VARSHABEN LAHERIKANT BHADRA,MUMBAI V. ITO 25(3)(1), MUMBAI, MUMBAI

ITA 1665/MUM/2024

AI Insights

The case revolves around an appeal by Varshaben Laherikant Bhadra against the order of the National Faceless Appeal Centre, which upheld the addition of Rs. 1,00,99,878 to her income under section 68 of the Income Tax Act, 1961. This addition was initially made by the Assessing Officer (AO) following an investigation that suggested the assessee's transactions in shares were part of a scheme to generate bogus long-term capital gains. The Tribunal, however, found that the shares were purchased and sold through a registered stock broker on the Bombay Stock Exchange, and that SEBI had not found any manipulation or violation of regulations concerning these transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360855 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2011-2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital Gains; Bogus
• Section: 148; 143(3); 68; 133(6); 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘F’ BENCH, MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.1665/Mum/2024 (Assessment Year: 2011-12) Varshaben Laherikant Bhadra 201, Beach Apartment Balraj Sahani Road Opp. Novotel Hotel, Juhu – 400049 Maharashtra Vs. ITO – 25(3)(1) 603, 6th Floor C-10, Pratyakshkar Bhavan Bandra Kurla Complex Bandra (E) - 400051 Mumbai, Maharashtra PAN/GIR No.AABPB7075M (Appellant) .. (Respondent) Assessee Represented by Shri Vimal Punmiya Revenue Represented by Smt. Kavita P. Kaushik, Sr.AR Date of Conclusion of Hearing 30.04.2025 Date of Pronouncement 19.05.2025 आदेश / O R D E R PER AMIT SHUKLA (JM): Aforesaid appeal has been filed by the assessee against the order dated 08.02.2024 passed by the National Faceless Appeal Centre, Delhi for the quantum of assessment passed u/s. 143(3) r.w.s 147 of the Income Tax Act, 1961 (in short “Act”) for the A.Y. 2011-12. ITA No.1665/Mum/2024 Varshaben Laherikant Bhadra 2 2. In various grounds of appeal, the assessee has challenged the addition of Rs. 1,00,99,878/- made u/s. 68 of the Act on sale of shares of M/s. Splash Media & Infra Ltd. after disallowing the claim of exemption u/s. 10(38) of the Act in respect of long term capital gains on sale of shares. 3. Brief facts are that assessee is an individual, derives income from other sources, dividend income and capital gains. She has filed return of income for the A.Y. 2011-12 on 30.07.2011 declaring total income of Rs. 6,98,041/-. Later on, on the basis of information received through ITD system that Pr. DIT (Inv.), Kolkata had made investigation regarding sale of bogus capital gain / loss to penny stock, Assessee case was reopened u/s. 147 of the Act and accordingly notice u/s. 148 of the Act was issued on 09.10.2016. Ld. AO in his assessment order has mostly reproduced the findings of the investigation wing and the general modus operandi adopted by the entry providers. Assessee had purchased 2500 shares of M/s. Splash Media (name changed to Luharuka Media & Infra Ltd from 19.08.2015 onwards) for Rs. 3,27,496/- on 19.08.2009 through Alliance Finstock, a broker duly registered with SEBI by executing purchase order online on BSE's electronic trading platform for execution of sale & purchase order of securities for which she has received delivery directly in D-MAT account maintained with Axis Bank Ltd. For the purchase of shares, assessee has made payment on 18.09.2009 though an account payee cheque drawn on Axis Bank Limited and the shares were delivered in D-Mat form in her D-Mat account on 08.12.2009. ITA No.1665/Mum/2024 Varshaben Laherikant Bhadra 3 There after company has declared Bonus in the ratio of 3:1 on 23.12.2009 i.e. three bonus shares for every share held on record date. Hence the assessee was eligible to 7,500 bonus shares. The said bonus shares were credited to her D-Mat account on 31.12.2009 making total holding of 10,000 shares as on 31.12.2009. The company split the stock in the ratio of 10:1 i.e. Rs.10 per share was split into Re. l per share. Thereby taking the assessee's holding of shares to 100,000 shares of Rs. 1 each as on 02.08.2010. The contention of the ld. AO is that the shares of M/s. Splash Media & Infra Ltd. was received on preferential basis or in amalgamation or merger of any private company with listed company or in off-market transaction has been stated to be incorrect. 4. The assessee has sold the shares through Bombay Stock Exchange through broker M/s. Alliance Finstock Limited on various dates for a total value of Rs. 1,00,99,878/- after paying STT. The details of sale are as under: DATE OF SALE QUANTITY GROSS CONSIDERATION NET CONSIDERATION 16.12.2010 2500 1,87,500 1,89,172 20.12.2010 3000 2,25,300 2,22,502 31.12.2010 6000 4,28,400 4,23,081 03.01.2011 5000 3,61,250 3,56,764 03.01.2011 4500 3,40,875 3,36,647 04.01.2011 4000 2,94,600 2,90,946 12.01.2011 15000 12,61,958 12,46,920 19.01.2011 15000 17,92,503 17,70,247 24.01.2011 25000 30,12,500 29,75,097 28.01.2011 20000 21,94,992 21,67,740 1,00,000 1,00,99,878 99,75,116 ITA No.1665/Mum/2024 Varshaben Laherikant Bhadra 4 5. The sale consideration was credited in bank account, thus the purchase and sale were done online on the electronic platform of Bombay Stock Exchange. 