Section 68 Addition on Stampede Capital Share Sale Deleted for Lack of Assessee Link: ITAT Kolkata

ITO Vs Stenly Securities Limited (ITAT Kolkata)

The ITAT Kolkata dismissed the Revenue’s appeal against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), for Assessment Year (AY) 2018-19, thereby upholding the deletion of an addition made under Section 68 of the Income-tax Act in respect of transactions involving shares of Stampede Capital Ltd.

The assessee had originally filed its return of income on 25.10.2018 declaring total income of ₹1,20,850. The assessment was reopened under Sections 147 and 148 based on information relating to alleged unexplained credits. After passing an order under Section 148A(d), the Assessing Officer issued notice under Section 148 on 07.04.2022. The assessee filed a return declaring the same income as originally returned.

During assessment, the Assessing Officer observed that the assessee held an opening stock of 9,66,364 equity shares of Stampede Capital Ltd. valued at ₹1,85,54,189 as on 01.04.2017. During the year, the assessee received 2,56,590 bonus shares and purchased another 25,000 shares for ₹3,20,634. It sold 2,56,590 shares for ₹2,02,67,586 and disclosed a profit of ₹13,92,763 in its profit and loss account. The assessee also disclosed intraday trading profit of ₹1,06,001.29 from the same scrip. Although the assessee furnished documentary evidence supporting the purchase and sale transactions, the Assessing Officer treated Stampede Capital Ltd. as a shell company and made an addition of ₹1,81,57,011 under Section 68 read with Section 115BBE, restricting the addition to the sale consideration received.

The CIT(A) deleted the addition after examining the share transactions. It observed that the assessee had purchased shares during the year at an average price of ₹12.82 per share and sold them at an average price of ₹16.24 per share, indicating no abnormal price rise ordinarily associated with penny stock transactions. It also noted that although the profit from the transactions was only ₹13,92,763, the Assessing Officer had added ₹1,81,57,011, while not including the sale proceeds of the bonus shares.

The CIT(A) relied upon decisions of the ITAT Hyderabad in Sudhir Babu Chalasani and the ITAT Delhi in Cellcapinvofin India Pvt. Ltd., both involving transactions in shares of Stampede Capital Ltd. Those decisions held that where an assessee had produced evidence establishing genuine purchase and sale transactions as an ordinary investor, the sale consideration could not be treated as unexplained merely on the basis of suspicion or general investigation reports. The CIT(A) found no material supporting the allegation that the assessee’s transactions were bogus and allowed the appeal.

Before the Tribunal, the Revenue challenged the deletion of the addition. The ITAT noted that the issue was squarely covered by the coordinate bench decision relied upon by the CIT(A). Referring extensively to the Hyderabad Bench decision, the Tribunal observed that although the Assessing Officer had relied on an investigation report regarding the alleged misuse of Stampede Capital Ltd. shares for providing bogus long-term capital gains, no evidence had been brought on record connecting the assessee with the alleged modus operandi or identifying the assessee as a beneficiary of such accommodation entries.

The Tribunal further noted that the assessee had furnished documentary evidence establishing the genuineness of the purchase and sale transactions, including evidence of purchase consideration, share certificates and Demat records. The Hyderabad Bench had also observed that the assessee was an ordinary investor holding investments in numerous companies over several years and had sold shares of Stampede Capital Ltd. in different lots over an extended period rather than disposing of the entire holding when the share price had reached its highest level. These facts did not support the allegation that the transactions were arranged accommodation entries.

The Tribunal reiterated that suspicion, however strong, cannot substitute evidence. It held that where documentary evidence establishes the genuineness of the transactions and there is no material linking the assessee to the alleged investigation findings, the sale consideration cannot be treated as unexplained merely on the basis of suspicion.

Finding the facts of the present case identical to those considered in the earlier coordinate bench decisions, the ITAT upheld the order of the CIT(A) deleting the addition under Section 68. Accordingly, the Revenue’s appeal was dismissed.

In the result, the appeal filed by the Revenue was dismissed by the ITAT Kolkata.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

This appeal preferred by the revenue is against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (hereinafter referred to as the “Id. CIT(A)”], dated 17.12.2025 for the Assessment Year (AY) 2018-19.

2. The only issue raised by the revenue is against the deletion of addition made by the Assessing Officer (In short, ‘the AO’) u/s 68 of the Act in respect of share of stampede capital limited.

3. The facts of the case in brief are that the assessee filed its return of income on 25.10.2018, declaring total income of Rs.1,20,850/-. The case was re-opened u/s 147 of the Act on the basis of information received for ‘Unexplained Credits’ during the year under consideration. The notice u/s 148 of the Act was issued on 07.04.2022 after passing order u/s 148A(d) of the Act. Thereafter, the assessee filed its return of income , declaring the same income as declared in the return of income filed originally. Thereafter, statutory notices along with questionnaire were issued and served upon the assessee. The AO noted that the assessee has opening balance of equity share of Stampede Capital Ltd. as on 1.04.2017 numbering 9,66,364 with cost of Rs.1,85,54,189/-. The bonus allotted during the year 2,56,590 equity shares. Further purchased during the year 25,000 equity shares for T 3,20,634/-.. The AO also noted that the assessee sold 2,56,590 shares of Stampede Capital Ltd. for Rs.2,02,67,586/-. The profit on the said sale of shares was Rs.13,92,763/-, which was shown in the profit and loss account. The AO noted that the assessee has also done intraday trade in Stampede Capital Ltd. and the profit of Rs.1,06,001.29, which were also shown in the profit and loss account. The assessee furnished all the required documentary evidences before the AO for purchase of shares. The addition was restricted to the amount whatever assessee had received as a consideration because Stampede Capital Ltd. has proved is a shell company and thereby making addition of Rs.1,81,57,011/- u/s 68 r.w.s. 11566E of the Act.

4. In the appellate proceedings, the Id. CIT(A) allowed the appeal of the assessee by observing and holding as under:

“7. Ground No 7 is raised against the addition of Rs.1,81,57,011/- on account of alleged unexplained cash credit under section 68. The Assessing Officer has reproduced the details of transactions in the shares of M/s Stampede Capital by the assessee;

Even though the profit generated was Rs.13,92,763 only, the Assessing Officer added Rs.1,81,57,011 from sale of 9,91,364 shares of Stampede Capital. Sale proceeds from bonus shares were not added. Further details of share transactions of the disputed share by the appellant is given below:

From the chart it is dear, during the year under consideration, the assessee purchased shares of Stampede Capital for average price of Rs.12.82 and sold them at an average price of Rs.16.24 per share. There is no abnormal increase in share prices usually associated with penny stocks. In the case of Sudhir Babu Chalasani. I.T.A. Nos. 1348 to 1352/Hyd/2025, the ITAT Hyderabad has verified the transactions in shares of Stampede Capital and held that, 15. In the present case, going by the evidence furnished by the assessee, there is no dispute with regard to the fact that, the assessee has proved the genuineness of the transactions of purchase and sale of shares of Stampede Capital Ltd as an ordinary investor in shares which is evident from the relevant details of purchase of shares of Brilliant Securities Ltd and corresponding consideration paid through Vijaya Bank. Further, the assessee has also furnished relevant evidences in the form of consolidated share certificate issued by M/s. Venture Capital and Corporate Investments Pvt. Ltd., regarding the issue of consolidated share certificate of Brilliant Securities Ltd and further, furnished Demat statement issued by GSV Securities Private Limited for all these assessment years, which is undisputedly proves the fact that, the assessee held the shares of Stampede Capital Ltd as an investment, but not a beneficiary bogus Long Term Capital Gains as alleged by the A.O. Had it been the case of the A.O. that the assessee is also one of the beneficiaries of bogus Long Term Capital Gains provided by the entry provider, the assessee would have sold entire lot of 1,99,900 shares in one go, when the share price of Stampede Capital Ltd has reached all time high of about Rs.510/- per equity share. In the present case, the assessee was holding shares for more than 10 years which is evident from the date of purchase and subsequent sale of shares in small lots right from F.Y. 2008-09 and upto F.Y. 2019-20 in different lots., even though the share price was reached at all-time high in earlier financial years. Further, the assessee had not only made investment in one solitary share of Stampede Capital Ltd, which is evident from the holding statement of the assessee for these assessment years, where the assessee is holding more than 145 scrips for different companies for many years. From the holding statement of the assessee, it is undisputedly clear that, the assessee is holding the Blue-Chip stocks of many companies like Bajaj Finance Ltd., Coal India Ltd., Divis Laboratories Ltd., IDBI Bank Ltd, Infosys Ltd, ITC Ltd, Reliance Industries Ltd and other shares. In our considered view, if we go by the modus operandi employed by the entry provider in respect of penny stocks, it was only one instance of purchase and sale of shares of penny stock but, in the present case, as per the facts available on record, the assessee is a regular investor in shares as an ordinary investor in the stock market and in that process, the assessee has invested in the shares of Brilliant Securities Ltd and the same has been subsequently converted into Stampede Capital Ltd. Therefore, in our considered view, the allegation of the A.O. and the Ld. CIT(A) that, the consideration received from sale of shares of Stampede Capital Ltd is unexplained money taxable u/s 69A of the Act, is totally on the basis of suspicion without there being any material to support the findings of the A.O. and thus, the findings given by the Ld. CIT(A) to sustain the additions made by the A.O. cannot be upheld.

In the case of Cellcapinvofin India Pvt. Ltd [ITA No.2393/Del/2024], the Delhi ITAT verified the transactions in the share of Stampede Capital and held that, 9. In the instant case, the entire case of the Revenue rests on Information available in insight portal which was collected in some other cases and nowhere, it was established that the assessee was part of the beneficiary. Further the AO has failed to appreciate the fact that the assessee was having closing stock of Rs. 17,77,050/- of 16155 shares of Stampede Capital Ltd. however, the AO has included this stock in the sale and loss thereon. Clearly there is no basis with the AO to support the allegation that the transaction of purchase and sale of shares of M/s Stampede Capital Pvt. Ltd made by the assessee were bogus. The assessee has been able to discharge the onus casted upon it to prove the genuineness of the transactions and was accepted by the Department in the order passed u/s 143(3), therefore, now alleging the same as bogus is nothing but mere change of opinion.

In both these case, in similar and specific fact of sale of shares of Stampede Capital, tribunals have held that, where as an ordinary investor the assessee has invested in the shares of Stampede Capital Ltd, the consideration received from sale of shares cannot be taxed as unexplained money only on the basis of suspicion. Hence it is held in this case that, there is no basis to support the allegation that the transaction of purchase and sale of shares of M/s Stampede Capital Pvt Ltd made by the assessee were bogus. As a result, ground no 7 is allowed.”

5. We have heard rival submissions and perused the materials available on record. We find that the issue is squarely covered by the decision of Co­ordinate Bench which has been followed by Id. CIT(A) while deciding the appeal of the assessee and accordingly, held that the sale of share cannot be taxed as unexplained money on the basis of suspicion. The case of the Co­ordinate Bench in case of Sudhir Babu Chalasani vs. ITO, in ITA No.1348 to 1352/Hyd/2025 for A.Y. 2013-14 to 2017-18, dated 19.11.2025, wherein the similar issue involved and the Co-ordinate Bench has allowed the appeal of the assessee by observing and holding as under:

“14. Having said so, let us come back, whether the transactions of the assessee with regard to purchase and sale of shares of Stampede Capital Ltd are genuine transactions carried out by an investor in the ordinary course of investment activity or it was an arranged transaction in collusion with entry providers by employing a modus operandi for providing bogus Long Term Capital Gains for conversion of unaccounted income by using the scrip Stampede Capital Ltd, as alleged by the A.O. The A.O. alleged that, the scrip Stampede Capital Ltd has been used by the entry providers for conversion of unaccounted income of various individuals in the form of bogus Long Term Capital Gains, for which the A.O. took support from the investigation report submitted by the Directorate of Investigation Wing, Kolkata, where they have unearthed modus operandi employed by certain individuals for providing bogus entries of Long Term Capital Gains to various beneficiaries. Although, the A.O. refers to the report received from the Investigation Wing, Kolkata and discussed the modus operandi employed by certain individuals in his assessment order at length, but nowhere provided any findings as to how the assessee had played a role in the alleged modus operandi employed by various individuals or failed to provide any findings as to whether the assessee is one of the beneficiaries of the said entries provided by various persons in the form of bogus Long Term Capital Gains of shares of Stampede Capital Ltd. Although, the A.O. has discussed the issue at length in light of financials of Stampede Capital Ltd and the findings of the investigation report, but failed to link the said investigation report to the assessee and its investment activity, which is evident from the assessment order passed by the A.O. where the assessment order is completely silent about the role of the assessee. Further, the Ld. CIT(A) also sustained additions made by the A.O. only on the basis of the findings given by the A.O. ignoring various evidences filed by the assessee on the sole basis of suspicion and surmises, but failed to link the assessee and its investment activity to the alleged investigation report submitted by the Investigation Wing, Kolkata. Therefore, in our considered view, the allegation of the A.O. and the Ld. CIT(A) that, the assessee is also a beneficiary of the bogus Long Term Capital Gains entries provided by the entry providers operating in Kolkata in the shares of Stampede Capital Ltd, is not baked by any evidences, but fully on the basis of suspicion and surmises. In our considered view, suspicion however strong cannot make it evidence. If the evidence furnished by the assessee proves otherwise then the findings reached by the A.O. on the basis of suspicion cannot take place the evidences furnished by the assessee, so as to draw adverse inference against the assessee towards sale consideration received for sale of shares of Stampede Capital Ltd.

