrived at a finding of fact that shares of Sunrise Asian Ltd. sold by the assessee cannot be doubted as bogus and exemption under Section 10(38) of the Act was rightly availed by the assessee. The Tribunal has also concluded that the presumption drawn by the Assessing Officer was not corroborated by any evidence to establish the alleged non-genuine transaction Printed from counselvise.com Sindhumati Ramavtar Pathak 8 by the assessee. It was, therefore, rightly held by the Tribunal that the claim of the assessee for exemption of Long Term Capital Gains under Section 10(38) of the Act cannot be held to be bogus on the basis of presumption in absence of any evidence brought on record by the assessee with regard to shares of Sunrise Asian Ltd, which is not even found to be rigged by the SEBI also. The Tribunal has also considered that the assessee held the shares for two and half years and after holding the shares for a long period, the same were sold by the assessee and therefore, reliance was placed on the decision of this Court in the case of Jagat Pravinbhai Sarabhai (supra), wherein this Court has held as under: \"5. The genuineness of investment in the shares by the assessee was substantiated by him by producing copy of transaction statement for the period from 1.6.2001 to 1.10.2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such long time. These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short span”. 6. The finding recorded by the appellate authority and confirmed by the appellate tribunal is based on material before them. They are in the realm of findings of fact. No error could be noticed in the findings and conclusion that the investment was longstanding and genuine and was not penny stock on the basis of which the capital gain was wrongly claimed. 6.1 On the facts of case, no question of law much less substantial question of law arises. 7. Resultantly, appeal is dismissed.\" 8. The Tribunal in the case of Haresh Dilip Vora Vs. ITO Ward 25(2){4} Mumbai {ITA no. 3646/M/2024 decided on 10.9.2024} has also dealt with identical scrip and while following aforesaid judgments, ultimately deleted the identical addition, as involved in this case, by observing and holding as under: 7.2. The ld. CIT(A) in impugned appeal order respectfully relied on the order of Hon'ble Calcutta High Court in the case of CIT Vs Swati Bajaj[2022] 446 ITR 56 (Calcutta) where on same set of facts related taxability of LTCG on sale of shares considered as manipulated penny stock & Printed from counselvise.com Sindhumati Ramavtar Pathak 9 the action of the ld. AO is confirmed. But the related to scrip \"Sunrise Asian Ltd\" the assessee is covered by the order of the Hon'ble Gujrat High Court. Accordingly, the same would prevail on the issue before this Bench. In the present case, the decision of the Hon'ble NonJurisdictional High Court carries only an influence. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value on the Tribunal than the decision of Hon'ble Non- Jurisdictional High Court. Considering the impugned assessment order, the ld. AO has not provided any evidence even worth a name that Assessee’s own money has been routed back to him. There is no nexus with the Assessee with price rigging and no adverse observation from stock exchange. The addition simply on third party statement is uncalled for. We respectfully relied on the order of Hon'ble Supreme Court in PCIT vs Smt. Renu Aggarwal [2023] 456 ITR 249 (SC). We respectfully rely on the orders of the Hon'ble Apex Court, Jurisdictional High Court and Coordinate Bench of ITAT Mumbai which has similar in the factual matrix with the impugned issue. The grounds of appeal of the assessee are upheld. We set aside the impugned appeal order. The additions amount to Rs. Rs.47,51,164/- U/s 68 of the Act and amount to Rs. 50,061/- U/s 69C are quashed. 9. As we observed above that the Assessee purchased the share through banking channel and held the same for around 17 months and sold the same through online platform and banking channel. The Assessee by filling relevant documents such as purchase bills of shares, bank account statement, DP statement and some broker notes in order to establish his claim of LTCG, has discharged primafacie onus cast u/s 68 of the Act. Further, the AO had no base or foundation/corroboration to make the addition in the hands of the Assessee but he simply relied on the investigation report of the Kolkata Directorate and the SEBI report and usual rise in the price, in which the Assessee has not played any role and it is a fact that no action has ever been taken by the SEBI or any investigation agency against the Assessee herein and therefore it goes to show that the AO made the additions under consideration simply, on the conjecture and surmises, and therefore the additions in view of the above facts and circumstances and decisions, are not sustainable, thus the same are deleted. Printed from counselvise.com Sindhumati Ramavtar Pathak 10 6. As the Assessee has been able to discharge his prima-facie onus cast u/s 68 of the Act and the Revenue Department has not rebutted the documents and/or claim of the Assessee by producing any corroborating material concerning directly and therefore respectfully following the judgment of the Co-ordinate Bench of the Tribunal in the aforesaid case and the judgment of the Hon’ble Gujarat High Court, wherein the identical scrip was involved, this Court is inclined to delete the addition of Rs.25,15,320/- u/s 68 of the Act. 7. As the substantive addition has been deleted and therefore the addition of Rs. 1,00,613/- being commission @ 4% of Rs.25,15,320/- made on account of commission made u/s 69C of the Act also collapsed, consequently, the same is also deleted.” 10. We further observe that Scrip involved in the instant case has also came into controversy and/or for adjudication in the case of Yogesh kumar Pravinkumar Shah (ITA No. 4544/Mum/2025 dated 22.10.2025) and ultimately resulted into deletion of identical addition based on identical facts and circumstances, as involved in the instant case. 11. Thus, respectfully following the aforesaid judgments and considering the peculiar facts and circumstances specific to the effect that the Assessee by filing relevant documents referred to above, has duly discharged her onus cast under section 68 of the Act and it is a fact that the Assessee sold the shares through online platform of recognized stock exchange, after holding the same for more than 30 months and it is also a fact that as on today, the Assessee is holding part of the shares and admittedly no allegation has ever been leveled or proved against the assessee by any of the investigation agencies, including SEBI or Income Tax Department and thus on the aforesaid analyzations, addition made by the Assessing Officer as sustained by Ld. Commissioner, is liable to be deleted. Consequently, the addition is deleted. Printed from counselvise.com Sindhumati Ramavtar Pathak 11 12. In the result, Assessee’s appeal is allowed. Order pronounced in the open Court on 24/12/2025. Sd/-/-/- Sd/-/-/- (Prabhash Shankar) (Narender Kumar Choudhry) ACCOUNTANT MEMBER JUDICIAL MEMBER Ms. Pratima, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "