Hareshkumar Mafatlal Shah Vs ACIT (ITAT Mumbai)
Assessee had declared LTCG of ₹2,41,53,979 from sale of shares of Sunrise Asian Ltd (SAL) & Monarch Health Services Ltd (MHSL), acquired through proper banking channels, held in Demat, & sold on BSE with STT paid. AO treated entire gain as bogus penny-stock accommodation entry based on general investigation statements of one Vipul Bhatt & denied cross-examination. AO added LTCG u/s 68 & alleged commission of ₹9,66,159 u/s 69C. NFAC upheld additions.
Before Tribunal, Assessee relied on multiple binding precedents:
- Gujarat HC – Divyaben Prafulchandra Parmar,
- MP HC (Indore) – Nilesh Jain (HUF), holding SAL transactions genuine,
- ITAT Mumbai – Lalitaben Praful Shah, relying on Bombay HC – Jamnadevi Agarwal,
- Bombay HC – Shyam R Pawar, emphasising that once documentary evidence such as contract notes, Demat proofs & bank entries are produced, Revenue must bring positive corroboration of sham nature.
Tribunal noted that AO produced no evidence linking Assessee with any operator, nor any irregularity in scrips SAL & MHSL. SEBI’s final orders also did not name Assessee. Udit Kalra (Delhi HC), relied upon by NFAC, was found factually distinct since that case involved “Kappac Pharma” with proven manipulation & delisting.
Once genuine documentary trail exists—purchase invoice, payment by cheque, Demat credit, sale through exchange with STT—the burden shifts to AO. As AO didn’t discharge this burden, additions u/s 68 & 69C were held unjustified. Tribunal followed Shyam R Pawar (Bom HC), holding that suspicion cannot override documented evidence.
