Jayaben Hetalkumar Patel Vs ITO (ITAT Ahmedabad)
Penny Stock Suspicion Cannot Skip the Evidence: ITAT Orders Fresh Assessment
Documentary Evidence Requires Examination
The Ahmedabad ITAT restored a dispute concerning a ₹12,16,738 addition under Section 68 to the Assessing Officer for fresh adjudication. The addition arose from share transactions in a company identified in the order as Hemo Organics Limited, earlier known as Dinesh Hargola, which the Investigation Wing had linked to accommodation entries.
The Tribunal found that the assessee had furnished additional evidence before the CIT(A), including ledger accounts, bank records and contract notes, but the appellate order made no reference to those documents.
Considering both the disruption caused by the COVID pandemic during assessment proceedings and the failure to examine the additional evidence, the Tribunal directed a fresh assessment. It expressly left the merits of the addition undecided.
Share Investment Ended in a Loss
The assessee filed her return for AY 2013-14 on 1 August 2013, declaring total income of ₹2,62,772 and a short-term capital loss of ₹17,672.
She maintained that she regularly invested in shares, conducted transactions through a registered broker on a recognised stock exchange, and made and received payments through banking channels.
According to her explanation recorded in the order, she invested ₹11,44,393 in shares of the company. After holding them for approximately three to four months, she noticed that their prices were continuously declining. She therefore sold the shares for ₹6,21,966, booking a loss of ₹5,22,427.
The genuineness of these transactions subsequently became the subject of reassessment proceedings.
Investigation Information Led to Section 68 Addition
The Assessing Officer received information from the Deputy Director of Income Tax (Investigation), Unit-1, Baroda, indicating that the company’s penny stock was used to provide accommodation entries involving business losses and capital gains.
The officer treated the assessee as a beneficiary and identified ₹12,16,738 as sale consideration received from the disputed shares.
Since the assessee did not comply with notices during assessment, the officer added this amount under Section 68. By the assessment order dated 13 September 2021, passed under Section 147 read with Section 144B, total income was assessed at ₹14,79,510.
The order records different sale figures in the assessee’s transaction explanation and the Assessing Officer’s account of the disputed receipts. The Tribunal did not reconcile those figures or adjudicate their correctness, having restored the matter for fresh examination.
Pandemic Disruption Explained the Non-Representation
Before the CIT(A), the assessee explained that the assessment proceedings took place during the COVID pandemic. Her family had suffered from COVID, and she and her husband were distressed and unable to attend properly to the income tax proceedings.
She nevertheless furnished documents at the appellate stage to support her explanation. These included the computation of income, ledger account, bank passbook, contract notes and broker bills.
The assessee challenged the treatment of the transactions as sham and disputed the addition of the receipts under Section 68. She also objected to the reliance on the principle of preponderance of probabilities without adequate consideration of her documentary evidence.
The CIT(A), however, confirmed the addition.
Timing of Losses Was Part of the Assessee’s Defence
Before the Tribunal, the assessee drew attention to the timing of her trading results. The Tribunal noted that the majority of share-trading losses were booked in September 2012, whereas the majority of profits were booked in March 2013.
The assessee argued that she had no taxable gains when the losses were booked. According to her, this chronology supported the genuineness of the transactions.
This remained a contention requiring examination. The Tribunal did not hold that the timing of a loss, by itself, established that the transaction was genuine.
Its decisive procedural finding was that the supporting documents had not been addressed in the appellate order.
Fresh Assessment Directed Before the AO
On examining the CIT(A)’s order, the Tribunal found no reference to the documents relied upon by the assessee. It also observed from Form 35 that additional evidence had been placed before the CIT(A) but had not been taken into consideration.
The Tribunal therefore set aside the CIT(A)’s order and restored the issue to the Assessing Officer for de novo adjudication, taking into account the evidence furnished at the appellate stage.
The assessee was also granted liberty to submit further documents and details supporting her case.
All three grounds were allowed for statistical purposes, without any findings on merits. Consequently, the disputed addition has been remitted for reconsideration; the Tribunal has neither accepted the share transactions as genuine nor finally sustained the addition.
Author’s Comments
The decision emphasises the need to examine the assessee’s specific evidence alongside investigation information. The Tribunal’s concern was that relevant documents had been furnished but remained unaddressed in the appellate decision.
For the fresh proceedings, a clear reconciliation of the purchase cost, sale receipts, disputed credits and resulting loss will be particularly useful. Contract notes and bank entries should be connected to the actual transactions under examination.
The ruling does not establish that banking channels or broker documentation automatically prove genuineness. It requires those records to receive proper consideration before the dispute is decided.
Equally, the pandemic explanation provided the context for granting a fresh opportunity. The ultimate tax treatment will depend on the Assessing Officer’s examination of the evidence and the assessee’s explanation.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The present appeal has been preferred by the Assessee against the Order, dated 30/12/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 13/09/2021, passed under Section 147 read with Section 144B of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2013-2014.
