ITAT Mumbai Dismisses Revenue's Bogus LTCG Addition on GIFL Shares, Upholds CIT(A) Deletion of Rs 16.95 Crore Section 68 Addition

Mumbai ITAT dismisses Revenue appeals challenging deletion of Rs 16.95 crore Section 68 addition on alleged bogus LTCG from Global Infratech and Finance Limited shares across multiple assessees and assessment years.

The Income Tax Appellate Tribunal, Mumbai “E” Bench, comprising Shri Sandeep Gosain, Judicial Member, and Shri Girish Agrawal, Accountant Member, on 13 May 2026 dismissed a batch of Revenue appeals and the corresponding cross-objections filed by the assessees. The appeals arose from orders passed by the Commissioner of Income Tax (Appeals) for assessment years 2014-15, 2015-16, and 2016-17, in which the CIT(A) had deleted additions made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 on account of alleged bogus long-term capital gains from shares of Global Infratech and Finance Limited, and a related addition under Section 69C on account of alleged commission paid to facilitate those gains. The Tribunal found no infirmity in the CIT(A)'s reasoning, holding that the Revenue had failed to bring any corroborative material to link the assessees to the alleged price-manipulation scheme.

The Dispute Before the Tribunal

The lead case involved Kishor Premchand Lahrani, an individual assessee, who for the year ended 31 March 2014 earned long-term capital gains of Rs 16,95,04,810 on the sale of equity shares of Global Infratech and Finance Limited (GIFL), a company listed on the Bombay Stock Exchange. The gains were claimed as exempt under Section 10(38) of the Act, which provides exemption for long-term capital gains on listed securities on which Securities Transaction Tax has been paid.

A notice under Section 153A was issued on 21 September 2016 following a search. In response, the assessee filed a return on 6 October 2016 declaring total income of Rs 78,95,290, the same figure as in the original return. The Assessing Officer completed assessment under Section 143(3) read with Section 153A on 29 December 2017, making two additions: denial of the Section 10(38) exemption on the LTCG of Rs 16,95,04,810 by treating the transaction as bogus under Section 68, and an addition of Rs 84,75,241 under Section 69C on account of alleged commission paid in cash to facilitate the bogus LTCG.

Connected appeals covered Kishor Premchand Lahrani HUF, Puneet Kishor Lahrani, Reena Kishor Lahrani, Mehr Lokesh Gurnani, and Lokesh Shankar Gurnani, spanning assessment years 2014-15, 2015-16, and 2016-17. A separate set of connected matters involved a second scrip, Pine Animation Ltd., where the Tribunal applied the same findings.

Revenue's Case: Off-Market Purchase, Penny Stock, and Admission Under Oath

The Departmental Representative, relying on the assessment order, argued that the CIT(A) had erred in deleting the Section 68 addition. The Revenue's position rested on three pillars. First, the shares of GIFL were originally purchased through off-market transactions and thereafter dematerialised and registered on the stock exchange, which the Revenue said was a hallmark of the penny stock entry-providing scheme. Second, the increase in GIFL's share price was not supported by the company's financials, making the claimed gains economically implausible. Third, the assessee himself had, during the course of the search, made an admission under oath that he had converted unaccounted income of Rs 56.52 crores of the Lahrani family through one Mr Jaswant Mehta.

On the Section 69C addition, the Revenue submitted that the assessee had accepted under oath that he paid commission in cash to facilitate the bogus LTCG, and that this admission was corroborated by the Investigation Wing's report and the penny stock analysis conducted by the Department. The Revenue also cited the Supreme Court decisions in Sumati Dayal v. CIT (214 ITR 801), CIT v. Durga Prasad More ((1971) 82 ITR 540), and McDowell & Company Ltd. v. Commercial Tax Officer ((1985) 3 SCC 230) for the proposition that the test of genuineness under the Income Tax Act is based on preponderance of probabilities and that strict rules of evidence do not apply.

Assessee's Case: Documentary Trail, SEBI Exoneration, and Retracted Statement

The assessee's representative reiterated the submissions made before the Revenue authorities and relied on the CIT(A)'s order. The assessee had placed before the authorities a comprehensive set of documents: contract notes for the sale of GIFL shares through India Infoline Limited on the BSE platform, showing quantity, rate, time stamp, STT, brokerage, and other charges; a ledger of India Infoline Limited; bank statements showing receipt of sale proceeds from the broker; and demat account statements showing the shares debited to the broker. The original purchase of shares from KKJ Stock & Co. and KL Ventures Capital Pvt. Ltd. had been made through banking channels and was verified by the Assessing Officer through notices under Section 133(6).

On the search statement, the assessee submitted that the statements were not provided to him until 19 September 2017, and that he filed a retraction affidavit on 26 September 2017, within one week of receiving the copies. He stated that he had been coerced into the admission, that he did not know any person called Mr Jaswant Mehta, and had not entered into any transaction with him. The AO, the assessee pointed out, could not locate Mr Jaswant Mehta, and his very existence remained in doubt.

