SURESH MAHESHWARI,MUMBAI V. THE DCIT, CIRCLE 19(3), MUMBAI

ITA 3370/MUM/2025

AI Insights

The case revolves around an appeal by Suresh Maheshwari against the order of the National Faceless Appeal Centre (NFAC), which upheld the addition of Rs. 85,05,050 as income from unexplained sources and a commission of Rs. 21,592. The additions were based on the premise that the transactions involved accommodation entries. The Assessing Officer (AO) and the First Appellate Authority rejected the assessee's claims, citing non-genuine transactions. However, the Tribunal, after reviewing the evidence and precedents, concluded that the transactions were genuine, involving proper banking channels and documented through a registered Demat account.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785509 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 13-05-2025
• Other Referred Cases: ITO vs. Manisha Narpatkumr Chopra, PCIT vs. Ziauddin A Siddique, CIT vs. Jamnadevi Agarwal, PCIT vs. Indravadan Jain (HUF), Shyam Pawar vs. State, Hitendra C Ghadia vs. State
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARY
• Keywords: Business income; Question of law; Unexplained cash credit; Capital Gains; Accommodation entries; Share purchase agreement; Bogus
• Section: 68; 131

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No.3370/Mum/2025 (Assessment Year: 2015-16) Suresh Maheshwari, 3rd Floor, 16, New Silk Bazar, Gandhi Mansion, Mumbai-400002 Vs. The DCIT, Circle 19(3) Piramal Chambers, Lalbaug, Parel, Mumbai 400012 (Appellant) : (Respondent) PAN NO. AAFPM 4397R Appellant by : None Respondent by : Shri Swapnil Choudhary, Sr. DR (Appellant) (Respondent) Date of Hearing : 27.10.2025 Date of Pronouncement : 29.10.2025 O R D E R Per Saktijit Dey, Vice President: This is an appeal by the assessee against order dated 25.03.2025 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year (AY) 2015-16. 2. The dispute in the present appeal is confined to addition made of an amount of Rs. 85,05,050/- as income from unexplained sources through alleged accommodation entries and payment of commission thereon amounting to Rs.21,592/-. When the matter was called out none appeared on behalf of the assessee. There is no request from assessee’s side seeking adjournment. Whereas, Printed from counselvise.com 2 ITA No.3370/Mum/2025 Suresh Maheshwari learned Departmental Representative (DR) was prepared to argue the matter. Perusal of record reveals that the assessee has furnished written synopsis explaining his case supported by certain judicial precedents and factual evidences. In view of the aforesaid, we are inclined to proceed ex-parte, qua the assessee and decide the appeal on merits based on the submissions made by learned DR, written synopsis filed by the assessee and materials available on record. 3. Briefly stated, the assessee is a resident individual and a qualified Chartered Accountant. For the assessment year under dispute, assessee filed his return of income on 01.09.2015, declaring NIL income after claiming exemption of long-term capital gain under section (u/s.) 10(38) of the Income Tax Act, 1961 (in short the ‘Act’). The return of income so filed by the assessee was selected for scrutiny to verify \"suspicious sale transaction in shares and exempt long term capital gain shown in return”. Based on information furnished by the assessee, the Assessing Officer (AO) found that the assessee had purchased 1,32,000 shares of M/s. Pine Animation Ltd. at a face value of Rs.1/- per share, whereas, in the financial year relevant to the assessment year under dispute, the assessee had sold them at the price of Rs.65.43 per share and received total sales consideration of Rs. 86,37,050/-. The resultant long term capital gain of Rs. 85,05,050/- was claimed exempt u/s. 10(38) of the Act. From the materials available with him, the AO found that as per the report of the investigation wing of Kolkata the scrip of M/s. Pine Animation Ltd is identified as a penny stock scrip. As per the Investigation Wing Report, the promoters of the said company, Shri Narendra Kumar Jain & Shri Pankaj Agarwal Printed from counselvise.com 3 ITA No.3370/Mum/2025 Suresh Maheshwari have stated before the Department that share transactions are non-genuine and in the garb of said transaction the promoters were providing accommodation entries to a number of beneficiaries. Based on the Investigation Wing Report, the AO issued summons to the assessee and examined him on oath. In the statement recorded, the assessee claimed the transaction relating to purchase and sale of shares as genuine. However, the AO was not convinced with the submissions of the assessee. Ultimately, she held that the share transactions are non-genuine and the assessee has indulged in such transaction to avail benefit of accommodation entries. Based on such conclusion, the AO rejected assessee’s claim of long-term capital gain and made the additions. Though, the assessee contested the additions in an appeal preferred before the First Appellate Authority however, he was unsuccessful. 4. We have heard learned DR, gone through the written synopsis of the assessee, in the light of judicial precedents relied upon and perused the materials on record. Undisputed facts are, on 16.01.2013, the assessee purchased 16000 shares of M/s. Pine Animation Ltd. having face value of Rs.10/- per share at a total sales consideration of Rs.1,75,000/- from a broker, by name, M/s Bhushit Trading Pvt. Ltd. This is evident from copy of invoice placed in the paper book. It is the case of the assessee that after getting information from an advertisement published in the Economic Times, the assessee contacted the said broker and purchased the shares. Subsequently, the shares got sub divided into 1,60,000 shares having face value of Rs.1/- per share. In the previous year relevant to the assessment year under dispute, assessee sold 1,32,000 shares for an aggregate sale consideration of Rs.99,34,233/-. Printed from counselvise.com 4 ITA No.3370/Mum/2025 Suresh Maheshwari Since the shares were held over a period of more than 12 months, the assessee claimed the resultant long term capital gain of Rs.97,89,858/- exempt u/s. 10(38) of the Act. 5. From the materials placed on record, it is evident, the shares of M/S. Pine Animation Ltd. on purchase were credited to the Demat account of the assessee and were held in the said account till the date of the sale. The shares were sold on the Bombay Stock Exchange through a SEBI registered broker, M/s Allwin Securities Ltd. It is further evident, the purchases and sales were through banking channel and there is no cash transaction. Pertinently, in the statement recorded oath u/s. 131 of the Act, in reply to the specific question asked by the AO, the assessee has categorically stated that he had been investing/trading in equity market since last 25 years, which can be verified from the Demat account. The assessee had also furnished details of Demat account, the brokers through whom the purchase and sales transaction were made, the details of scrip purchased in the earlier as well as in the current assessment year, the details of transaction through banking channel etc. From the copy of the Demat account furnished before us, the statement of the assessee that he was regularly investing/trading in equity market stands corroborated. On a perusal of the Demat Account of the assessee, it is observed that the assessee is holding scrips of a number of companies including many reputed companies. Therefore, the fact that the assessee has knowledge of the share market and well acquainted with share transactions cannot be brushed aside. On a reading Printed from counselvise.com 5 ITA No.3370/Mum/2025 Suresh Maheshwari of the assessment order, it is very much clear that the entire decision-making process of the AO is based on the Investigation Wing Report. 6. From the assessment order it transpires that the AO has not conducted any independent enquiry to further corroborate the allegations made in the Investigation Wing Report. The limited investigation made by the AO worth its name is, he has referred to the financial statement of the M/s. Pine Animation Ltd. downloaded from the website and recorded a statement u/s. 131 of the Act from the assessee. The financial statement of the M/s. Pine Animation Ltd. can at best be a starting point of the investigation but cannot be made basis for making the addition. In so far as the statement recorded u/s. 131 of the Act, we do not notice any ambiguity in the replies of the assessee. The assessee has clearly and categorially asserted that not only is he well acquainted with equity market and is regularly investing/trading in scrip but the choice of investments is as per his own decision. Further, the entire purchase and sales transactions are not only through registered Demat account standing in the name of the assessee but through verifiable banking channel and registered stock brokers. Though, the AO has not spoken in so many words, however, it appears that the Investigation Wing Report is based on some preliminary report of SEBI alleging role of certain entities in manipulation of scrip of M/s. Pine Animation Ltd. However, in its final report dated 19.09.2017, the SEBI having found that there is nothing adverse against the entities, has held that direction issued against the entities named in the preliminary report should not continue. Thus, the final report of SEBI Printed from counselvise.com 6 ITA No.3370/Mum/2025 Suresh Maheshwari clearly establishes that there is no manipulation or wrong doing in relation to pricing of the scrips of M/s. Pine Animation Ltd. 7. Having carefully perused the orders of the Departmental Authorities, we do not find any material or substance brought on record to corroborate the allegations made in the Investigation Wing Report. Pertinently in case of ITO vs. Manisha Narpatkumr Chopra, ITA No. 2443/Mum/2023 and order dated 28.08.2024, which is for the very same assessment year 2015-16, the Coordinate bench while dealing with similar addition made in case of another assessee on account of sale of shares of M/s. Pine Animation Ltd. has held as under: “11. We heard rival contentions and perused the record. We notice that the AO has primarily placed reliance on the report given by the Investigation Wing of the Income-tax Department, Kolkatta in order to arrive at the conclusion that the Long Term Capital Gain reported by the assessee is bogus in nature. We notice that the investigation report prepared by Investigation Wing, Kolkatta is a generalized report with regard to the modus operandi adopted in manipulation of prices of certain shares and generation of bogus capital gains. We notice that the AO has placed reliance on the said report, without bringing any material on record to show that the transactions entered by the assessee were found to be a part of manipulated transactions, i.e., it was not proved that the assessee has carried out the transactions of purchase and sale of shares in connivance with the people, who were involved in the alleged rigging of prices. We notice that the promoters and their associations of M/s. Pine Animation Ltd., were initially debarred from accessing stock market, but the same has been revoked by the SEBI, vide its order dated 19th September, 2017. The following observations made by the SEBI in the above said order are worth noting:- “10. Considering the fact that there are no adverse findings against the aforementioned 114 entities with respect to their role in the manipulation of the scrip of PAL, I am of the considered view that the directions issued against them vide interim order dated May 08, 2015 which were confirmed vide Orders dated June 02, 2016, July Printed from counselvise.com 7 ITA No.3370/Mum/2025 Suresh Maheshwari 05, 2016, August 22, 2016 and June 02, 2017 need not be continued.” 11.1. We noticed earlier that the assessee has sold the shares during the period from June 05, 2014 to September 15, 2014. Thus, the transactions of purchase and sale of shares by the assessee have happened prior to the passing of initial order by SEBI, which has been later revoked. Hence, we are of the view that the transactions of purchase and sale of shares of M/s. Pine Animation Ltd., by the assessee would not be affected by the above said orders of the SEBI. 12. In the statement recorded from the assessee, she has stated that she was guided by her husband in making the investment, who is a Chartered Accountant by profession. The AO has also recorded statement from her husband, but did not find any adverse feature in the statements given by both the parties. We also notice that – (a) the assessee has purchased these shares by paying consideration through banking channels. (b) the shares of M/s. Pine Animation Ltd., have been purchased from an existing share holder in the off market. The copy of physical share certificate is given, wherein the name of the assessee has been to have been endorsed. (c) the shares have been later dematerialised and kept in the Demat account. (d) the assessee has sold the shares through stock exchange platform (e) the assessee has received the sale consideration through banking channels. Further, the shares have entered and exited the demat account of the assessee. We notice that the AO himself has not found any defect/deficiencies in the evidences furnished by the assessee with regard to purchase and sale of shares. Further, the AO has not brought on record any material to show that the assessee was part of the group, which involved in the manipulation of prices of shares. Hence, there is no reason to suspect the purchase and sale of shares undertaken by the assessee. 13. Both the parties relied on various case laws before us. We may refer to the some of the decisions rendered by Hon‟ble jurisdictional Bombay High Court. In the case of Shyam Pawar (54 taxmann.com 108) (Bom), the Hon‟ble Bombay High Court has observed as under:- Printed from counselvise.com 8 ITA No.3370/Mum/2025 Suresh Maheshwari “3. Mr. Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding that findings of fact concurrently rendered by the Assessing Officer and the Commissioner are perverse. The Tribunal proceeded on the footing that onus was on the Department to nail the Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr.Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted. 4. Mr. Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed. 5. We have perused the concurrent findings and on which heavy reliance is placed by Mr.Sureshkumar. While it is true that the Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order, what was important and vital for the purpose of the present case was whether the transactions in shares were genuine or sham and bogus. If the purchase and sale of shares are reflected in the Assessee's DMAT account, yet they are termed as arranged transactions Printed from counselvise.com 9 ITA No.3370/Mum/2025 Suresh Maheshwari and projected to be real, then, such conclusion which has been reached by the Commissioner and the Assessing Officer required a deeper scrutiny. It was also revealed during the course of inquiry by the Assessing Officer that the Calcutta Stock Exchange records showed that the shares were purchased for code numbers S003 and R121 of Sagar Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it is stated to be involved in the modusoperandi. It is on this material that he holds that the transactions in sale and purchase of shares are doubtful and not genuine. In relation to Assessee's role in all this, all that the Commissioner observed is that the Assessee transacted through brokers at Calcutta, which itself raises doubt about the genuineness of the transactions and the financial result and performance of the Company was not such as would justify the increase in the share prices. Therefore, he reached the conclusion that certain operators and brokers devised the scheme to convert the unaccounted money of the Assessee to the accounted income and the present Assessee utilized the scheme. 6. It is in that regard that we find that Mr.Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs.25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 & 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. Printed from counselvise.com 10 ITA No.3370/Mum/2025 Suresh Maheshwari The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribunal proceeds on this line and concluded that inquiry was not carried forward and with a view to discharge the initial or basic onus, then such conclusion of the Tribunal cannot be termed as perverse. The conclusions as recorded in para 12 of the Tribunal's order are not vitiated by any error of law apparent on the face of the record either. 