Ramesh Meghraj Jain HUF Vs ITO (ITAT Mumbai)
Mumbai ITAT Allows LTCG Exemption on Greencrest Shares; Investigation Wing Report Alone Cannot Dislodge Documentary Evidence
The Mumbai ITAT allowed the appeal of the assessee-HUF and held that the exemption under Section 10(38) on long-term capital gains from sale of Greencrest Financial Services Ltd. shares could not be denied merely on the basis of the Investigation Wing’s report alleging penny stock manipulation. The Tribunal directed deletion of the additions made under Sections 68 and 69C.
The Assessing Officer had rejected the assessee’s claim of exempt long-term capital gain of ₹28.61 lakh on the ground that Greencrest Financial Services Ltd. was a penny stock used for generating bogus LTCG through price manipulation by entry operators. Based on the Investigation Wing’s report, the AO treated the gain as unexplained cash credit under Section 68 and also made an addition under Section 69C towards alleged commission paid for arranging the accommodation entry. The CIT(A) affirmed the additions.
The Tribunal found that the assessee had produced all primary documentary evidence in support of the purchase and sale of the shares, including documents evidencing genuine stock exchange transactions, and the Assessing Officer had not pointed out any defect in these documents. The additions were founded primarily on the general findings of the Investigation Wing without any material directly connecting the assessee’s transactions with any manipulation.
The Tribunal further noted that Coordinate Benches of the Mumbai ITAT had already examined the very same scrip, Greencrest Financial Services Ltd., for the same assessment year and had deleted similar additions in DCIT v. Nisha Shantaram Pokle and Sheela Ashok Bafna v. ITO after analysing the evidence and the company’s financials. Following the principle of judicial consistency and the binding precedents, the Tribunal held that the assessee was entitled to exemption under Section 10(38).
Accordingly, the Tribunal directed the Assessing Officer to allow the exemption under Section 10(38) and delete the additions made under Sections 68 and 69C. The assessee’s appeal was allowed.
Cases Discussed
- Sheela Ashok Bafna v. ITO (Mumbai ITAT), [2025] 170 taxmann.com 307 (Mumbai – Trib.)
- DCIT v. Nisha Shantaram Pokle (Mumbai ITAT), [2024] 166 taxmann.com 552 (Mumbai – Trib.)
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the Assessee against the order of Ld. CIT (A), NFAC dated 08-Aug-2025 for the Assessment Year 2015-16. The Assessee has raised the following grounds of appeal:
1. The orders passed by the learned lower authorities are bad in law and bad in facts.
2. The learned lower authorities have grossly erred in passing /upholding impugned assessment order on the basis of report of 2 the Investigation Wing without independent application of mind and without linking contents of said report to the transactions of shares carried out by the appellant.
3. The assessment order passed / upheld is ab-initio void inasmuch as, same has been pased purely on the ground of presumption and without bringing any material or evidence on record.
4. The learned lower authotities have grossly erred in rejecting appellant’s claim of exemption u/s 10 (38) of the I. T. Act, 1961, 4 of STT paid Long Term Capital Gain of Rs.28,61,775/- without showing how the said gain was bogus, particularly when entire sale transaction had taken place on stock exchange.
5. The learned Assessing Officer has grossly erred in referring to and relying upon the testimony of third parties without giving an opportunity to cross examine said parties without assiging any reason.
6. The learned Assessing Officer has grossly erred in making an adddition of Rs.28,61,775/- by recourse to sec. 68 of the I. T. Act, 1961, even though no finding has been rcorded by the Assessing Officer that the appellant had in fact maintained any books of account and that on his examination of said books, credit of Rs.28,61,775/- was found by him.
7. The learned Assessing Officer has grossly erred in holding sell of 46000 Equity Shares of M/s. Green Crest Financial Services 7 Ltd. between 19.12.2014 to 18.03.2015 as a pre-arranged bogus sale though purchase of said shares on 24.02.2012 has not been doubted at all.
8. The learned Assessing Officer has grossly erred in making an addition of Rs. 85,853/- by recourse to section 69C of the I. T. Act, 1961, purely on assumption basis and without bringing any material or evidence on record.
9. Having regard to the facts of the case, provisions of law, judicial 9 propositions addition of Rs. 29,47,628/- is wholly unteanable in law and unsustainable.
10. The appellant may please be permitted to raise any additional or alternative ground on or before hearing of the appeal.
3. All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of the learned CIT(A) in upholding the rejection of the assessee’s claim of exemption under section 10(38) on account of the claim of long-term capital gain.
3. I have heard the counsel for both the parties, perused the material placed on record, the judgments cited before us, and also the orders passed by the Revenue authorities.
4. I notice that, as per the record, the assessee, being an HUF, filed its return of income on 08.03.2016 and claimed exempt income of Rs. 28,15,775 under section 10(38) of the Act on account of the sale of equity shares of M/s. Greencrest Financial Services Limited. Since the case of the assessee was selected for complete scrutiny, the AO, based on the information received from the Directorate of Income Tax (Investigation), examined the financials and transactions of M/s. Greencrest Financial Services Limited and found that there was an abnormal increase in the prices of its equity shares. The AO concluded that, with the help of entry operators and promoters, there had been systematic manipulation of the prices of the equity shares. The AO found the scrip to be a penny stock through which bogus long-term capital gains were availed of by a large number of beneficiaries. According to the Assessing Officer, since the assessee was one of the beneficiaries, he rejected the claim of exemption under section 10(38) of the Act and made additions under sections 68 and 69C of the Act on account of unexplained cash credit and unexplained expenditure, respectively, which were also upheld by the learned CIT(A).
5. I notice that the assessee has furnished all the supporting documents in order to prove that the transactions entered into by the assessee on the sale of equity shares of M/s. Greencrest Financial Services Limited are genuine transactions, and the AO has not found any defect in the documents relied upon by the assessee.
6. Moreover, I noticed that the Coordinate Benches of the ITAT, while dealing with the same scrip pertaining to the same assessment year, wherein also the claim of LTCG was rejected in the cases of the respective assessees, after analysing the entire evidence and the financials of M/s. Greencrest Financial Services Limited, deleted the additions made by the AO. The decisions of the Coordinate Benches of the ITAT are as follows:
- DCIT v. Nisha Shantaram Pokle [2024] 166 com552 (Mumbai – Trib.)
- Sheela Ashok Bafna v. ITO [2025] 170 com307 (Mumbai – Trib.)
7. Thus, considering the totality of the facts and circumstances of the case, and keeping in view the decisions of the Coordinate Benches of the ITAT in respect of the said scrip, and respectfully following the doctrine of binding precedents and maintaining judicial consistency, I direct the AO to allow the claim of exemption under section 10(38) of the Act and delete the additions made under sections 68 and 69C of the Act. Accordingly, the grounds raised by the assessee stand allowed.
8. In the result appeal filed by the assessee stands allowed.
Order pronounced in the open court on 06.08.2026.