The assessee also placed on record SEBI order no. WTM/MB/IVD/ID6/12613/2021-22 dated 16 July 2021, in which SEBI had specifically examined the role of the assessee and his family members in the alleged price manipulation of GIFL. SEBI concluded that the assessee and his family members could not be said to be connected to GIFL or to the entities involved in price manipulation, and that no allegation of LTP contribution, price manipulation, volume manipulation, circular trades, reversal trades, or synchronised trades stood established against them.

How the Tribunal Reasoned

The Tribunal reproduced and adopted the detailed findings of the CIT(A) spanning paragraphs 8 to 9 of the appellate order. The CIT(A) had found that the purchase of shares was through proper banking channels and had been specifically examined and verified by the AO during assessment proceedings without any adverse finding. The shares were held in the demat account for more than a year. The sale was effected on the BSE platform through India Infoline Limited, a registered and reputed broker. STT was paid. A survey was conducted on the broker during the search and nothing incriminating was found. Sale proceeds were received through banking channels.

On the Section 68 addition, the CIT(A) held that for an amount to be treated as an unexplained cash credit, there must be absence of identity, genuineness of transaction, and creditworthiness of the payer or creditor. Here, the sale was a software-driven, screen-based transaction on BSE, with proceeds received through normal banking channels. The identity, source of funds, and genuineness of the transaction stood established, leaving no scope for an addition under Section 68. The AO had not pointed out any deficiency in the documents or doubted the genuineness of the transaction for want of evidence.

On the retracted confession, the CIT(A) referred to CBDT Circular F. No. 286/2/2003-IT (Inv.) dated 10 March 2003, in which the Board itself acknowledged that confessions extracted during search and seizure are often made under pressure and are subsequently retracted, and directed that no attempt should be made to obtain confessions as to undisclosed income during search operations. The CIT(A) held that a statement recorded under Section 132(4) can constitute evidence but cannot be the sole basis for an addition, particularly when retracted and unsupported by corroborative material. The AO had not found any further incriminating material to support the confession.

The CIT(A) also found that the statements of third parties — Mr Rajkumar Kedia, Mr Anuj Agarwal (director of Korp Equity), and Pravin Agarwal (director of M/s Gateway Financial Services Ltd) — did not establish that the assessee had paid any unaccounted money to these parties, that none of the replies named the assessee or provided any link to the alleged bogus LTCG, and that copies of these statements were never provided to the assessee nor was cross-examination allowed.

The SEBI exoneration was treated as a significant factor. The CIT(A) observed that since SEBI had carried out a specific investigation against the assessee and his family members and found nothing adverse, the addition on account of LTCG in GIFL had no leg to stand on. The Tribunal agreed, noting that the mere fact that a share has been subject to price manipulation does not automatically lead to an addition under Section 68 unless it is conclusively demonstrated that the assessee was part of the scheme.

The Tribunal also relied on the coordinate bench decision in DCIT v. Surendra B. Jiwrajka (ITA Nos. 2431-2434/Mum/2021), which involved the same GIFL scrip and where the additions were deleted on materially identical facts. That decision had been upheld by the Bombay High Court in ITXA No. 563 of 2024, dismissing the Revenue's appeal. The Tribunal applied the doctrine of binding precedent and judicial consistency.

On the Section 69C addition for alleged commission, the Tribunal found that there was no evidence whatsoever on record to prove that any commission was ever paid by the assessee.

Connected Matters and Pine Animation Ltd.

For the connected appeals involving Kishor Premchand Lahrani HUF, Puneet Kishor Lahrani, Reena Kishor Lahrani, Mehr Lokesh Gurnani, and Lokesh Shankar Gurnani, covering assessment years 2014-15, 2015-16, and 2016-17, the Tribunal held that the facts and circumstances were common and identical and that the findings in the lead case applied equally.

For the separate set of connected matters involving the scrip Pine Animation Ltd., the Tribunal noted that similar issues had been considered by coordinate benches in Vijayrattan Balkrishan Mittal v. DCIT (121 taxmann.com 100), Gopal Nihchaldas Pariani v. ITO (ITA Nos. 7761 & 7762/Mum/2019), ITO v. Alpa Rajendra Shah (ITA No. 1922/Mum/2023), and ACIT v. Priyanka Ankit Miglani (ITA No. 2531/Mum/2021), in all of which the additions were deleted. Applying the doctrine of binding precedent, the Tribunal held that the findings in the lead case applied mutatis mutandis to those appeals as well.

Outcome

The Tribunal dismissed all Revenue appeals. The grounds raised by the Revenue in ITA No. 7699/Mum/2025 and all connected ITAs were dismissed, and the orders of the CIT(A) deleting the additions under Section 68 and Section 69C were upheld. Since the Revenue's appeals were dismissed, the cross-objections filed by the assessees required no separate adjudication and were also dismissed. The order was pronounced in open court on 13 May 2026.