Bahar Merchants Pvt. Ltd. Vs ITO (ITAT Kolkata)
Kolkata ITAT Upholds ₹2.79 Crore Section 68 Addition on Penny-Stock Purchase-Section 68 Covers Credit Purchases & Journal Entries; Credit Need Not Be Cash
The Kolkata ITAT upheld an addition of ₹2.79 crore under Section 68 arising from an alleged off-market purchase of penny-stock shares, laying down an important proposition that Section 68 is not confined to cash credits—a credit representing the value of goods/shares purchased on credit or recorded through journal entries can also fall within its ambit.
The assessee had purchased 3 lakh shares of Global Infratech & Finance Ltd. (GBLINFRA) at ₹93 per share for ₹2.79 crore through an off-market transaction from Spark Commodeal Pvt. Ltd. The shares were not sold during the year. Instead, they were valued as closing stock at ₹1.212 crore, resulting in a notional loss of ₹1.578 crore, which was set off against interest income of ₹1.721 crore.
The AO found several suspicious circumstances. There was no demat account or contract note, and only a bill dated 03.01.2014 was produced to substantiate the purchase. When the departmental Inspector visited the stated address of Spark Commodeal Pvt. Ltd., the entity could not be found and neighbouring occupants denied the existence of its office at that address.
Further, while the purported purchase consideration was ₹2.79 crore, only about ₹3 lakh appeared to have actually been paid, with the balance stated to have been settled or squared off through journal entries. The entire ₹2.79 crore purchase amount appeared as trade payable in the balance sheet.
The assessee’s principal legal argument was that Section 68 could not apply because there was no cash credit or corresponding receipt of ₹2.79 crore in its bank account. The Tribunal rejected this contention by relying upon the Karnataka High Court judgment in Smt. Rekha Krishna Raj v. ITO, whose SLP was subsequently dismissed by the Supreme Court.
The ITAT emphasised that the expression used in Section 68 is “found credited” and not “cash credited”. Therefore, the credit may represent cash or the value of supplies/purchases made on credit. Once the amount is credited in the books, Section 68 can apply if the assessee fails to satisfactorily explain the nature and source of that credit.
On genuineness, the Tribunal found the transaction highly dubious. The shares were purchased off-market from a struck-off/non-traceable company, there was only a single transaction in the particular scrip, the seller/broker’s identity and genuineness were not established, and the price of the scrip had fluctuated by approximately 125 times within two years without corresponding financial justification.
The Tribunal also noted that GBLINFRA was among the 84 penny stocks investigated by the Kolkata Investigation Wing, that SEBI had suspended trading in the scrip, and that operators/share brokers were found to have manipulated its price. It therefore applied the jurisdictional Calcutta High Court ruling in PCIT v. Swati Bajaj.
A particularly significant factual feature was that the shares were never actually sold during the year. The assessee simply reduced their closing-stock value from ₹2.79 crore to ₹1.212 crore and thereby generated a ₹1.578 crore artificial/notional loss, substantially wiping out its interest income of ₹1.721 crore. The Tribunal considered this an important circumstance supporting the Revenue’s case that the overall transaction lacked genuineness.
Accordingly, the ITAT held that the assessee had failed to discharge the onus of proving the genuineness of the purchase transaction and confirmed the entire ₹2.79 crore addition under Section 68. The appeal was dismissed.
Cases Discussed:
- PCIT Vs. P.L.Goenka (HUF) (Calcutta HC), [2025] 174 com588(Calcutta)
- Saroj Baid v. Income-tax Officer (Kolkata ITAT), [2023] 155 com630 (Kolkata – Trib.)
- Archana Rajendra Malu v. Income-tax Officer (Pune ITAT), [2023] 155 com625 (Pune – Trib.)
- Atmiben Alipitkumar Doshi v. Income-tax officer (Ahmedabad ITAT), [2023] 149 com104 (Ahmedabad – ITAT)
- NRA Iron & Steel (P.) Ltd. v. PCIT (SC), [2020] 117 taxmann.com 752/273 Taxman 14 (SC)
- Rekha Krishna Raj v. ITO (SC), [2017] 85 taxmann.com 256/250 Taxman 333 (SC)
- Principal Commissioner of Income-tax v. Swati Bajaj (Calcutta HC), [2022] 139 com352 (Calcutta)
- Rekha Krishna Raj v. ITO (Karnataka HC), [2013] 33 taxmann.com 64/215 Taxman 159 (Karn.)