15. In the present case, going by the evidence furnished by the assessee, there is no dispute with regard to the fact that, the assessee has proved the genuineness of the transactions of purchase and sale of shares of Stampede Capital Ltd as an ordinary investor in shares which is evident from the relevant details of purchase of shares of Brilliant Securities Ltd and corresponding consideration paid through Vijaya Bank. Further, the assessee has also furnished relevant evidences in the form of consolidated share certificate issued by M/s. Venture Capital and Corporate Investments Pvt. Ltd., regarding the issue of consolidated share certificate of Brilliant Securities Ltd and further, furnished Demat statement issued by GSV Securities Private Limited for all these assessment years, which is undisputedly proves the fact that, the assessee held the shares of Stampede Capital Ltd as an investment, but not a beneficiary of bogus Long Term Capital Gains as alleged by the A.O. Had it been the case of the A.O. that the assessee is also one of the beneficiaries of bogus Long Term Capital Gains provided by the entry provider, the assessee would have sold entire lot of 1,99,900 shares in one go, when the share price of Stampede Capital Ltd has reached all time high of about Rs.510/- per equity share. In the present case, the assessee was holding shares for more than 10 years which is evident from the date of purchase and subsequent sale of shares in small lots right from F.Y. 2008-09 and upto F.Y. 2019-20 in different lots., even though the share price was reached at all-time high in earlier financial years. Further, the assessee had not only made investment in one solitary share of Stampede Capital Ltd, which is evident from the holding statement of the assessee for these assessment years, where the assessee is holding more than 145 scrips for different companies for many years. From the holding statement of the assessee, it is undisputedly dear that, the assessee is holding the Blue-Chip stocks of many companies like Bajaj Finance Ltd., Coal India Ltd., Divis Laboratories Ltd., IDBI Bank Ltd, Infosys Ltd, ITC Ltd, Reliance Industries Ltd and other shares. In ourconsidered view, if we go by the modus operandi employed by the entry provider in respect of penny stocks, it was only one instance of purchase and sale of shares of penny stock but, in the present case, as per the facts available on record, the assessee is a regular investor in shares as an ordinary investor in the stock market and in that process, the assessee has invested in the shares of Brilliant Securities Ltd and the same has been subsequently converted into Stampede Capital Ltd. Therefore, in our considered view, the allegation of the A.O. and the Ld. CIT(A) that, the consideration received from sale of shares of Stampede Capital Ltd is unexplained money taxable u/s 69A of the Act, is totally on the basis of suspicion without there being any material to support the findings of the A.O. and thus, the findings given by the Ld. CIT(A) to sustain the additions made by the A.O. cannot be upheld.

16. The assessee has relied upon the decision of ITAT, Delhi Bench in the case of ITO Vs. Smt. Shivani Gupta and Shri Dinesh Gupta (supra), the ITAT, Delhi, under identical set of facts and also on identical issue of capital gains derived from sale of shares and claimed exemption u/s 10(38) of the Act, held that, once the A.O. does not reject the documentary evidence furnished by the assessee in support of the transactions of Capital Gains derived from sale of shares, then merely on the basis of report of Investigation, that too without there being any reference to the assessee, additions cannot be made to consideration received from sale of shares as unexplained credit u/s 68 of the Act.

17. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that, the A.O. has erred in making addition towards consideration received for sale of shares of Stampede Capital Ltd as unexplained money u/s 69A of the Act. The Ld. CIT(A) without appreciating the relevant facts, simply sustained additions made by the A.O. Thus, we set aside the order of Ld. CIT(A) and direct the A.O. to delete the additions made towards consideration received for sale of shares as unexplained money u/s 69A of the Income Tax Act, 1961.

18. In the result, the appeal filed by the assessee in ITA No.1348/Hyd/2025 for A. Y. 2013-14 is allowed.”

6. We, therefore, in view of the facts of the case and respectfully following the decision of Co-ordinate Bench cited on the same scrip (supra), uphold the order of Id. CIT(A) by dismissing the appeal of the revenue.

7. In the result, the appeal of the revenue is dismissed.

The order is pronounced in the open Court on 25/06/2026.