Arvind Bhanguji Kangane Vs DCIT (ITAT Mumbai)
The appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai arose from the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre dated 11 June 2025 for Assessment Year 2013-14. The assessee challenged both the validity of reassessment proceedings initiated under section 147 and the addition made under section 68 in respect of the sale proceeds of shares.
The assessee, an individual investor engaged in share investments, had originally filed a return of income declaring income of ₹30,85,930. The return was processed under section 143(1). Subsequently, the case was reopened under section 147, and a notice under section 148 dated 31 March 2021 was issued. In response, the assessee filed a return on 16 April 2021 declaring the same income as previously declared.
The reopening was based on information received from the Investigation Wing stating that Sanasa Tech Fab Ltd., earlier known as Jeevo Motors Finance Company Limited, had been identified as a penny stock company allegedly used to generate bogus capital gains or losses. Since the assessee had traded in this company’s shares, the assessment was reopened.
During the assessment proceedings, the Assessing Officer observed that the assessee had claimed exemption under section 10(38) on long-term capital gains amounting to approximately ₹2.40 crore from the sale of shares of Sanasa Tech Fab Ltd. The assessee had acquired 1,00,000 shares under a preferential allotment scheme at ₹10 per share and paid ₹10 lakh by cheque. These shares were held in a demat account and later sold through the Bombay Stock Exchange between November 2015 and March 2016 at an average price of approximately ₹250 per share, resulting in sale consideration of about ₹2.50 crore.