- CIT vs. Precision Finance Pvt. Ltd. (Calcutta HC), 208 ITR 465 (Cal.)
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Act for AY 2014-15 dated 14.08.2025.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that the Ld. CIT(A), NFAC, Delhi has erred in law as well as on facts of the case by passing order u/s 250 of the I.T. Act, 1961 dated 14/08/2025 dismissing the appeal filed by the appellant and thereby confirming the addition of Rs.2,79,00,000/- made by the Assessing Officer u/s 68 of the I.T. Act, 1961 treating the devaluation of the share price on the same line as of the Assessing Officer ignoring the totality of the submission made by the appellant which is not correct as Statement of Facts in details pointing out that there was no role of the appellant in devaluation of share price was submitted before Ld. CIT(A), NFAC.
2. For that the Ld. CIT(A), NFAC, Delhi has erred in law as well as on facts of the case by passing order u/s 250 of the I.T. Act, 1961 dated 14/08/2025 dismissing the appeal filed by the appellant on the point of addition of Rs.2,79,00,000/- u/s 68 of the I.T. Act, 1961 which is not correct as there was no such CASH CREDIT of Rs.2,79,00,000/- detected by the Assessing Officer in the bank accounts of the appellant.
3. For that the Ld. CIT(A), NFAC, Delhi has erred in law as well as on facts of the case by dismissing the appeal filed by the appellant depending on the wrong/baseless conception which has been noted at para 5.1 of the appellate order, ‘One of such node is claiming short-term capital loss and LTCG exempted under section 10(38) of the Act. The present case is a classic example of this arrangements’ a blind as well as a bias finding made by the Ld. CIT(A) which is not correct as the appellant neither claimed STCL nor claimed LTCG. This type of wrong findings have been given by the Ld. CIT(A) just to find out a plea for dismissing the appeal filed by the appellant which is not correct as well as bad in law.
4. For that the observations and contentions of the Ld. CIT(A), NFAC, Delhi in dismissing the appeal filed by the appellant on the grounds which are baseless and incorrect.
5. For that the appellant craves leave to adduce, modify and/or alter the grounds at or before hearing.”
3. Brief facts of the case are that the assessee had filed the return of income for AY 2014-15 on 30.11.2014 declaring the total income at ₹13,58,279/-. The case was selected for scrutiny through CASS for suspicious transactions relating to short-term capital loss on shares, and accordingly notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee. During the assessment proceedings, the Assessing Officer (hereinafter referred to as Ld. ‘AO’) observed that the assessee had claimed a short-term capital loss of ₹1,57,80,000/- on the off-line purchase and devaluation of shares of a penny stock named Global Infratech & Finance Ltd. (GBLINFRA). The Ld. AO found that the assessee had purchased shares worth ₹2,79,00,000/- from a broker who, upon inquiry, was found to be non-existent. The Ld. AO pointed out the unnatural price fluctuations of the scrip and investigations by the Department uncovering the operation of entry providers manipulating penny stocks for bogus capital losses, and accordingly held the entire purchase value of ₹2,79,00,000/- as bogus and added it as unexplained cash credit u/s 68 of the Act to the income of the assessee and determined the total income of the assessee at ₹2,92,58,280/- vide order passed u/s 143(3) of the Act dated 29.12.2016. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who noted that the financials of the penny stock company reflected meagre business transactions despite unusual fluctuations in its share price. Relying on the reports of the SIT on Black Money and findings that the entities involved operators to provide accommodation entries, the Ld. CIT(A) rejected the assessee’s claims and held that secondary evidence was sufficient in such matters without requiring cross-examination of the operators. Accordingly, the Ld. CIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. It was argued that section 68 of the Act was not applicable as bogus purchases as the amount was not credited in the bank account and the addition was infructuous. Our attention was drawn to page 104 of the paper book being a bill dated 03.01.2014 for a sum of ₹2,79,00,000/- for purchase of shares. The same is reproduced as under:
6. Our attention was also drawn to pages 105 being ledger account for the shares purchased on 03.01.2014 being 3 lakh shares of GBLINFRA, page 37 to 51 being the copy of the assessment order and page 40 of the paper book which gives details of the transaction in the scrip of Global Infratech and Finance Ltd and the variation of price from ₹ 0.692 ₹ 67.99 and further to ₹ 83.60 and thereafter to ₹ 34.61 in which allegation of manipulation has been made during the period of financial year 2012-13 to 28/03/2014. It was submitted that a wrong section was applied and section 68 of the Act was not applicable. The assessee had claimed short term capital loss of ₹1,57,80,000/-, which was the loss on account of devaluation. Our attention was also drawn to page 116 of the paper book which contains the decision of the Ld. CIT(A).