7. As a result of the above discussion, we do not find any substance in the contention of Mr.Sureshkumar that the Tribunal misdirected itself and in law. We hold that the Appeals do not raise any substantial question of law. They are accordingly dismissed. There would no order as to costs. 8. Even the additional question cannot be said to be substantial question of law, because it arises in the context of same transactions, dealings, same investigation and same charge or allegation of accommodation of unaccounted money being converted into accounted or regular as such. The relevant details pertaining to the shares were already on record. This question is also a fall out of the issue or question dealt with by the Tribunal and pertaining to the addition of Rs.25,93,150/-. Barring the figure of loss that is stated to have been taken, no distinguishable feature can be or could be placed on record. For the same reasons, even this additional question cannot be termed as substantial question of law.” 14. In the case of PCIT vs. Ziauddin A Siddique (Income tax Appeal No. 2012 of 2017 dated 4th March, 2022), the Hon‟ble Bombay High Court has observed as under:- “2. We have considered the impugned order with the assistance of learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd (“RFL”) is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (“STT”) has also been paid. The Printed from counselvise.com 11 ITA No.3370/Mum/2025 Suresh Maheshwari Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against the assessee that it has participated in any price rigging in the market on the shares of RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 15. Further, in the case of CIT vs. Jamnadevi Agarwal (20 taxmann.com 529 (Bom), the Hon‟ble Bombay High Court has held that the transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim. In the case of PCIT vs. Indravadan Jain (HUF) (ITA No. 454 of 2018)(Bom), the broker through whom, the assessee had carried out the transactions have been alleged to have been indulged in price manipulations and the SEBI had also passed an order regarding irregularities and synchronized trades carried out in the shares by the said broker. However, the evidences furnished by the assessee with regard to purchase and sale of shares were not doubted. Under these set of facts, the Hon‟ble Bombay High Court held as under:- “….The CIT(A) came to the conclusion that respondent bought 3000 shares of RFL, on the floor of Kolkatta 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 Kolkatta 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 Printed from counselvise.com 12 ITA No.3370/Mum/2025 Suresh Maheshwari the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instruction slips and also received payment from Kolkatta Stock Exchage. 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.” 16. The Ld. DR has placed reliance on the decision rendered by the Co- ordinate Bench in the case of Hitendra C Ghadia(supra), wherein the Tribunal had confirmed the additions relating to long term capital gains arising on sale of penny stock. We have gone through the said order passed by the Tribunal. First of all, we notice that none of the binding decisions rendered by Hon‟ble jurisdictional Bombay High Court has been referred to by the Tribunal. Secondly, it has been mentioned clearly that the decision has been rendered on the basis of facts prevailing in that case. There cannot be any dispute that the question as to whether the capital gain declared by the assessee is genuine or not has to be decided on the basis of facts prevailing in each case. In the earlier paragraphs, we have followed the binding decision rendered by Hon‟ble Bombay High Court. Hence, the Ld. DR cannot place reliance on the decision rendered by Hon‟ble Kolkatta High Court in the case of Swati Bajaj (supra). Accordingly, we are of the view that the decision rendered in the above said case cannot be taken support of by the Revenue. 17. In view of the foregoing discussions, we are of the view that the Ld CIT(A) was justified in deleting the addition of value of sale consideration arising on sale of shares of M/s. Pine Animation Ltd. Since we have confirmed the decision of Ld CIT(A) in holding that the sale transactions of shares cannot be doubted with, the addition made by the AO with regard to estimated commission expenses is also liable to be deleted. Accordingly, we confirm the order passed by Ld. CIT(A). 18. In the result, the appeal of the Revenue is dismissed.” 8. The issue in dispute at hand is squarely covered by the aforesaid decision of the Coordinate bench. Therefore, respectfully following the said decision, we accept Printed from counselvise.com 13 ITA No.3370/Mum/2025 Suresh Maheshwari assessee’s claim of exemption u/s. 10(38) of the Act in respect of long-term capital gain arising out of sale of shares of M/s. Pine Animation Ltd. Accordingly, the AO is directed to delete the addition. 9. In the result, appeal is allowed. Order pronounced in the open court on 29/10/2025. Sd/- Sd/- (Padmavathy S) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 29/10/2025 Aks/- Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "