Sangita Ben Mardia Vs ITO (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai has overturned the reopening of assessments and subsequent additions made by the Assessing Officer (AO) in the case of Sangita Ben Mardia for the Assessment Years (AYs) 2015-16 and 2016-17. The Tribunal’s decision, issued on May 28, 2025, emphasizes the necessity of independent inquiry and concrete evidence to establish accommodation entries, rather than solely relying on generic investigation reports.
Sangita Ben Mardia, a resident individual, had claimed exemption for Long Term Capital Gain (LTCG) arising from the sale of shares of M/s. Appu Marketing and Manufacturing Ltd., also known as Ejecta Marketing Ltd. For AY 2015-16, she sold 10,250 shares for Rs. 67,68,101/-, and for AY 2016-17, she sold 23,250 shares of the same company for Rs. 1,38,72,950/-. These transactions led the AO to reopen her assessments under Section 147 of the Income Tax Act, 1961.
The AO’s reasoning for reopening the assessments was primarily based on information from the Department’s Investigation Wing. The AO observed that Appu Marketing and Manufacturing Ltd., though incorporated in 1983 as a non-government company, was classified as a “shell penny stock company” involved in price rigging. The AO noted that the share price, despite a face value of Rs. 10, had been artificially inflated through manipulation to Rs. 309.75 and even a 52-week high of Rs. 790 on March 18, 2015, before drastically falling to Rs. 400 by December 24, 2015. The net worth of the company, according to the AO, did not justify such high valuations. Furthermore, the Bombay Stock Exchange (BSE), under SEBI’s direction, had suspended trading in 35 listed companies, including M/s Appu Marketing Ltd. Based on these observations, the AO concluded that the share transactions were non-genuine accommodation entries designed to generate artificial profits. Consequently, the AO invoked Section 69A of the Act and added the entire LTCG amount as unexplained income.
