Mahendrakumar R Punjabi Vs ITO (ITAT Ahmedabad)
Assessee, engaged in brokerage & share advisory, filed his return declaring income of ₹3.93 lakh for AY 2016-17. He dealt in shares primarily on behalf of clients, earning commission or “tips income.” Subsequently, the case was reopened u/s 147 on the allegation that Assessee had made unexplained investment of ₹11.27 lakh in certain shares, reportedly flagged in SEBI alerts for penny stock manipulation. Since Assessee did not respond to notices during reassessment, AO completed the proceedings ex-parte u/s 144, treating the investment as unexplained under Section 69B, & determined total income at ₹15.21 lakh.
Before CIT(A)/NFAC, Assessee submitted that he had not invested his own money-shares were purchased in his name for clients, & he only earned brokerage. He relied on the precedent of AY 2015-16, where under identical facts, Department had reopened the case but later accepted a Nil assessment after full verification of investments of ₹6.42 crore.
However, CIT(A) dismissed the appeal, observing:
- Assessee failed to produce confirmations, names, or bank statements of alleged clients.
- No brokerage agreements, contract notes, or commission income were produced to prove agency transactions.
- SEBI had raised red flags about the relevant scrips, & such “penny stock” transactions carry higher evidentiary onus.
- Repetition of earlier facts or reliance on acceptance in family members’ cases does not bind AO; each assessment year is independent.
- Accordingly, CIT(A) confirmed AO’s addition of ₹11.27 lakh.
Arguments before ITAT
