PRADEEP KOTHARI,BANGLORE vs. ITO,WARD-2(2)(1), BANGLORE, BENGALURU

The brief facts of the case are that the assessee is an individual and filed his return of income on 23/03/2015. His case was selected for scrutiny through CASS and the assessment has been completed by assessing total income at Rs. 1,29,28,435/-. As against the said order, the assessee filed an appeal before the Ld.CIT(A) and the Ld.CIT(A) had confirmed the assessment order. Thereafter the assessee filed an appeal before this Tribunal and this Tribunal had set aside the order of the Ld.CIT(A) and remit this issue to the file of the AO for fresh adjudication in view of the earlier order passed by the Coordinate Bench of this Tribunal in the assessee’s brother case Shri Suresh J Kothari (HUF) vs. ITO in ITA Nos. 650/Bang/2019 dated 31/07/2019. The Coordinate Bench had remitted the issue to the AO for verification and examination with similar directions issued in the assessee’s brother’s case as stated supra.

Pursuant to the said remand, the matter was again taken up for hearing and the AO had furnished the copy of the investigation report of the Principal Director of Income Tax (Investigation), Kolkata and thereafter notices u/s. 142(1) were issued. The AO on analysis of the information available with the department and comparing it with the data contained in the return of income, had alleged that the assessee sold shares of the script Sunrise Asian Ltd. during the F.Y. 2013-14 for a value of Rs. 1,20,32,895/- and claimed the entire income as long term capital gains eligible for deduction u/s. 10(38) of the Act. Originally, the assessee had purchased 25,000 shares of M/s. Conart Traders Ltd. for a price of Rs. 20/- each and thereafter the said company was merged with M/s. Sunrise Asian Ltd. vide order of the Hon’ble Bombay High Court and consequently the assessee was allotted the shares of the M/s. Sunrise Asian Ltd. The said shares were sold by the assessee for Rs. 1,20,32,895/- during the A.Y. The AO had conducted an elaborate enquiry and also considered the order of the adjudicating officer of Securities & Exchange Board of India dated 18/02/2021 in which it was reported that M/s. Sunrise Asian Ltd. share prices were manipulated for the period 16/10/2012 to 30/09/2015. The AO based on the said enquiry and the records, had issued a show cause notice enclosing the draft assessment order. The assessee had raised objections to the said draft order which was considered by the AO and not satisfied with the said objections, had confirmed the addition by disallowing the exemption claimed by the assessee.

As against the said order, the assessee filed an appeal before the Ld.CIT(A). The assessee had raised jurisdiction issue as one of the ground and also raised grounds on merits by relying on the report of the Principal Director of Income Tax (Investigation), Kolkata in which the name of the assessee has not been mentioned. The assessee also raised a ground that the AO had not followed the directions of the ITAT. The Ld.CIT(A) observed that the assessee had opted for VSV Scheme by filing form no. 1 and form no. 2 on 25/02/2021. The Ld.CIT(A) had issued four hearing notices to the assessee but the assessee had not responded to any of the notices and also not filed their written submissions as well as documents in support of his case. The Ld.CIT(A), therefore, relying on the provisions of the Direct Tax Vivad Se Vishwas Act, 2020 had concluded that the appellate authority has no authority to adjudicate the appeal when the form 3 has been issued by the designated authority viz., the PCIT and observed that the appeal is liable to be dismissed as withdrawn. The Ld.CIT(A) also dismissed the appeal on merits since the assessee has not produced the necessary evidences in support of his claim and also relying on the order of the Coordinate Bench of the Mumbai Tribunal in the case of Aakruthi Ketan Mehta vs. ITO in ITA No. 2924/Mum/2022 dated 31/01/2024 in which the Coordinate Bench has confirmed the addition made u/s. 68 of the Act by relying on the detailed investigation carried out by the SEBI in which it was pointed out that the sale price of M/s. Sunrise Asian Ltd. was manipulated and the prices were rigged in the stock exchange.

As against the said order, the assessee is in appeal before this Tribunal.

At the time of hearing, none appeared on behalf of the assessee even though several notices were issued on various dates. The assessee filed adjournment applications for all the hearing notices except filing a written submission on 16/12/2025. Further, we have also perused the order sheet entries in which the assessee had not appeared on all the occasions and in such circumstances, the appeal being filed in the year 2024 and also it is a second round of litigation, we are deciding the appeal based on the materials available before us including the written submissions and also after hearing the Ld.DR.

The Ld.DR submitted that the AO had scrupulously followed the directions of this Tribunal and therefore, the order of the AO is in order.

The Ld.DR also submitted that in respect of the manipulation of the share prices of M/s. Sunrise Asian Ltd., a detailed investigation was done by SEBI and confirmed that there was a rigging of prices of shares of M/s. Sunrise Asian Ltd. and therefore the orders of the lower authorities are in order. The Ld.DR also relied on the findings of the Ld.CIT(A) in which the Ld.CIT(A) had relied on the order of the Coordinate Bench of the Mumbai Tribunal in which the addition made u/s. 68 of the Act was confirmed by relying on the report of the SEBI in respect of the very same company M/s. Sunrise Asian Ltd. The Ld.DR also submitted that the assessee had also availed the VSV Scheme and the designated authority also issued form 3 and therefore, it could be presumed that the assessee had not seriously disputed the issue. The Ld.DR also draw our attention that the assessee had not appeared before the Ld.CIT(A) and submitted the necessary documents and therefore, it could be presumed that the assessee is not interested in pursuing the appeal before the Ld.CIT(A). Similarly, the Ld.DR submitted that, before this Tribunal also the assessee had not appeared and furnished the necessary documents except raising several grounds and submitted that considering the response of the assessee before the Ld.CIT(A) as well as before this Tribunal it would amply exhibits that the assessee had not interested in pursuing the appeal and therefore, prayed that the appeal may be dismissed.

