TaxTMI 
TaxTMI 
2026 (4) TMI 1874
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..... 2.1 The grounds raised by the assessee in ITA No. 3803/Mum/2025 in the case of Manimudra Vincome Pvt. Ltd. are reproduced as under: 1. On the facts & in the circumstances of the case & in law the Hon'ble CIT (A) erred in wrongly upholding the decision of Ld. AO of disallowance of genuine trading loss of Rs. 3,81,88,649/- allegedly as bogus & the reason assigned for doing so are wrong & contrary to the provision of Income Tax Act & rules made thereunder. 2. On the facts & in the circumstances of the case & in law, the Hon'ble CIT (A) erred in making enhancement to the returned income by wrongly directing the Ld. AO to make addition of Rs. 11,45,659/- being 3% of Rs. 3,81,88,649/- as commission expenses paid to earn alleged bogus trading loss & the reason assigned for doing so are wrong & contrary to the provision of Income Tax Act & rules made there under. 3. On the facts & in the circumstances of the case & in law, the Hon'ble CIT (A) erred in upholding the initiation of penalty proceedings u/s. 271(1)(c) of the IT Act & the reason assigned for doing so are wrong & contrary to the provision of Income Tax Act & rules ma....
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....he demat account, and routed through proper banking channels with payment of Securities Transaction Tax (STT). It was further contended that no adverse material existed against the assessee either in the report of the Investigation Wing or in any proceedings initiated by SEBI. It was submitted that there is no iota of evidence of any nature against the assessee and he was not part of price rigging pre-determined to incur loss. 4.4 The learned Commissioner (Appeals), upon consideration of the material on record, returned a categorical finding that the assessee is a regular trader in shares and that the impugned transactions were genuine, being duly supported by documentary evidence. It was further observed that the Assessing Officer had merely relied upon general findings of the Investigation Wing regarding price movement of certain scrips without conducting any independent enquiry to establish the assessee's involvement in any alleged price manipulation. The learned Commissioner (Appeals) also placed reliance on binding judicial precedents, including decisions of the Hon'ble jurisdictional High Court, to hold that in the absence of any material linking the assessee with ....
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....f RFL. 3. Therefore we find nothing perverse in the order of the Tribunal. 4. Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6.5 Further, ITAT in the case of Amrita Abhishek Doshi vs DCIT Circle 19(1), Mumbai (ITAT Mumbai) [ITA No. 1353/Mum/2024] has deleted the addition made by the AO in respect of transaction in Ashika Credit Capital Ltd. Relevant portion of the order of the ITAT is reproduced as under: 8. We heard the rival submission and considered the documents available in the record. On perusal of the records, we find that the assessee, herself never involved in price rigging of the scrips. The Ld.A....
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....alve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. but that does not help the revenue in as much as the facts in that case were entirely different. 5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law. 6. The appeal is devoid of merits and it is dismissed with no order as to costs." the order of the Hon'ble Bombay High Court in the case of CIT us Shyam R Pawar 229 Taxman 256 (Bom). The relevant paragraph is reproduced as below: - "6. It is in that regard that we find that Mr. Gopal's contentions are well founded. The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/ Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stop....
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....d proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the .Respondent. With regard to the claim that observations made by the CIT (A) were in conflict with (he Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT (A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT (A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the decision therein was arrived at in light of the peculiar facts and circumstances demonstrated before the ITAT and the Court, such as, inter alia, lack of evidence produced by the Assessee (herein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not est....
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.... search/ investigation which would reveal as to from which income earning activity did the assessee derive such unaccounted monies to support his theory that he had routed such unaccounted monies in the guise of bogus capital gains. The order Aakruti Ketan Mehta (supra) is distinguishable in this point. The order of SEBI never contended that the assessee was involved in price rigging. 9. We find that the shares of Ashika Credit and Capital Limited were purchased from the open market i.e. recognised stock exchange through registered brokers. The purchase and sale were routed through demat accounts. The purchase and sale considerations were routed through proper banking channels. The transactions were recorded in books of accounts and reflected in the return. Since the shares were held for less than one year, the appellant was offered the Short-term Capital Gain to tax @ 15%. The shares of Confidence Finance and Trading Limited, although purchased through preferential allotment, were dematerialized in the year of purchase itself. These shares were sold on recognised Stock exchange through a registered broker. The purchase and sale considerations were routed through proper ba....
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....s quashed." 6.6 Hence, taking into consideration submission of the assessee and judicial decisions, it is held that the share transaction is genuine and hence, AO is directed to delete the addition of Rs. 1,44,738/- made on account of disallowance of loss in respect of share transaction of Ashika Credit Capital Ltd. Accordingly, grounds of the appeal are Allowed." 5. We have considered the rival submissions and perused the material on record. It is evident that the assessee has carried out the impugned transactions through recognised stock exchange mechanisms, supported by contract notes, demat statements, and banking records. There is no dispute raised by the Assessing Officer regarding the authenticity of these primary evidences. The disallowance of loss incurred on Rs. 1,44,738/- on the shares of Ashika Credit Capital Ltd. has been made by the Assessing Officer merely for the reason that share scrip was either rigged by few operators for providing benefit of long term capital gain to certain beneficiaries, simply for the reason that assessee also treated shares but assessee has neither made investment in the preference shares nor part of any racket....
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....cials of the assessee we do not find any reason to doubt the losses only in respect of ten (10) shares when the turnover of the assessee is more than hundred crores. As mentioned elsewhere, the assessee is involved in the stock-market and is well aware of the price fluctuations in the market. Merely because some share brokers / operators colluded in the alleged rigging of share prices and merely because the assessee was benefited indirectly cannot be a reason to disallow the claim of the assessee on the alleged ground that the assessee has also participated in rigging the share price. It is not the case of the revenue that the assessee has purchased shares Off-Market, all the transactions have been done Online. The payments have been made through banking channels. The Assessing Officer has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Sumati Dayal (supra) and referred to the preponderance of probability. Hon'ble Supreme Court in Padmasundra Rao v. State of Tamilnadu [255 ITR 147] has held that circumstantial flexibility, example, one additional or different fact, make a world of difference between conclusions in two cases. The relevant finding....