6. Ld. AO observed that the market prices of the shares were around Rs.3.26 in August 2009 and the price was jacked up to Rs.72 till September 2010 which was nearly 22 times and thereafter the prices went steeply low. Apart from that, he noted that M/s. Splash Media & Infra Ltd. had network of Rs.15 Crores during March, 2011 and reserves were Rs.1.89 crores and the total turnover of the company was Rs. 5.35 crores. Accordingly he deduced that it is a penny stock. In the assessment order he has also mentioned that some letters u/s. 133(6) of the Act were issued to the exit providers who purchased the shares from the assessee along with other details, however, these notices were returned back un-served. But nowhere AO has brought on records who were the entry providers or is there any adverse information or material against exit providers who has bought the shares online from BSE. Thereafter he has highlighted the observations of the Investigation Wing and treated the entire amount received through sale of shares of Rs. 1,00,99,878/-as bogus and added the same u/s. 68 of the Act. He further added commission @3% u/s. 69C of the Act which assessee might have incurred for making the arrangement of bogus long term gain. 7. Ld. CIT(A) has confirmed the addition on the same reasoning as done by the ld. AO which is mostly relying upon the investigation report. ITA No.1665/Mum/2024 Varshaben Laherikant Bhadra 5 8. We have heard the rival submissions and also perused the relevant findings in the impugned orders. Apart from the fact that the shares were purchased and sold only on electronic platform of Bombay Stock Exchange through registered stock broker from SEBI after paying STT, it has been brought on record by the Ld. Counsel that husband of the assessee was a regular trader and investor in shares and assessee had also made investments in several other shares. Thus assessee was also a regular investor in shares. During the course of hearing we had enquired from the assessee whether there is any investigation or finding of the SEBI on the scrip of M/s. Splash Media & Infra Ltd., now known as Luharuka Media & Infra Ltd. It has been brought on record that on 31.10.2017 the department had sent a letter along with the report of Director of Income Tax, Investigation, Kolkata with regard to investigation of the scrip of M/s. Splash Media & Infra Ltd. The General Manager, Investigation Department of SEBI vide report dated 11.10.2017 have submitted the report of the Investigation Wing and also to the ACIT, Central Circle -4(4), Mumbai that the investigation of SEBI did not find violation of provisions of the SEBI Act, 1992 and SEBI (PFUTP) Regulations. Along with the letter there is a confidential report given to Pr.DIT (Investigation), Kolkata which had sought for the information regarding the alleged manipulation in market price of shares of certain companies including M/s. Splash Media & Infra Ltd. The SEBI in his report has analysed the volume and price of the trading of the M/s. Splash Media & Infra Ltd. for various patch starting ITA No.1665/Mum/2024 Varshaben Laherikant Bhadra 6 from 15.09.2009 onwards. In their exhaustive report they categorically stated that there was no manipulation pattern observed in the trading of M/s. Splash Media & Infra Ltd. and therefore no adverse inference is drawn. The report deals with all the buyers and the sellers of the scrip in the Stock Exchange in various periods and after detailed examination and inquiry, in the report it is categorically stated that in none of the period there was no specific instance or manipulative pattern which can show that price was rigged or scrip was manipulated to provide any accommodation entry. Thus it was reported that there was no manipulation and no adverse has been drawn. Since it is an exhaustive report, therefore the contents of the same cannot be reproduced. This SEBI report itself clarifies the doubts of the ld. AO and also Director, Investigation Wing, Kolkata who had specifically referred this matter that it should be further investigated by the SEBI. SEBI did not find any manipulation in the prices or that the prices were rigged by some entities either by the buyers or by the sellers and no adverse inference have been drawn even with regard to the exit providers. Thus, the SEBI report itself absolves the case of the assessee. 9. Moreover, the entire premise of the ld. AO is based on that the DIT (inv.) Report which itself has been clarified by the SEBI to the Investigation Wing to whom specific information was shared by the Pr.DIT, Investigation, Kolkata. Once in the investigation it has been held that there was no manipulation in the scrip of M/s. Splash Media & Infra Ltd., and the trading at Bombay Stock Exchange was genuine and the prices quoted in ITA No.1665/Mum/2024 Varshaben Laherikant Bhadra 7 the Stock Exchange over the time were in accordance with the SEBI Rules and Regulations, no adverse can be drawn in the case of assessee. Accordingly, in view of the documents submitted by the assessee as well as the report of the SEBI specifically with regard to the M/s. Splash Media & Infra Ltd., the transaction of purchase and sale of shares online through Bombay Stock Exchange cannot be held to be bogus or non- genuine and accordingly, addition of Rs.1,00,99,878/- made u/s. 68 of the Act is deleted. Consequentially, the adhoc commission made @3% is also deleted. 10. In the result, appeal of the assessee is allowed. Order pronounced on 19th May, 2025. Sd/- (PRABHASH SHANKAR) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 19/05/2025 Giridhar, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "