ITO Vs Vikash More (ITAT Ahmedabad)
Summary: ITAT Ahmedabad dismissed the Revenue’s appeal in ITO Vs Vikash More for Assessment Year 2016-17, sustaining the CIT(A)’s deletion of an addition of ₹1,47,12,954 under Section 69A read with Section 115BBE and an alleged undisclosed commission addition of ₹4,41,388 under Section 69C. The dispute concerned sales of shares of Kushal Tradelink Pvt. Ltd., which the Assessing Officer alleged represented accommodation entries in a manipulated penny stock. The Tribunal held that general findings concerning a scrip could not, without evidence connecting the assessee to wrongdoing, justify treating documented share-sale proceeds as unexplained money.
The assessee had filed a return declaring income of ₹17,43,870. Following information received through the Insight Portal, the assessment was reopened under Section 148 and completed under Sections 147 and 144B. The Revenue relied on SEBI findings about price manipulation and questioned the claim of exempt long-term capital gains under Section 10(38). The assessee maintained that purchases and sales had been conducted through SEBI-registered broker Sharekhan Limited, reflected in the demat account and books, and supported by broker bills and bank receipts. The order records ₹1,46,79,424.85 as bank receipts according to the assessee’s submissions.
The Tribunal examined broker bills, trading comparisons, bank statements, demat holding and transaction statements, and SEBI orders dated 22 December 2017 and 31 May 2019. It found that the assessee had established the purchase and sale transactions and that the Assessing Officer had not demonstrated that those transactions were bogus or that the assessee participated in the alleged accommodation-entry mechanism. The SEBI material did not establish an assessee-specific link to manipulation. Consequently, the share proceeds could not be assessed as unexplained money merely on the basis of the SEBI reports.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Revenue against order dated 28.03.2024, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2016-17.
2. The assessee has raised the following grounds of appeal :-
“(a) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.1,47,12,954/- made by AO on account of accommodation entries from sale of penny script M/s. Kushala Tradelink Pvt. Ltd. treated as unexplained money u/s.69A r.w.s. 115BBE of the Act.
(b) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.4,41,388/- made by AO on account of undisclosed commission expenses under Section 69C of the Act.
3. The assessee filed return of income on 13.10.2016 declaring total income at Rs.17,43,870/- for Assessment Year (A.Y.) 2016-17. On the basis of information received from the Insight Portal of ITBA, the case of the assessee was reopened and notice under section 148 of the Income Tax Act, 1961 was issued to the assessee on 31.03.2021. The assessee furnished his return of income under Section 148 of the Act on 29.04.2021. The copy of reasons recorded for reopening of the assessment was forwarded to the assessee on 08.11.2021. Various notices under Section 142(1) of the Act were issued to the assessee. The assessee submitted the documentary evidences relevant to the reassessment proceedings. The Assessment Order was passed under Section 147 read with Section 144B of the Act dated 30.03.2022 thereby making addition of Rs.1,47,12,954/- as unexplained money under Section 69A of the Act which was claimed by the assessee on sale of shares of M/s. Kushal Tradelink Pvt. Ltd. The Assessing Officer also made addition of Rs.1,68,98,212/- as unexplained expenditure under Section 69C of the Act towards payment of commission on account of accommodation entry.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. DR submitted that the CIT(A) was not right in deleting the addition of Rs.1,47,12,954/- on account of accommodation entries for sale of penny scrip of M/s. Kushal Tradelink Pvt. Ltd. which was treated as unexplained money under Section 69A read with Section 115BBE of the Act. The Ld. DR submitted that the assessee sold the shares of M/s Kushal Tradelink Pvt. Ltd. on account of transfer of shares at Rs.1,35,72,928/- as claimed as LTCG and the same was claimed as exempt income under Section 10(38) of the Act. The Ld. DR submitted that the Assessing Officer rightly made addition under Section 69A of the Act as the assessee could not establish the sale consideration