7. It was submitted by the Ld. AR that the purchases of the shares were carried out in the same year and the loss was carried forward. The transactions were carried out through the share broker. The value had gone up by 125 times as has been noted by the Ld. CIT(A). When enquired when the payment was made and whether the loss was set off subsequently, the Ld. AR stated it was not known to him. However, it is noted on perusal of the documents filed that the purchase was made during the year, no sale of the shares bought during the year was made in the impugned assessment year and loss on account of lower valuation due to market price being less than the cost price, was worked out, which has been set off against the interest income of the assessee in the profit and loss account.
8. The Ld. DR countered by submitting that the details were on record and the shares were purchased offline from a struck off company and the return of income of ₹58 lakh was filed. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.
9. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The return was selected for scrutiny for one of the reasons being “suspicious transaction relating to short-term capital loss in shares”. The assessee had claimed income from trading in shares and securities and for providing loans and advances. The Ld. AO noted that the assessee had shown and claimed short term capital loss amounting to ₹ 1,57,80,000/- on off-line purchase of shares of M/s Global Infratech and Finance Ltd, a penny stock. The assessee had not sold the shares but had decreased the total value of such shares by ₹ 1,57,80,000/- by valuing the inventory at lower of cost or the market price and such short term loss on closing stock of the scrips actually amounted to ₹1,57,80,000/-, which has been set off against the interest income. Further, though the assessee had shown total opening balance of ₹263,000/- on such sale of shares of the scrip named Blue Circle Services Ltd, a penny stock, but it had actually not made any profit/loss from the sale of such shares, as noted by the Ld. AO. The Ld. AO required the assessee to furnish various details which were filed from time to time. The Ld. AO noted that the assessee was not a regular investor/trader of shares and had not made such huge profit/loss in the shares in the past. The assessee had never transacted in the scrip of Global Infratech & Finance Ltd. (GBLINFRA). Further, the results of enquiry carried out by him are extracted as under from the assessment order.
“As stated earlier, an all – out verification / investigation was needed in this case so as to reach into the fact as to why purchase was made at such excessive high rates.
5.2 Hence, the documents, as submitted by the A/R of the assessee company, was once again perused, and it is found that, the assessee company had made an off – line purchase of 3, 00,000 shares of the scrip named Global Infratech & Finance Limited, a penny stock, from one M/s. Spark Commodeal Private Limited, @ Rs. 93/-, amounting to a total of Rs. 2,79,00,000/-, on 03.01.2014.
However, on examination of the ledger account of the assessee company, in the books of Intime Equities Limited, the share broker of the assessee company, it is found that, an amount of Rs. 3,00,000/- only was reflected there, in respect of Global Infratech & Finance Limited, a penny stock, that too on 26.03.2014.
The A/R of the assessee company, was time and again, requested to submit the demat account, of the assessee company. However, he admitted that, there was no demat account, as those shares were purchased off – line. No contract notes were also not submitted by the assessee company. A bill dated 03.01.2014, as stated above, was only submitted by the assessee company, to prove the genuineness of the said transaction.
Naturally, suspicion arose on the fact that, whether the transaction of such purchase actually took place or not, and the authenticity of the said bill was placed under scanner.
As a consequence, the departmental Inspector was sent to the address of M/s. Spark Commodeal Private Limited, i.e., 66, Salkia School Road, 5th Floor, Kolkata – 711 106, as provided by the A/R of the assessee company, to verify the existence of the said company, and the genuineness of the said transaction.
In his report, the departmental Inspector stated that, “….All my efforts to locate the office of M/s. Spark Commodeal Pvt. Ltd., at 5th Floor, 66, Salkia School Road, Howrah – 711 106 went futile “. He added that, “….Occupants / residents of other neighbouring flats in the same floor of the building also denied any presence of the office of M/s. Spark Commodeal Pvt. Ltd., in the said floor & building “. In support of his report, he has also enclosed the photographs of two other companies, namely, Jahangir Biri Factory (P.) Ltd., & L. N. Co., both of whom are presently operating from the said address. Such report, including such photographs, were perused, and have been placed in the assessment folder.