2. The Assessee has raised following grounds of appeal:
1. The Hon’ble CIT(Appeals) has erred in law and on facts in confirming the learned AO’s consideration of genuine transactions of investment in shares of Dinesh Hargola as Sham and Dummy Transactions.
2. The Hon’ble CIT(Appeals) has erred in law and on facts in confirming the addition by invoking section 68 of the Act though all the transactions were supported by proper bills / contract notes and all the receipt and payment were through proper banking channels only.
3. The Hon’ble CIT(Appeals) has erred in law and on facts in confirming the addition Rs. 12,16,738/ u/s 68 by wrongly applying the principle of preponderance of probabilities
3. The relevant fact as emerging from the record are that the Assessee filed her return of income for the Assessment Year 2113-2014 on 01/08/2013 declaring total income of INR.2,62,772/. In the said return of income the Assessee disclosed short term capital loss of INR.17,672/-. It is the case of the Assessee that the Assessee regularly invested in shares; all the transactions were entered into through a registered broker and on the recognized stock exchange only; and all the receipts and payments were done through proper banking channels. During the relevant previous year the Assessee had also invested INR.11,44,393/ in the shares of Dinesh Hargola (later known as Homo Organics Limited). After holding the shares of the said company for about 3-4 months, the Assessee found the prices of the shares of the said company were continuously going down and therefore, the Assessee sold the said shares for at INR.6,21,966/- and booked loss of INR.5,22,427/-. Reassessment proceedings were initiated in the case of the Assessee for the relevant assessment year and the Learned Assessing Officer passed the Assessment Order by making addition of INR.12,16,738/- under Section 68 of the Act. In appeal preferred by the Assessee challenging the aforesaid addition, the Learned CIT(A) confirmed the addition by applying the principle of preponderance of probabilities. and by ignoring the facts and documentary evidences submitted. Being aggrieved, the Assessee had preferred the present appeal before this Tribunal.
4. We have heard both the sides and have perused the material on record.
5. It emerges in the case of the Assessee reassessment proceedings were initiated by the Assessing Officer on the basis of information received from Deputy Director of Income Tax (Investigation) Unit-1 Baroda to the effect that the penny stock script of Hemo Organics Limited [earlier known as Dinesh Hargola] was utilised for providing accommodation entries of Business Loss/Long Term Capital Gains/Small Term Capital Gains for the purpose of introducing unaccounted in the books of accounts. According to the Assessing Officer, Assessee was beneficiary of the aforesaid transactions as the Assessee had received sale by consideration of INR.12,16,738/- on sale of shares of Hemo Organics Limited during the relevant previous year. Since the Assessee failed to comply with the notice issued during the assessment proceedings the Assessing Officer proceeded to make addition of the sale consideration of INR.12,16,738/- in the hands of the Assessee. Vide Assessment Order, dated 13/09/2021, Assessing Officer assessed income of the Assessee at INR.14,79,510/- making addition of INR.12,16,738/- to income of INR.2,62,772/- disclosed in the original return of income filed by the Assesseeon 01/08/2018. Before the Learned CIT(A) it was contended that the assessment proceedings were conducted during the covid pandemic period. The family of the Assessee had suffered from covid. The Assessee and her husband were upset and mentally disturbed due and therefore, could not attend to the income tax proceedings. Before the Learned CIT(A) it was contended that the assessment proceedings were conducted during the COVID pandemic period on account of which proper representation could not be made before the Assessing Officer. It is the case of the assessment that the Learned CIT(A) dispose the appeal without considering evidence furnished by the Assessee on the basis of written submission only. During the course of hearing Learned Authorised Representative for the Assessee has raised attention to documents/details filed before the Learned CIT(A) which included computation of income, ledger account, pass-book, contract noted/broker bills. We find that the majority of loss from trading in shares was booked in September, 2012 whereas majority of profits from trading in shares were booked in March 2013. When the loss was booked the Assessee did not have any taxable gains. According, to the Assessee this showed that the transaction were genuine. It was contended that the aforesaid documents were not considered by the Learned CIT(A) while passing the impugned order. On perusal of the impugned order we find that no reference has been made to the aforesaid documents. Perusal of Form 35 shows that the Assessee had placed additional evidence before the Learned CIT(A) which have not been taken into consideration. Taking into consideration the fact that the assessment proceedings were conducted during the covid pandemic period and the fact that the additional evidence filed before the CIT(A) was not considered, we set aside the order passed by the Learned CIT(A) and restore the issue back to the file of the Assessing Officer for denovo adjudication after taking into consideration the documentary evidences furnished by the Assessee before the learned CIT(A). The Assessee is granted liberty to placed before the Assessing Officer such other documents/details as the Assessee may deem fit to support his case/contentions. Thus, Ground No. 1 to 3 raised by the Assessee are allowed for statistical purposes without returning any findings on merits.
6. In result, present appeal preferred by the Assessee is allowed for statistical purposes.
Order pronounced on 28.09.2026
