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Facts
The assessee purchased shares and claimed capital gains exemption under Section 10(38). The AO disallowed the claim, treating sale proceeds as unexplained income under Section 68, which was affirmed by the CIT(A). The assessee filed an appeal after a significant delay.
Held
The Tribunal condoned the delay in filing the appeal. However, upon hearing the appeal ex-parte due to the assessee's non-appearance, the Tribunal found that the assessee failed to establish the prima facie case under Section 10(38) and discharge the onus under Section 68.
Key Issues
Whether the capital gains exemption under Section 10(38) is admissible for shares of a company that merged, and whether the sale proceeds constitute unexplained income under Section 68 in the absence of sufficient documentation.
Sections Cited
10(38), 68, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI “SMC” BENCH : MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
Shri Rahul Sumerchand Dodal Income Tax Officer, L/H. Shri Sumerchand R. Dodal Ward-27(3)(1), IT Office,3rd& 4th Floor, 20, Akanta Appt,Pant Nagar, vs. 6th Tower Complex, Ghatkopal, Mumbai-400075. Vashi Railway Station Building, PAN : AACPD9421E Navi Mumbai-400703. (Appellant) (Respondent) For Assessee : None For Revenue : Shri A.M.K. Mahadevan, Ld. Sr.DR Date of Hearing : 20-11-2025 Date of Pronouncement : 30-12-2025 O R D E R This appeal has been preferred by the assesseeagainst the order dated 01-05-2023 impugned herein passed by National Faceless Appeal Centre (NFAC), Delhi (in short „NFAC‟)/Ld. Commissioner of Income Tax (in short „Ld. Commissioner‟) u/s. 250 of the Income Tax Act 1961 (in short „the Act‟) for the AY. 2014-15.
At the outset, it is observed that there is a delay of 643 days in filing the instant appeal, on which the assessee by filling an application for condonation of delay, has claimed as under:
“1. The assessee submits that in the present case, the appellate order u/s 250 passed by the CIT-(A), NFAC, Delhi was issued on the email on 01.05.2023. Thus, the due date for filing the appeal before Hon'ble ITAT was 30.06.2023. The appeal is being filed on 04.04.2025. Thus, there is a delay of 643 days in filing the present appeal before Hon'ble ITAT. The assessee submits that the above delay in filing the appeal was on account of reasonable cause.
2. The appellate order u/s 250 of the Income Tax Act 1961 passed for A.Y 2014-15 by CIT(A), NFAC, Delhi was not received physically through post. The said order was received on the email id of the erstwhile consultant which was mentioned in the Form 35 for communication i.e. lohadeashok@gmail.com The appellant would like to state that the erstwhile consultant namely CA Ashok Lohade took retirement from active practice due to his old age. Therefore, appellate order as well as the notices of hearings which were served by the CIT(A) on this particular email id remained unchecked. It is only in the last week of September, 2024 Shri. Rahul Dodal received the call from the income tax department intimating him about his outstanding demand, at that time assessee became aware of the fact that the order was passed in his case. He then informed the consultant that the appeal had also been filed by his late father and requested a status update. However, restoring the password for the income tax portal took some time. Consequently, the account only became accessible in the last week of October 2024, at which point the order dated 01.05.2023 became available.
The registration of the legal heir with the income tax authorities was a necessary step, which took some time and was completed only in the last week of November 2024. Subsequently, in the last week of December 2024, Shri Rahul Dodal, the legal heir of the assessee, approached CA Sanket Joshi to file an appeal in the present case. At that stage, the counsel requested various documents and information. Since the assessee had passed away in 2019,gathering the necessary records took considerable time. The compiled documents were finally submitted to the counsel in the third week of February 2025.
However, due to persistent technical issues on the income tax portal- particularly the repeated failure to receive OTPs on time-the appeal could not be filed online. As a result, the assessee opted to file the appeal physically by post. It was dispatched from Aurangabad and is expected to reach ITAT, Mumbai, on 04.04.2025. Given these circumstances, there was an unavoidable delay of 643 days in filing the appeal. It is, therefore, humbly requested that the delay be condoned in the interest of justice.
5. In this respect, the appellant places reliance on the ratio laid down in the decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji& Ors. [167 ITR 471/ wherein it has been held that "When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred".
3. On the contrary, the Ld.DR refuted the claim/request of the assessee.
4. Considering theaforesaid contentions/reasons stated by the assessee through condonation application, as genuine, bonafide, plausible and un-intentional, the delay of 643 days in filing the instant appeal, is condoned.
Coming to merits of the case,it is observed that the Assessee on dt. 17-09-2012 had purchased 4700 shares (at Rs.10/-each)of Transcend Commerce Ltd., (in short „TCL) from M/s. Shubhmangal Sales Pvt. Ltd., on a total consideration of Rs. 47,000/- through banking channel. Thereafter the said company i.e., TCL merged with SRK Industries Ltd. (in short „SRK‟) vide Amalgamation Scheme Sanctioned by the Hon‟ble Madras High Court, vide order dt. 09-10-2012 and, therefore, the assessee was allotted 20868 shares of SRK at Rs. 5/- each. Subsequently, the assessee sold the said shares @ 192.2 and on a total consideration of Rs.40,12,236/-on dt. 30-12-2013 and consequently earned capital gain of Rs.39,65,236/-and claimed the same as exempt u/s. 10(38) of the Act.
The AO though considered the said claim of the assessee qua deduction and submission of details and documents, such as share transaction/purchase bills, contract note, bank statement and extract of demat accounts, however, by considering the investigation carried out by Directorates of Mumbai and Kolkata, sale of shares and unusual rise in price, analysis of transactions, failure to discharge the onus by the assessee, ignorance of the assessee about shares and penny stock companies, financial analysis of the penny stock companies, cash trail in the accounts of the entry providers, arranged transactions and considering SRK being a bogus company, while relying on the judgment of the Hon‟ble Apex Court in the case of CIT vs. Durga Prasad More [1971] 82 ITR 540 and Sumati Dayal vs. CIT, 214 ITR 801, ultimately disallowed the said claim of the assessee and resultantly added the entire amount of Rs. 40,12,236/- being sale proceeds of the shares, as un-explained income u/s. 68 of the Act.
The assessee being aggrieved, challenged the said addition/ disallowance by filing first appeal before the Ld. Commissioner, however, could not get any relief, as the Ld. Commissioner on the identical reasons, as of the AO, ultimately affirmed the aforesaid addition/disallowance, vide impugned order.
Thus, the assessee has preferred the instant appeal. Despite issuing notice of the date of hearing on 20-11-2025, the assessee neither appeared nor filed any adjournment application. Thus, this Court is constrained to decide this appeal, as ex-parte on the basis of material available on record and while hearing the Ld.DR.
Heard the Ld.DR and perused the material available on record, including the orders passed by the authorities below. Though it appears from the assessment order that the assessee filed certain documents referred to above, however, the assessee has not demonstrated clearly, on what mode the assessee has sold the shares. Further, the assessee has not submitted any documents with regard todematerializing and selling the shares. Therefore, in absence of relevant documents, this Court is the considered opinion, the Ld.AO has rightly drawn the conclusion that the assessee has failed to establish his prima facie case u/s. 10(38) of the Act and also failed to discharge the onus cast u/s. 68 of the Act. Thus, this court is unable to take the contrary view, as taken by the authorities below, specifically in the absence of relevant submissions and documents, which the assessee failed to file, in spite of affording opportunity. Hence, this court is inclined to dismiss the appeal of the assessee, however, with a liberty to the assessee to seek recalling of this order by substantiating plausible cause for non-appearance or non-prosecution.