DCIT Vs Anmol Govindram Sekhri (ITAT Mumbai)
The ITAT Mumbai considered cross appeals filed by the Revenue and assessee against the NFAC order dated 17.09.2025 for AY 2019-20. The assessee, an investor in shares for over two decades, had declared total income of ₹3,28,00,390. Based on Investigation Wing information concerning transactions in M/s Florence Investech Ltd., the Assessing Officer initiated reassessment proceedings under Section 148A and subsequently issued notice under Section 148. The assessee furnished demat statements, ledger accounts, bank statements, computation of income and capital gains working. The AO nevertheless treated ₹4,07,25,879 as unexplained cash credit under Section 68, alleging that the share transactions represented accommodation entries.
Before the CIT(A), the assessee relied on documentary evidence and explained the corporate background of Florence Investech Ltd. The CIT(A) noted that the company had been promoted by J.K. Tyre Industries Ltd. and BMF Investments Ltd., with promoters holding 74.98% of the equity share capital. The CIT(A) also considered the subsequent transfer of promoter shareholding and amalgamation involving Florence Investech Ltd. and Bengal & Assam Company Ltd. The CIT(A) observed that the AO had concluded that the share prices were manipulated but had not established how the alleged price rigging occurred. The CIT(A) further noted that SEBI had not banned trading in the shares or found any individual, broker or promoter guilty of price rigging. The CIT(A) therefore directed deletion of the ₹4,07,25,879 addition under Section 68.
The Revenue challenged the deletion before the Tribunal, contending that the transactions were pre-arranged penny-stock transactions and that the LTCG claimed under Section 10(38) represented accommodation entries. The Tribunal observed that the addition was primarily founded on the Investigation Wing report. It held that suspicion could not substitute legal proof and that characterization of a scrip as a penny stock, without independent material establishing the assessee’s involvement in price rigging, market manipulation or accommodation arrangements, could not by itself justify an adverse inference. The Tribunal noted that the assessee had produced contract notes, demat statements, bank statements and other contemporaneous records, while the transactions were carried out through the recognised stock exchange using a screen-based trading mechanism. No material was brought on record showing that the documents were false or fabricated or that the assessee had a nexus with alleged operators or beneficiaries identified by the Investigation Wing.
The Tribunal found no infirmity in the CIT(A)’s deletion of the Section 68 addition and dismissed the Revenue’s appeal. Since the Revenue’s appeal was dismissed, the assessee’s cross objection challenging the reassessment proceedings became infructuous and was also dismissed. The order was pronounced in the open court on 15.07.2026.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Present cross appeals filed by the Revenue and assessee arises out of order dated 17.09.2025 passed by NFAC, Delhi for assessment year 2019-20 of following grounds of appeal:
Grounds raised by the Revenue in ITA 7243/MUM/2025
1. Whether the CIT(A) erred in deleting the addition of Rs. 4,07,25,879 /- made under Section 68 of the Act, despite the assessee’s failure to establish the genuineness, creditworthiness, and identity of the counterparties involved in the alleged sale of shares of a penny stock?
2. Whether the CIT(A) failed to appreciate that the assessee’s transactions in shares of Florence Investech Ltd. were pre-arranged and carried out in a closed group, as per the findings of the AO, which justified the treatment of sale proceeds as unexplained cash credit under Section 68?
3. Whether the CIT(A) erred in law and on facts in deleting the addition without considering the totality of evidence, pattern of trading, and information from the Investigation Wing which clearly pointed to the accommodation entry nature of the alleged gains?
4.Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has· erred in deleting the addition made by the AO u/s.68 of the I.T. Act, 1961 without appreciating the fact that the LTCG, which claimed as exempt u/s 10(38), was derived by the assessee from sale of shares of a penny scripts and also by not considering the modus operandi/ basic aim of the scheme of routing the unaccounted money of LTCG beneficiaries into their account/ books in the grab of Long Term Capital Gain/Loss?
5. Whether on the facts and the circumstances of case and in law, the Hon’ble ITAT has erred in holding that the claim of LTCG of the assessee is genuine, given that unequivocal evidence on record to show that assessee was a beneficiary to claim bogus Long Term Capital Gain?
Grounds raised by the assessee in CO 360/MUM/2025
1. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/ Ld. Commissioner Income Tax (Appeals) has erred in not adjudicating upon the Jurisdictional issue of the challenge to the re-opening of Assessment as raised by the Appellant in the Form 35.
2. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/ Ld. Commissioner Income Tax (Appeals) has erred in not appreciating that the re-opening of Assessment made u/s 148 of the Act was bad in law.
3. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/Ld. Commissioner Income Tax (Appeals) has erred in not appreciating that the re-opening of Assessment made u/s 148 of the Act was bad in law as the copy of sanction was not furnished to the Appellant.
4. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/Ld. Commissioner Income Tax (Appeals) has erred in not appreciating that the re-opening of Assessment made u/s 148 of the Act was made without any specific information that suggested that the Income in the case of the Appellant had escaped assessment.
5. In the facts and circumstances of the case and in law, the National Faceless Appeal Centre/ Ld. Commissioner Income Tax (Appeals) has erred in not appreciating that the re-opening of Assessment made u/s 148 of the Act was made without furnishing the result and findings of the enquiry made as required u/s 148A(A) of the Income-tax Act, 1961.
6.The appellant craves leaves to add to, to alter or to amend the grounds of cross objections.
Brief facts of the case are as under:
2. The assessee, an investor in shares for over two decades, filed its return of income declaring a total income of ₹3,28,00,390/-. The return was processed under section 143(1) of the Income-tax Act, 1961. Subsequently, based on information received from the Investigation Wing alleging that the assessee had entered into transactions in the scrip of M/s. Florence Investech Ltd., purportedly a penny stock, the Ld.AO initiated proceedings under section 148A of the Act and issued a notice under section 148A(b) dated 08.03.2023.
2.1. In response to the said notice, the assessee filed a detailed reply on 20.03.2023 denying that any income had escaped assessment. In support of its explanation, the assessee furnished, inter alia, copies of the demat statement for the relevant financial year, ledger account of M/s. Florence Investech Ltd. for Financial Year 2017-18, relevant bank statements, computation of income for the year under consideration, and the capital gains working highlighting the transactions in the shares of M/s. Florence Investech Ltd.
2.2. After considering the reply, the Ld.AO passed an order under section 148A(d) dated 28.03.2023 rejecting the explanation furnished by the assessee. The Ld.AO observed that an amount of ₹3,20,43,769/- appeared to be in the nature of bogus transactions representing income that had escaped assessment. Consequently, a notice under section 148 was issued, followed by notices under sections 143(2) and 142(1), calling upon the assessee to furnish complete details relating to the purchase and sale of the shares of M/s. Florence Investech Ltd.
2.4.During the reassessment proceedings, the assessee submitted that the impugned transactions were executed through the recognised stock exchange on a screen-based electronic trading platform, leaving no scope for any manual intervention or manipulation. It was further contended that M/s. Florence Investech Ltd. was a holding company of the J & K Group of Companies and possessed sound financial fundamentals, including adequate share capital, reserves, investments and revenue, which had prompted the assessee to invest in its shares.
2.5.The assessee further pointed out that as on 31.03.2023, the market value of its investment portfolio stood at approximately ₹389.75 crores comprising shares of several well-established listed companies, including Public Sector Undertakings and Tata Group companies. It was also submitted that during Assessment Year 2020-21, the assessee had sold shares aggregating to nearly ₹100 crores and the assessment for that year, selected for scrutiny, had been completed after accepting the transactions. According to the assessee, the impugned purchase and sale transactions were carried out entirely through the stock exchange, the consideration was paid and received through normal banking channels, and the movement of shares was duly evidenced by the demat statements.
2.6. The Ld.AO, however, was not persuaded by the explanation furnished by the assessee. Placing reliance primarily on the information received from the Investigation Wing, the Ld.AO concluded that the transactions in the shares of M/s. Florence Investech Ltd. were accommodation entries and treated the amount of ₹4,07,25,879/- as unexplained cash credit under section 68 of the Act. The said amount was accordingly added to the income of the assessee.
Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A).
3. Before the Ld.CIT(A), the assessee placed on record various documentary evidences and statements in support of the genuineness of the impugned share transactions. Upon examination of the material, the Ld.CIT(A) noted that the company whose shares were transacted was originally incorporated as M/s. JK Agri Genetics Ltd., a company promoted by J.K. Tyre Industries Ltd. and BMF Investments Ltd., both belonging to the Singhania Group of Companies. It was further observed that, pursuant to an order of the Registrar of Companies, Delhi dated 07.11.2012, the name of the company was changed to M/s. Florence Investech Ltd., wherein the promoters collectively held 74.98% of the equity share capital through J.K. Tyre Industries Ltd. and BMF Investments Ltd.
3.1. The Ld.CIT(A) further noted that on 22.03.2017, the promoter shareholding was transferred to Harishankar Singhania Holdings Pvt. Ltd. It was also observed that, subsequently, BMF Investments Ltd. and Florence Investech Ltd. were amalgamated with another Singhania Group company, namely Bengal & Assam Company Ltd., with effect from 24.05.2019.
