Zany Share Trading Pvt. Ltd. Vs ITO (ITAT Mumbai)
Bogus Share Transactions: ITAT Mumbai Restricts Section 68 Addition to 2% Commission for Conduit Company
The Mumbai ITAT (G-Bench) partly allowed the appeal of the assessee for AY 2010-11, holding that while the share transactions were non-genuine and pre-arranged accommodation entries, the assessee—being merely a conduit entity in a layered structure—could not be taxed on the entire value of the alleged short-term capital loss and gain under Section 68.
The Tribunal noted that the assessee had disclosed bogus short-term capital loss of ₹70.84 lakh on shares of Purti Sakhar Karkhana Ltd., which was exactly set off against an equal bogus short-term capital gain on shares of Sperm Tracom Pvt. Ltd., resulting in nil income. Statements recorded during survey proceedings confirmed that the assessee acted only as a facilitator for accommodation entries and not as a real investor.
Relying on consistent coordinate-bench jurisprudence, including decisions where layered entities were treated as entry providers, the ITAT held that only the embedded commission/profit element constitutes real income in such cases, not the gross transaction value. Accordingly, the Tribunal modified the orders of the lower authorities and directed the AO to restrict the addition to 2% of the aggregate value of the non-genuine share transactions, treating it as estimated commission income.
The reassessment ground was not pressed. To the extent of estimation at 2%, the appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Present appeal filed by assessee arises out of order dated 21/07/2025 passed by NFAC, Delhi [hereinafter “the Ld.CIT(A)”] for AY 2010-11, on following grounds of appeal:-
