LOV SUBHASH AGRAWAL,MUMBAI vs. DCIT, CIRCLE-22(1), MUMBAI, MUMBAI

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ITA 5177/MUM/2025Status: DisposedITAT Mumbai02 December 2025AY 2013-148 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that both the AO and CIT(A) made and confirmed the addition on the grounds that the assessee failed to produce material to prove the genuineness of the LTCG exemption claim. However, the Tribunal observed that the assessee had submitted documents and acknowledgments dated 13.12.2021, but the assessment order dated 31.03.2022 did not mention these documents. The CIT(A) also failed to notice this and confirmed the addition mechanically. The Tribunal found that since the assessee had furnished necessary documents, the AO/CIT(A) should have considered them and provided an effective opportunity of hearing. Consequently, the Tribunal held that the principles of natural justice were not followed, and the impugned order suffered from illegality and perversity. The Tribunal set aside the order of the CIT(A) and restored the matter to the file of the AO for deciding it afresh after giving an effective opportunity of hearing and considering the submissions made. The assessee was directed to submit all details and take necessary steps within 60 days. The issue of whether the addition under Section 68 was valid in the absence of books of account, and the validity of the Section 148 notice, were not expressly decided but were implicitly to be considered during the de novo assessment.

What were the facts?

The assessee, Lov Subhash Agrawal, filed an appeal against the order dated 24.06.2025 of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed an addition of Rs. 53,62,634/- made by the Assessing Officer (AO) on account of bogus Long Term Capital Gains (LTCG). The AO had received information regarding JRI Industries Infrastructure Limited and a syndicate providing LTCG entries, identifying the assessee as a beneficiary who received an accommodation entry of Rs. 71,69,924/-. The assessee claimed exempt income of Rs. 53,62,634/- for Assessment Year (AY) 2013-14. Despite opportunities, the assessee failed to provide documentary evidence for the investment in shares of a penny stock company, leading the AO to add the amount under Section 68 of the Income Tax Act, 1961. The CIT(A) upheld this addition, finding the assessee's submissions unacceptable and the transaction's genuineness unproven.

What were the issues?

1. Whether the notice issued under Section 148 of the Income Tax Act, 1961, for AY 2013-14 is bad in law and void ab initio due to the absence of conditions precedent for its issuance? 2. Whether the reassessment order passed by the AO is without jurisdiction because it was made without disposing of the written objections raised by the assessee to the notice under Section 148? 3. Whether the reassessment order is without jurisdiction and liable to be quashed for not supplying third-party information, documents, and other evidence used against the assessee? 4. Whether the addition of Rs. 53,62,634/- made by the AO invoking Section 68 is without the authority of law in the absence of books of accounts maintained by the assessee? 5. Whether the CIT(A) erred in confirming the AO's order under Section 144 with false allegations that the assessee did not file replies to notices under Section 142(1)? 6. Whether the CIT(A) erred in confirming the addition of Rs. 53,62,634/- by disallowing the exemption claimed under Section 10(38) solely based on cited precedents without appreciating the facts and assessee's explanation? Assessee's contentions: The assessee argued that the notice under Section 148 was bad in law. They contended that the AO and CIT(A) failed to consider their written objections filed on 13.12.2021 and the documents submitted in the paper book. The assessee asserted that the addition under Section 68 was illegal in the absence of books of account. They also claimed the CIT(A) made false allegations regarding non-compliance with notices and erred in confirming the addition under Section 10(38) without appreciating evidence. The assessee relied on the principle of natural justice and requested the matter be restored for de novo decision. Revenue's contentions: The Revenue, through the Sr. DR, opposed the assessee's submissions and supported the orders passed by the lower authorities, arguing that the appeal should be dismissed.

Which sections of the Income-tax Act were involved?

Section 250,Section 68,Section 148,Section 147,Section 144,Section 142(1),Section 10(38)

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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI

Before: SHRI VIKRAM SINGH YADAV & SHRI. RAJ KUMAR CHAUHAN

For Appellant: Shri Vinay Kawadia, Ld. AR
For Respondent: Shri Surendra Mohan, Sr. DR
Pronounced: 02.12.2025

O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 24.06.2025 of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y.

2013-14, wherein addition of Rs. 53,62,634/- made by the AO on account of bogus LTCG was confirmed.

2.

The brief facts as culled out from the proceedings of authorities below are that the assessee has filed the return of income on 24.07.2013 declaring total income of Rs.9,83,400/- An information was received from DDIT(Inv) Unit6(3), Mumbai regarding JRI Industries Infrastructure limited and the entire shareholding of which is bought by the syndicate to provide LTCG entries. It is noticed that assessee is one of the beneficiaries and as per information received, the assessee has received accommodation entry of Rs. 71,69,924/-. The assessee has claimed exempt income of Rs. 53,62,634/- for the relevant assessment year on which STT was paid. However, the assessee did not make any compliance after getting ample opportunity to submit the documents regarding exempt income on investment in shares in the alleged penny stock company. Therefore in the absence of documentary evidence, the AO concluded that the identity, creditworthiness and genuineness of above mentioned transactions remained unexplained. Hence, a sum of Rs.53,62,634/- was added back to the income of the assessee u/s. 68 of the Act. Penalty proceedings were also initiated. Page | 2

3.