5.3 In view of such report, it is concluded that the suspicion that such transaction of purchase amounting to Rs. 2,79,00,000/-, was non – existent, is proved to be correct. It is further concluded that, the A/R of the assessee company, had knowingly tried to guide the stream of investigation in another direction.”
9.1 The Ld. AO thus added a sum of ₹2,79,00,000/- as bogus purchases and added the same to the income of the assessee by invoking section 68 of the Act by relying upon the decision of the jurisdictional High Court in the case of CIT vs. Precision Finance Pvt. Ltd. 208 ITR 465 (Cal.) and other decisions.
10. The Ld. CIT(A) dismissed the appeal of the assessee as per his findings as under:
“5. Decision
In this case, The Assessing officer noted that the Appellant had claimed a short-term capital loss of rupees 1,57,80,000/- in the devaluation of a script named as Global Infratech & Finance limited. It was noted by the A.O that the Appellant had purchased the same script on 03-01-2014 for an amount of Rs. 2,79,00,000/-, Through a broker named as M/S Spark Commodeal Pvt Ltd at the rate of Rs. 93/- per share. It was further noted by the A.O that Investigation wing of the department had carried out search and seizure operation in the premises of several penny stock companies and their share brokers as well as certain operators. The A.O has mentioned in details the list of such persons in the body of the Assessment order. It was found and reported by the investigation wing that a number of penny stock companies where unearthed which were used to provide bogus STC losses and exempted LTCG by manipulating prices of this script. Those companies did not have any actual existence or business to justify the abnormal rise or fall in the prices of their shares. Global Infratech & Finance limited was found to be one of such penny stock companies and the Appellant was found to be one of the beneficiaries. The A.O. has mentioned in details the extent of price fluctuation in the script of the above company which ranges from 69p per share to Rs. 83.63 per share within a spare of two years. The A.O has also analysed the financials of the company and has also depicted a graphical presentation of the fluctuation in shares. The A.O has also referred the report of SIT consisting of two retired supreme court judges, which has pointed out this modus operandi as a common practice for converting black money into the white.
The A.O. also conducted an independent inquiry regarding the existence of the share broker that is M/s Spark commodeal pvt Ltd by deputing the Inspector of his office. The inspector has furnished a categorical report that the above share broker company never existed in the given address. Based on the above facts, The A.O. held the amount of purchase of script to the tune of Rs. 2,79,00,000 /-to be unexplained credit u/s 68 of the Act and added to the total income of the Appellant .
The Appellant , on the other hand, made a detail submission justifying his purchase of script and Capital loss shown on account of devaluation of the said script. The Appellant had also stated that he was not aware of anything called penny stock. He further stated that the share broker was actually situated in the address given by him and the Inspector simply failed to locate it. The Appellant also raised the issue of not providing him the opportunity to cross examine the persons based on whose statements, the above company was held as a penny stock company.
5.1 I have gone through the entire gamut of the case, facts brought in by the A.O. and those mentioned by the Appellant. In recent years, The Department has unearthed various nodes of arrangements through which the black money is converted into the white without paying tax. One of such node is claiming Short-term capital loss and LTCG, exempted under section 10(38) of the Act. The present case is a classic example of this arrangements. As mentioned by the A.O, The financials of the company reflects meagre business transactions but unusual fluctuation in the price of the share. In this case shares of the company has fluctuated more that 125 times within a period of two years , without any apparent reasons. Moreover, The enquiry conducted by the A.O revealed that even the broker of the above share transaction was a non-existing company , As it was not found located in the address given. It is also note worthy here that SEBI had restricted the sell and purchase of the shares of this company. Regarding issue of cross-examine the persons, whose statements were recorded regarding the above penny stock companies, it is seen that the A.O has discussed the issue in details. Moreover, it is seen that the A.O has not relied merely on the statements of such persons, but has discussed the suspicious nature of the activities of the company regarding the unusual fluctuation in its share process. Moreover, information unearthed by the above exercise including statements of the concerned share brokers and other operators, constitute only the secondary evidences, for which no cross-examination is required.
