DCIT-27(3), MUMBAI, NAVI MUMBAI vs. VIMAL ARVIND KAPASI, GHATKOPAR-WEST
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANTMs SUCHITRA KAMBLEThe Deputy Commissioner of Income Tax-27(3), Mumbai.
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
This appeal is filed by the Revenue against the appellate order dated 24.03.2025 passed by the Add//JCIT Commissioner of Income Tax
(Appeals)-1 Chandigarh, relating to the Assessment Year 2014-15. 2. The Revenue has raised the following grounds of appeal:
On the facts AMD circumstances of the case, the Addl./JL.CIT (A) has erred in holding that the AO has worked out the amount of addition u/s 68 as the sum of purchase price AMD the commission expense incurred by the assessee, AMD in not appreciating the fact that the addition amount has been worked out as the difference between the sales proceeds from sale of shares of M/s First Financial Services Ltd. AMD the disclosure made under the IDS 2016. Asst. Year : 2014-15
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On the facts AMD circumstances of the case, the Addl./Jt.CIT (A) has erred in not appreciating the fact that the entire proceeds of Rs.2,20,67,915/- from sale of shares of M/s First Financial Services Ltd. is unexplained credits since the transaction is a sham transaction AMD the same was used as a conduit by the assessee to convert unaccounted money into regular books of accounts.
On the facts AMD circumstances of the case, the Addl./Jt.CIT(A) has erred in not appreciating that the AO has deliberated upon the amount declared by the assessee under IDS 2016 AMD has duly given the benefit of the same while calculating the addition u/s 68 of the Act.
On the facts AMD circumstances of the case, the Addl./Jt.CIT (A) has erred in inferring that the addition made by the AO was the purchase price whereas the AO has clearly mentioned in the assessment order that he/she is only adding the differential sales consideration.
The assessee had filed return of income for A.Y. 2014-15 on 29.09.2014 declaring total income at Rs.56,24,533/-. The assessment was completed u/s 143(3) of the Income Tax Act, 1961 on 29.10.2016 at assessed total income at Rs. 56,24,533/-. An information has been received that the assessee has earned total receipts of Rs. 2,20,67,915/- from sale of penny shares of First Financial Services during the year ended on 31.03.2014. There was reason to believe that by claiming exemption u/s 10(38) of the Income Tax Act, 1961 on account of ‘Long Terim Capital Gain’ accrued from arranged and bogus transactions in aforesaid equity shares of penny stocks, the assessee has also disclosed its real income and hence its income to the extent of Rs. 2,20,67,915/- and/or more, had escaped assessment. Thus, the assessment in the case of the assessee was reopened under Section 147 of the Income Tax Act, 1961, with prior approval from competent authority, by way of issue of Asst. Year : 2014-15
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notice under Section 148 of the Income Tax Act, 1961 dated 24.03.2018
which was duly served on the assessee. In response to notice us/ 148, the assessee vide its letter dated 17.04.2018 stated that the return of income for Assessment Year 2014-15 filed u/s 139(1) of the Income Tax
Act, 1961 on 29.09.2014 be considered and treated as its return of income for assessment year 2014-15 filed in response to the notice u/s 148 of the Act, 1961. The assessee filed declaration under IDS scheme which declared Rs. 2,46,90,685/- as undisclosed income and accepted as per Form No. 4 dated 10.02.2018. The gross amount received was credited which included the original amount invested of Rs.15,77,230/-.
As per the scheme declaration made after discussion with the Department, the declaration in IDS Scheme was filed in respect of Capital
Gain earned. The Assessing Officer of Mr. Ketan Kapsi who is the cousin of the assessee issued summons dated 23.09.2016 and was informed that the assessee’s case was also under consideration. The Assessing
Officer observed that the assessee had subscribed 75,000/- shares of M/s. First Financial Services Ltd. (FFSL) at Rs.20 per shares by FFSL vide letter dated 15.03.2012. On perusal of the AIR details and information received from investigation conducted by the Investigation Wing, it was observed by the Assessing Officer that the assessee has earned total receipts of Rs. 2,20,67,915/- from sale of penny shares of First Financial
Services) during the year ended on 31.03.2014. By disclosing the LTCG of Rs. 2,04,90,685/- earned from transactions in the aforesaid penny shares under Income Disclosure Scheme, 2016, the assessee himself accepted that such transactions were not genuine. In view of the AIR
Asst. Year : 2014-15
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information and investigation conducted by the Investigation wing, the entire consideration receipts of Rs. 2,02,67,915, from transaction s in the aforesaid penny shares, is non-genuine. Hence, the Assessing Officer vide order sheet noting dated 24.10.2017 requested the assessee to explain as to why the difference amount of Rs. 15,77,230/- i.e. (sale consideration of Rs. 2,20,67,915/-) less (income disclosed in IDS, 2016
for Rs. 2,04,90,685/-) should not be added to the total income of the assessee being treated as unexplained cash credit. The assessee except reiterating his earlier submissions that the exempt long term capital gain on sale of aforesaid penny scrip is disclosed in IDIS, no explanation submitted as to why the difference amount of Rs. 15,77,230/- shall not be added to his total income vide letter dated 14.11.2018. The assessee further explained that the assessee transferred a sum of Rs.15,00,000/- through RTGS to FFSL on 09.03.2012 through his bankers account with Bank of Baroda, Tardeo Branch, Mumbai. FFSL vide its letter dated
15.03.2012 has communicated the assessee that 75,000/- shares were allotted. As per the letter the said 75,000/- Equity shares of FFSL were transferred to the Demat Account of the assessee maintained with HDFC
Bank Limited. The assessee furnished the following documents to the Assessing Officer in support of his purchase of shares of FFSL vide letters dated 26.06.2018 and 02.11.2018:
a. A letter of application to FFSL for allotment of 75,000 Equity shares.
Asst. Year : 2014-15
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b. Investment of Bank of Baroda, Tardeo Branch Mumbai showing
RTGS payment of 15,00,000/- to FFSL for the said shares.
c. The letter allotment dated 15.03.2012 issued by FFSL to the assessee.
d. Demat statement of the assessee with DP HDFC Bank Limited evidencing of FFSL on trading platform of stock exchange.
The Assessing Officer passed the Assessment Order thereby making addition of Rs.15,77,230/- which is a difference amount i.e. (Sale consideration of Rs. 2,20,67,915 less income disclosed in IDS, 2016 for Rs. 2,04,90,685/-) under Section 68 of the Income Tax Act, 1961 as the assessee made declaration under IDS, 2016 about the same.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) appeal allowed the appeal of the assesses.
The Ld. DR submitted the CIT(A) was not right in holding that the Assessing Officer has worked out the amount of addition u/s.68 as the addition made has been worked out as the difference between sale proceed from sale of shares of M/s. First Financial Services Ltd and the disclosure made in the IDS scheme 2016 by the assessee which is accepted fact by the assessee before the Revenue. The Ld. DR further Asst. Year : 2014-15
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submitted that the CIT(A) has not appreciated the fact that the entire proceeds of Rs.2,20,67,915/- from the sale of shares of M/s. First
Financial Services Ltd. is unexplained credit since the transaction is sham transaction and the same was used as conduit by the assessee to convert the unaccounted money into regular books of accounts. The Ld.
DR further submitted that the Assessing Officer has restricted the addition upon the amount declared by the assessee under the IDS 2016
and has duly given the benefit of the same, while calculating the addition u/s.68 of the Act. The addition made by the Assessing Officer was that of the purchase price to the extent of differentiation in sale consideration.
The Ld. DR submitted that the CIT(A) has categorically ignored the fact that under form 4 of the Income Declaration Scheme Rules 2016 the details of declaration column i.e. column No.5 has categorically mentioned the Assessment Year and the amount of undisclosed income declared and accepted. Thus, the scheme itself allows the assessee to declare and accept the undisclosed income. The credit to that extent remains as it is and therefore the Assessing Officer has rightly made addition to the extent of difference of sale consideration of shares and the income disclosed under IDS, 2016 by assessee himself.
The Ld.AR relied upon the order of the CIT(A) and further submitted that once the assessee has made declaration under the IDS scheme, the Assessing Officer cannot again tax the said amount which amounts to double taxation. In fact, the amount disputed was complied with, as the assessee had paid the full taxes and the said transaction of Asst. Year : 2014-15
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the purchase and selling of the shares of FFSL. Since the Assessing
Officer has not found any fault with the documentary evidences with regards to purchase and sale of shares of FFSL. The assessee contended that the Long Term Capital Gain of Rs.2,04,90,685/- declared by the assessee could not be termed as bogus.
We have heard both the parties and perused the material available on record. The contention of the Ld. DR that the Assessing Officer has worked the amount of addition u/s.68 as the sum of purchase price and the commission expenses incurred by the assessee and made addition to the extent of difference between the sale proceeds from the sale of shares of M/s. First Financial Services Ltd. and disclosure made under the Income Tax Declarative Scheme Rules 2016. Once the assessee declared and accept the said amount the credit of this unexplained amount has to be taken into account and the Assessing Officer has rightly done the addition to that extent. This is not the Long Term Capital Gain which has been accepted by the assessee but the assessee has accepted the undisclosed income which is govern under section 68 of the Act and while calculating the addition u/s.68 of the Act, the benefit which was given to the assessee in IDS scheme 2016 is a scheme which was also taken into account again. Thus, the CIT(A) was not right in deleting the said addition. In result, the appeal of the Revenue is allowed Asst. Year : 2014-15
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In the result, the appeal of the Revenue is allowed.
The order is pronounced in the open Court on 17.09.2025. (OM PRAKASH KANT)
JUDICIAL MEMBER
Mumbai; Dated 17.09.2025
MV
आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to :
अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधतआयकरआयुƅ / Concerned CIT 4. आयकरआयुƅ(अपील) / The CIT(A)- 5. िवभागीयŮितिनिध, आयकरअपीलीयअिधकरण, मुंबई / DR, ITAT, मुंबई 6. गाडŊ फाईल/ Guard file.
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आदेशानुसार/ BY ORDER,सहायक पंजीकार (Dy./Asstt.