ITAT Mumbai Restores Penny Stock Reassessment Appeal for Fresh Hearing

The “D” Bench of the Income Tax Appellate Tribunal, Mumbai, delivered its order on 23 February 2026 in the case of Ronak Ashok Shah for Assessment Year 2018–19. The appeal challenged an ex parte order passed by the National Faceless Appeal Centre which had upheld reassessment and addition relating to alleged penny stock transactions.

Reopening Based on Alleged Penny Stock Transactions

The assessee had not fi led a return of income originally. The Assessing Officer later received information that the assessee had traded in shares of Goenka Business and Finance Ltd. and Ejecta Marketing Ltd., receiving sale proceeds of ₹92.63 lakh. Following enquiries that labelled these companies as penny stock entities, the assessment was reopened under Section 147 of the Income Tax Act. The AO treated the transactions as non-genuine and added the entire sale consideration to the assessee’s income. The assessee appealed against both the reopening and the addition. However, due to repeated non-appearance, the first appellate authority dismissed the appeal ex parte, largely on the ground of non-prosecution, without examining the legal and factual grounds raised.

Tribunal’s Ruling: Speaking Order Required

The ITAT observed that although the assessee was partly responsible for non-compliance, the appellate authority was still required to decide the grounds on merits through a reasoned and speaking order. Since neither the legality of reopening nor the merits of the addition were properly addressed, the Tribunal set aside the ex parte order and restored the matter for fresh adjudication after granting a reasonable opportunity of hearing.

The appeal was allowed for statistical purposes.