received by the assessee on transfer of shares and of M/s. Kushal Tradelink Pvt. Ltd. The Assessing Officer has categorically mentioned that there was SEBI order from which modus operandi of price manipulation in the scrip of M/s Kushal Tradelink Pvt. Ltd. for the period was categorically mentioned by the Assessing Officer. In fact, the said scrip was defunct in case of Ketan Parikh dated 14.07.2013 and there was manipulation prior to purchase of the scrip of M/s Kushal Tradelink Pvt. Ltd. and after the scrip was sold at that time also the pricing of this share was manipulated. In fact, the beneficiary was aware about the booking price of the period upon which the assessee will incur loss/gain. Thus, the Ld. DR submitted that the Assessing Officer has made addition correctly as the assessee could not explain the said transaction of the scrip and its manipulation. Thus, the Ld. DR submitted that the CIT(A) was not right in deleting this entire addition without any reference to the SEBI proceedings in the said order. As regards to the addition of Rs.4,41,388/- on account of undisclosed commission expense under Section 69C of the Act, the Ld. DR relied upon the Assessment Order and submitted that the accommodation entries from sale of penny scrip has certainly gained commission expenses and, therefore, the addition was rightly done by the Assessing Officer.
6. The Ld. AR submitted that the CIT(A) has rightly taken into account that the reasons recorded was mainly on the basis that the assessee has received accommodation entries from Kushal Group amounting to Rs.1,47,12,954/- but in fact during the year under consideration the assessee has purchased and sold shares of M/s Kushal Tradelink Pvt. Ltd. for which the assessee has received payment amounting to Rs.1,46,79,424.85 during the year under consideration through Bank. Both purchase and sale of shares was carried out by SEBI registered stock brokers Sharekhan Limited through DMAT account was properly recorded in books of the assessee. The CIT(A) has rightly taken cognisance of the evidences and, therefore, has rightly deleted this addition.
7. As regards ground no.2 of the Revenue’s appeal, the Ld. AR submitted that the question of earning commission which is undisclosed commission expenses was not established by the Assessing Officer and has rightly deleted. The Ld. AR relied upon the order of the CIT(A).
8. We have heard both the parties and perused all the reverent material available on record. It is pertinent to note that the assessee during the assessment proceedings has given copy of bills of stock broker Sharekhan Limited for the scrip of M/s Kushal Tradelink Pvt. Ltd., Trading chart comparison, Bank statement reflecting receipts of the share/scrip, D-mat holding and transaction statement reflecting purchase and sale of shares of Kushal Tradelink. The Ld. AR also pointed out the order passed by the SEBI dated 22.12.2017 and 31.05.2019. From the perusal of the records, it appears that the assessee has very well transacted thereby purchasing and selling of the scrip of M/s Kushal Tradelink Pvt. Ltd. From the perusal of the records, the transaction was properly established by the assessee and there was no doubt expressed by the Assessing Officer in the Assessment Order that the transaction of purchase and sale is bogus. The order of the SEBI related to the scrip of M/s Kushal Tradelink Pvt. Ltd. will not be the sole and whole criteria for making addition under Section 69A read with Section 115BBE of the Act as the assessee whether actually has given the accommodation entries through its regular books of accounts or outside the books of account, this case was not established by the Assessing Officer/revenue. Thus, the CIT(A) has rightly held that the assessee has explained his transaction through the evidences and, therefore, it cannot be treated as unexplained money. The base of the Assessment Order was solely on the SEBI report and the SEBI orders which does not deal with the assessee’s linkage with this scrip malpractice, therefore, the CIT(A) has rightly deleted this addition. The question of undisclosed commission expenses also will not arise as the assessee has given brokerage to its broker company and that cannot be held as unexplained/undisclosed commission expenses. Thus, ground nos.(a) & (b) of Revenue’s appeal are dismissed.
9. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on this 14th February, 2025.