Aggrieved by the order of AO, the assessee filed the appeal before the Ld. CIT(A) and various issues were raised before him including invoking of section 68 of the Act was illegal as no books of account were produced by the assessee and the AO has not examine the income as no alleged sum is credited in the books of account of the assessee maintained in the previous year as was the requirement of invoking section 68 of the Act. Ld. CIT(A) observed that assessee has not made a case as to how such huge LTCG/STCG has accrued to him from share of the company by name Splash Media & Infra Ltd. (now known as Luharuka Media & Infra Ltd.) which did not have sound business activity to attract such steep rise in the share values. Ld. CIT(A) further observed that the submission of the assessee are not acceptable that the sale of shares was made through stock exchange on which STT was paid and the payment was made through banking channel and the exemption of LTCG was rightly claimed. The Ld. CIT(A) stated that the genuineness of the purchases were also questioned and the assessee has claimed the transaction to be genuine, but failed to prove it by furnishing relevant documentary details and evidences. Hence, the Ld. CIT(A) upheld the addition made by the AO.

4.

Aggrieved by the impugned order, the assessee is in appeal before us and has raised the following grounds of appeal:-

“1) On the facts and circumstances of the case and in law and without prejudice to other grounds, in the absence of conditions precedent for issuance of notice u/s 148 of the I.T. Act 1961, the notice issued u/s 148 for A.Y. 2013-14 is bad in law, void ab initio and hence liable to be quashed.

2) On the facts and circumstances of the case and in law and without prejudice to other grounds, the reassessment order passed by the AO without disposing off the written objections raised by the appellant to the issue of notice u/s 148, is without jurisdiction and hence the impugned reassessment order be vacated / quashed / annulled.

3) On the facts and circumstances of the case and in law and without prejudice to other grounds, the reassessment order passed by the AO without supplying the third party information/documents and other evidences/statements etc. on record and used against the assesse is without jurisdiction and liable to be quashed.

4) On the facts and circumstances of the case and in law and without prejudice to other grounds, in the absence of books of accounts maintained by the appellant, the addition made by the AO of Rs. 53,62,634/- by invoking section 68 is without the authority of law and thereby liable to be deleted.

5) On the facts and circumstances of the case and in law and without prejudice to other grounds, the learned CIT(A), NFAC has erred in confirming the order passed by the AO u/s 144 of the Act with false allegations that assessee did not file any reply to the notices issued u/s 142(1) from time to time.

6) On the facts and circumstances of the case and in law and without prejudice to other grounds, the learned CIT(A), NFAC has erred in confirming the addition of Rs. 53,62,634/- made by AO by disallowing the exemption claimed u/s 10(38) of the Act solely by relying on the decisions in cases of Pr. CIT vs. Swati Bajaj [2022] 139 taxmann.com 352 (Calcutta) without appreciating the facts of the case, explanation of the assessee and without rebutting the direct evidences on record supporting the claim of the appellant.

7) The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”

5. Ground No. 1 is the legal ground and Ground no. 2 to 6 are pertaining to addition of Rs. 53,62,634/- made u/s 68 of the Act by passing the order u/s 147 r.w.s. 144 of the Act.

6.

We have heard Ld. AR and Ld. DR and examined the record. At the outset, Ld. AR on behalf of the assessee brought to our attention the paper book containing 2 to 97 pages and submitted that all the relevant details with regard to genuineness of the transaction are at page no. 32 to 40 of the paper book. Ld. AR further submitted that the objections regarding the issue of notice u/s 148 of the Act, has not been considered

by the AO or the Ld. CIT(A) despite the fact that the objections were filed on 13.12.2021 and the assessment order was passed on 31.03.2022 without considering the written submissions and documents and the acknowledgement of filing of the documents in 3 pdf was placed at page no. 47 of the paper book. It is therefore vehemently argued that since the authorities below have not considered the relevant facts and the submissions, the impugned order is liable to be set aside and the matter be restored to the file of either the Ld. CIT(A) or the AO for considering the material submitted by the assessee and de novo decision may be given.

7.

Ld. DR on the other hand, opposed the submission of the assessee and supported the orders passed by the lower authorities stating that the appeal is liable to be dismissed.

8.

We have considered the rival submission and examined the record. We notice that both the authorities below made the addition and confirmed the addition respectively on the ground that assessee has failed to produce any material to show the genuineness of the transaction with respect to exemption of LTCG claim. We further notice that the submission and the documents were submitted by way of paper book against the acknowledgment dated 13.12.2021 and the assessment order was passed on 31.03.2022 wherein no such documents were mentioned. Similarly, the Ld. CIT(A) has also failed to notice the said failure and illegality in the assessment order and has confirmed the addition in a mechanical manner. Since the assessee has furnished the necessary documents, the AO/Ld. CIT(A) should have considered the submissions of the assessee while passing the order and effective opportunity of hearing need to be given to the assessee. Therefore, the principle of natural justice has not been followed while passing the impugned order and the impugned order, therefore suffers from illegality and perversity. Accordingly, we set aside the impugned order passed by the Ld. CIT(A) and the matter is restored to the file of AO for deciding the same afresh after giving effective opportunity of hearing to the assessee by considering the submissions already made. The assessee is also directed to submit all the details if any and take all necessary steps regarding his claim within 60 days from this order.

9.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Page | 7

Order pronounced in the open court on 02.12.2025

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