We have heard the arguments of the Ld.DR and the written submissions filed by the assessee. For the sake of convenience, we are extracting the written submissions filed by the assessee. “Appellant's Written Submissions to Appeal NO. ITA 2388/BANG /2024 for A.Y. 2014-15 are as follows: 1. The Learned Assessing Officer (Ld. AO) passed the assessment order dated 29.08.2021 under the Act making certain additions/disallowances, primarily on assumptions, surmises and without properly appreciating the facts and evidences on record. The demand of Rs 74,80,274/- (excluding interest) for the Assessment Year 2014-15 has arisen from Order u/s 143(3) r.w.s 254 of the Income Tax Act,1961, passed by Income Tax Department, NFAC, Delhi, dated 28-08-2021 for AY: 2014-15. The whole demand of Rs 74,80,274/- for AY: 2014-15 is based on disallowance of LTCG of Rs 1,20,32,895/- which was considered exempt u/s 10(38) of the Income Tax Act,1961. 2. The Ld. AO failed to consider the explanations submitted by the Appellant and proceeded to make additions in violation of principles of natural justice. 3. The assessment order dated 29.08.2021 was bad in law, arbitrary, unsustainable and liable to be quashed/modified. 4. Being aggrieved by the said assessment order dated 29.08.2021, the Appellant filed an appeal before CIT Appeal on 04/09/2021vide Acknowledgement Number 433676030040921 and no relief was given by CIT Appeal. 5. Being agreed by the order passed by CIT Appeal. Appellant preferred this appeal on following grounds, which are independent and without prejudice to one another. GROUNDS OF APPEAL (a) At the outset, it is respectfully submitted that the addition of Rs. 1,20,32,895/- made by the Learned AO and confirmed by the CIT(A) is unjustified, as the same is solely based on a generalized Investigation Wing, Kolkata report which does not even mention the name of the appellant as a beneficiary. The AO has neither brought any independent cogent material on record nor verified the genuineness of transactions from the stock exchange or the broker.

We have considered the said written submissions in which the assessee had relied on the very same grounds raised in the form 36 and also submitted that the assessee had duly furnished contract notes, demat statements, bank statements and all other documentary evidences in support of the Long Term Capital Gain claim. Thereafter the assessee had relied on the case laws and also the circulars issued by the CBDT. In paragraph number 6, the assessee submitted that because of the viral fever, he was not able to gather and compile the necessary data and documents required for the hearing and prayed that the hearing may kindly be adjourned and fixed in March, 2026. From the said paragraph, we find that the assessee could be able to gather and compile the necessary data and documents in support of his case and therefore prayed an adjournment. This Tribunal also considered the said request and adjourned the appeal to 10/03/2026 and the appeal was again adjourned to 19/05/2026. Then again the appeal was adjourned to 20/07/2026 since the bench was not sitting on that date. Finally, the appeal was listed for hearing on 20/07/2026. But unfortunately, the assessee had neither appeared nor filed the data and documents even after seven months which shows that the assessee is not really interested in pursuing the appeal pending before this Tribunal. In such circumstances, we don’t have other alternative except to decide the appeal on merits based on the available documents.

As submitted by the Ld.DR, there was an investigation conducted by the Principal Director of Income Tax (Investigation), Kolkata in respect of the shares of M/s. Sunrise Asian Ltd. There was also an adjudication report made by the SEBI in which the investigation made by them also revealed that the prices of the shares of M/s. Sunrise Asian Ltd. were rigged by considering the various documents. The said reports were also furnished to the assessee. In fact, this is the second round of litigation but the assessee had neither produced the documents before the Ld.CIT(A) nor produced the documents before us.

We have also considered the observation made by the Ld.CIT(A) in which the Ld.CIT(A) had relied on the form 1 and 2 filed by the assessee and form 3 issued by the designated authority under the VSV Scheme and therefore, as per the Direct Tax Vivad Se Vishwas Act, 2020, the appellate authorities are not empowered to decide the appeals when the assessee had availed the VSV scheme. Therefore, the Ld.CIT(A) had relied on the said provisions and held that the appeal is liable to be dismissed as withdrawn. Insofar as the merits of the case, the Ld.CIT(A) had relied on the order of the Coordinate Bench of the Mumbai Tribunal wherein the addition made u/s. 68 in respect of the shares of M/s. Sunrise Asian Ltd. were upheld by relying on the detailed investigation carried out by the SEBI wherein it was found that there was manipulation and rigging of the prices in the stock exchange in respect of the shares of M/s. Sunrise Asian Ltd. In spite of the said finding, the assessee had not come forward with the data and documents as prayed for in the written submissions filed on 16/12/2025. In such circumstances, we do not have any other option except to confirm the findings of the lower authorities and therefore, dismissed the appeal filed by the assessee.

In the result, the appeal filed by the assessee is dismissed.