In recent years, this issue has come before the various courts of law for adjudication. Hon’ble courts had discussed the issue in details and have come to almost unanimous opinion that these transaction are merely a tool to covert the unaccounted money into the accounted one without paying tax. Some of such judgments are mentioned here under, including those of jurisdictional high court of the Appellant :
i. [2025] 174 com588(Calcutta) PCIT Vs. P.L.Goenka (HUF)
ii. [2022] 139 com352 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Swati Bajaj*
iii. [2023] 155 com630 (Kolkata – Trib.) IN THE ITAT KOLKATA BENCH ‘B’ Saroj Baid v. Income-tax Officer
iv. [2023] 155 com625 (Pune – Trib.) IN THE ITAT PUNE BENCH ‘B’Archana Rajendra Malu v. Income-tax Officer
v. [2023] 149 com104 (Ahmedabad – ITAT) IN THE ITAT AHMEDABAD BENCH ‘SMC’ Atmiben Alipitkumar Doshi v. Income-tax officer
6. Based on above discussion, addition made by the A.O In this case is here by sustained and appeal of the Appellant is dismissed.”
11. The Ld. DR submitted that during the course of the appeal, written submission dated 07.04.2026 has been filed on 07.04.2026, which may be considered. The same is reproduced as under:
“BEFORE THE HON’BLE INCOME TAX APPELLATE TRIBUNAL, KOLKATA
“A” BENCH, KOLKATA
In the matter of:
Assessee: Bahar Merchants Pvt Ltd
Assessment Year: 2014-15
WRITTEN SUBMISSION ON BEHALF OF THE REVENUE
1. Brief Facts
1. The present appeal pertains to additions made by the Assessing Officer in respect of transactions undertaken by the Assessee in the scrip of Global Infratech & Finance Ltd., a known penny stock company.
2. Scrip Covered under Kolkata Investigation Wing – “84 Penny Stocks”
1. It is an undisputed fact that the scrip Global Infratech & Finance Ltd. forms part of the 84 penny stock companies identified by the Investigation Wing, Kolkata.
2. These very scrips were the subject matter of detailed investigation and were directly considered by the Hon’ble Calcutta High Court in the landmark judgment in PCIT vs. Swati Bajaj & Ors.
3. The Investigation Wing had unearthed a systematic racket involving non-genuine transactions in these scrips.
4. Therefore, the present case falls squarely within the same factual matrix as examined and upheld by the Hon’ble Jurisdictional High Court.
5. Being a judgment of the Jurisdictional High Court, the same is a binding judgement.
3. JV Entries and applicability of Section 68
1. In the present case, the facts are even more glaring and incriminating. Some of these facts are enumerated below:
1. The Assessee has allegedly purchased shares offline from a struck-off company, which itself raises serious doubts regarding the genuineness of the transaction.
2. The total consideration for the shares is stated to be approximately ₹79 crores, whereas the actual payment appears to be only about ₹3,00,000.
3. The remaining consideration is claimed to have been settled through journal entries / barter / JV entries, as was submitted by the Ld. Authorised Representative of the Assessee in course of hearing today.
2. These facts clearly demonstrate that the transaction completely lacks genuineness for the following reasons:
1. The transaction is not conducted through normal banking or market channels,
2. There is a complete mismatch between stated consideration and actual payment,
3. The arrangement is artificial and lacks commercial substance.
3. During the course of hearing, the Ld. Authorised Representative of the Assessee has contended that Section 68 is not applicable, as there is no “credit” in the books, and that the transaction has been recorded through journal/barter entries.
4. The said contention is misconceived and untenable for the following reasons:
1. Section 68 applies to any sum found credited in the books, irrespective of the mode of entry.
2. Even journal entries constitute credits, and the Assessee is required
to satisfactorily explain:
Identity,
Creditworthiness, and
Genuineness of the transaction.
3. While purchasing the shares, the assessee would have had to debit the shares account while crediting the account of Spark Commodeal Pvt Ltd, since the shares were purchased on credit as submitted by the Ld. Authorised Representative of the Assessee in course of hearing today. Thus, it goes without saying that the share purchase transaction has involved credit of the amount in the books in the name of Spark Commodeal Pvt Ltd. Such credit is directly linked to the share purchase transaction and is also clearly non-genuine as submitted above.
4. Thus, the provisions of Section 68 of the IT Act, 1961 are clearly attracted in this case.
4. Prayer
In view of the above submissions, it is most respectfully prayed that:
-
- The assessee’s appeal be dismissed
- The addition made by the Assessing Officer be confirmed;
- Any other relief deemed fit in the facts and circumstances of the case may kindly be granted in favour of the Revenue.”
12. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). A perusal of the financial details filed before us shows that the director’s report has highlighted the financial result of the company for the year ended on 31.03.2014 as under:
13. The statement of profit and loss account for the year ended on 31.03.2014 along with other details is as under:
14. We thus note that the assessee had also issued its own shares at a premium and the premium received along with the share capital was given as loan and advances, the details of which are however not mentioned. Apparently, on such loans the assessee had earned other income being interest received of ₹1,72,17,404/- (last year ₹1,57,36,000/-). In the A.Y. 2013-14 the assessee had purchased shares of ₹1,61,74,500/- which were sold for ₹23,78,761/- and after debiting other expenses, the profit of ₹18,51,489/- was shown. Thus, the interest income was offset to a large extent by the loss on account of share transactions in the earlier year as well. In the impugned assessment year, the purchases of shares were shown at ₹2,79,00,000/- and the shares were purchased from a struck-off company, allegedly on 3rdJanuary, 2014 and were purchased off-market. The entire amount of purchase of shares is being shown as trade payables in the balance sheet and as per the written submission filed by the Ld. DR, only a sum of ₹3,00,000/- was paid and the balance amount was settled/squared off through journal entries. The shares were not sold but a notional loss on account of closing stock being valued at ₹1,21,20,000/- was worked out, thereby creating an artificial loss of ₹1,57,80,000/-, which has been utilized for offsetting the interest income of ₹1,72,17,404/-. Thus, on facts the entire transaction of purchase of shares of a penny stock company is dubious as within a short span of time, the scrip has been utilized for creating artificial loss as well as profit for the intended beneficiaries to whom it was sold. Thus, the transaction cannot be held to be genuine on facts as highlighted by the Ld. AO and reiterated in the written submission filed by the Ld. DR and also discussed by the Ld. CIT(A). The Ld. CIT(A) has discussed the fluctuation of the price of the shares by 125 times within a period of two years without any apparent reasons and the decision of the Hon’ble Calcutta High Court in the case of PR. CIT vs. Swati Bajaj [2022] 139 taxmann.com 352 (Cal) and other decisions relied upon by him are squarely applicable to the facts of the case. As regards the non-applicability of section 68 of the Act to the impugned transactions, it would be apt to refer to the decision of Smt. Rekha Krishna Raj v. ITO [2013] 33 taxmann.com 64/215 Taxman 159 (Karn.) wherein it has been held that the words used in the provision is either ‘found credited’ or ‘so credited’ and there is no indication that such a credit should be a cash credit. It may be a cash credit or it may be a credit representing the value of the supplies made by the suppliers on credit. The essence is that the credit should be shown in the account and that would satisfy the requirement of section 68. The SLP has also been dismissed in Rekha Krishna Raj v. ITO [2017] 85 taxmann.com 256/250 Taxman 333 (SC). Further, in the case of NRA Iron & Steel (P.) Ltd. v. PCIT [2020] 117 taxmann.com 752/273 Taxman 14 (SC) it has also been held that the practice of conversion of unaccounted (or black) money through the cloak of share capital/premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee since the information is within the personal knowledge of the assessee. He is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the assessee. Since the transaction of purchase of shares has not been proven to be genuine as the identity of the seller/broker was not established and he failed to appear for examination before the Ld. AO and it was the shares of a struck-off company in which adverse finding had been given by SEBI as well, only a single transaction was made of a lone scrip, 54 share brokers and shares operators of the scrip had manipulated the price of the scrip in a collusive manner as per the investigation carried out by the Department on the basis of their sworn statements and the price fluctuation was not supported by the financials of the company in which investment was made by the assessee, and as the onus to prove the genuineness of the purchases, was not discharged by the assessee, the addition made was justified. As SEBI had also suspended trades in the scrip of GBLINFRA, the genuineness of the transaction is also not established. The scrip was covered among 84 penny stocks which was the subject matter of the order of the Jurisdictional High Court in the case of Swati Bajaj and Ors. (supra), therefore, considering the totality of facts and circumstances of the case, the addition of ₹ 2,79,00,000/- made under section 68 of the Act by the AO and confirmed by the Ld. CIT(A) is upheld as we do not find any infirmity in the order of the Ld. CIT(A) whose order is confirmed and the appeal of the assessee is dismissed.
15. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 10th August, 2026.
