Rajendra P. Shah Vs ITO (ITAT Mumbai)
Addition u/s 69 for Penny Stock Investment Deleted – Explained Source Through Banking Channel Accepted – ITAT Mumbai
The assessee challenged addition of ₹42.60 lakh made u/s 69 towards alleged unexplained investment in shares of Mind Vision Capital Ltd., which was treated by AO as suspicious penny stock transaction based on investigation wing inputs. The assessment was reopened u/s 147 and addition was made mainly on the ground that the assessee failed to furnish complete details of share transactions.
Before ITAT, the assessee demonstrated that shares were purchased through recognized brokers (Kotak Securities & Religare Securities) and payments were made through explained banking channels, partly from bank funds and partly from sale proceeds of other listed shares. Documentary evidence such as demat statements, contract notes, bank statements and transaction details were already placed before lower authorities but were ignored. The Tribunal observed that once primary onus is discharged by furnishing source of investment, Revenue must bring adverse material instead of relying only on suspicion or generalized investigation reports.
ITAT held that neither the assessee nor brokers were shown to be involved in price rigging and no independent enquiry was conducted by AO. Since documentary evidence remained unrebutted and source of investment was explained, addition u/s 69 was unsustainable and was deleted. The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal by assessee is directed against the order of ld. CIT(A)/ADDL/JCIT(A), Agra dated 30.09.2025 for Assessment Year (A.Y.) 2012-13.The assessee has raised the following grounds of appeal:
“1. The ld. CIT(A) has erred in confirming the order of the AO and adding a sum of Rs. 42,60,406/- paid towards service tax on rent.
2. The ld. CIT(A) erred in not appreciating the details and submissions submitted by the assessee and treated the details submitted as incomplete along with the appeal memo and confirmed the additions made by the AO in the impugned assessment order.”
2. Brief facts of the case are that assessee is individual. As per contents of assessment order no return of income for A.Y. 2012-13 was filed by assessee. The case of assessee was reopened under section 147 on the basis of information that certain search and seizure action was conducted by Investigation Wing wherein certain incrimination material about providing bogus long term capital gain or short term capital gain or business income was discovered. On the basis of such information, it was discovered that assessee has also traded in penny stock scrip of Mind Vision Capital Ltd. during F.Y. 2011-12. The assessing officer after recording the reasons about escapement of income issued notice under section 148 to the assessee. (Date of notice under section 148 is not mentioned in the order). In response to such show cause notice, the assessee filed return of income declaring total income of Rs. 1,48,140/-. The assessing officer (AO) in para 3 of assessment order recorded about information about penny stock company and beneficiary thereof. As per information, the assessee is beneficiary of such penny scrip of Mind Vision Capital Ltd. The AO also recorded that statement of assessee was recorded under section 131 on 19.11.2019. The assessing officer referred certain question asked to him and answer thereof. In response to question no. 19, the assessee stated that he has purchased share of Mind Vision Capital Ltd. from Kotak Securities and Religare Securities Ltd. @ Rs. 9.85 per share. He was advised by broker Religare Securities. In response to question no. 24, the assessee explained that he has not sold share of Mind Vision Capital and that he has not claimed in long term or short term capital gain during the year. In para 5 of assessment order, the AO recorded that assessee purchased 294225 share of Mind Vision Capital Ltd. for a consideration of Rs. 42,60,402/-. The assessee was issued show cause notice as to why such investment should not be treated as unexplained. The ld. AO recorded that no response was made by assessee. The AO recorded that assessment was getting time barred. The AO made addition of purchase value of Rs. 42,60,406/- under section 69 of the Act while passing assessment order on 19.12.2019.