3.2. However, it is noticed that although the Ld.CIT(A) has referred to the transfer of shares by BMF Investments Ltd. to Harishankar Singhania Holdings Pvt. Ltd., the subsequent chain of events relating to the remaining promoter shareholding and the consequential restructuring within the Singhania Group, culminating in the amalgamation with Bengal & Assam Company Ltd., has not been examined in its entirety while appreciating the factual matrix of the case. This aspect assumes significance in evaluating the assessee’s contention regarding the identity, ownership and corporate background of M/s. Florence Investech Ltd. and the genuineness of the impugned share transactions.
3.3. Based on these facts Ld.CIT(A) observed and held as under:
“3.5.I have perused the order of the Assessing Officer. However, I do not find the findings of the Assessing Officer very convincing. The shares of FIL were listed in stock exchange. Since almost 75% of the shares are held by the promoters. It is very natural that the shares are not traded by a broad base of shareholders. Therefore, less number of participants in the trading of the shares is very natural.
The Assessing Officer was convinced that the prices of the shares are manipulated but could not pin point how such price rigging had actually taken place. I have personally inquired to find whether there had been any investigation conducted by the SEBI on trading of shares of FIL. I find that the trading of the shares had never been banned by the SEBI, neither any individual nor any broker or the promoters were ever found guilty of price rigging.
I found that only once the SEBI had made an enquiry against M/S IndistockPvt. Ltd. Ltd. (AAACI6554J) and Spark Securities Pvt. Ltd. (AADCS6039D) relating to trading in shares of FIL. In this enquiry, the SEBI made an enquiry into whether any artificial price rigging had taken place during March 2017, coinciding with the transfer of promoters’ shares to HarisankarSinghania Holdings Pvt. Ltd. In the order dated 18.12.2019 (Adjudication order no Order/KS/VC/2019-20/6176-6177) the adjudicating officer of SEBI had found that the allegation of price manipulation in the scrip of FIL had not been established.
3.6. As claimed by the assessee,he was a regular trader in shares. He claimed to have had market holdings of nearly Rs. 400 Crores, in 1306 listed companies as on31.03.2023, including that of companies having various huge market capitalisations. The shares included those of PSU’s, Tata Group etc.
I also find that the trading results of trading in FIL shares were duly declared by the assessee in his return of income for AY2019-20 and taxes were paid accordingly. There was no attempt to get any benefit of any exemption from tax by the assessee.
3.7.Under the above circumstances, I do not agree with the findings of the Assessing Officer and I direct the Assessing Officer to delete the addition made by the Assessing Officer for a sum of Rs. 4,07,25,879/- u/s 68 of the Act.
The Ld.CIT(A) thus deleted the addition made by the Ld.AO.
Aggrieved by the order of the Ld.CIT(A) revenue is in appeal before this Tribunal.The assessee filed cross objection challenging the authority of the re-assessment proceedings.
We shall first consider the grounds raised by the revenue.
4. We have considered the rival submissions and perused the material available on record. Admittedly, the assessee had purchased shares of M/s. Florence Investech Ltd., which were subsequently sold during the year under consideration, and the resultant long-term capital gains were claimed as exempt under section 10(38) of the Act. The addition made by the Ld. AO is founded primarily on the investigation report treating the scrip as a penny stock. However, it is a settled proposition of law that suspicion, however grave, cannot substitute legal proof. The mere inclusion of a particular scrip in an investigation report or its characterization as a penny stock, without any independent material establishing the assessee’s involvement in price rigging, market manipulation, or accommodation entry arrangements, cannot, by itself, justify an adverse inference against the assessee.
4.1. In the present case, the assessee has furnished complete documentary evidence in support of the impugned transactions, including contract notes, demat statements, bank statements evidencing payment and receipt through normal banking channels, and other contemporaneous records. The transactions were admittedly carried out through the recognised stock exchange by way of a screen-based trading mechanism. No material has been brought on record by the Revenue to demonstrate that these documents are false or fabricated or that the assessee had any nexus with the alleged operators or beneficiaries identified by the Investigation Wing. The burden cast upon the assessee to establish the genuineness of the transactions thus stands duly discharged, and the Revenue has failed to rebut the same by bringing any cogent or credible evidence on record.
In view of the foregoing discussion, we do not find any infirmity in the well-reasoned order of the Ld. CIT(A) deleting the addition made under section 68 of the Act. The Revenue has failed to bring any material before us warranting interference with the findings recorded by the Ld. CIT(A).
Accordingly, the grounds raised by the Revenue stands dismissed.
5. As we have dismissed the appeal filed by the Revenue, the cross objection raised by the assessee becomes infructuos.
In the result, appeal filed by the revenue stands dismissed and the cross objection filed by the assessee is dismissed as infructuous.
Order pronounced in the open court on 15.07.2026
