TARUN SURESHKUMAR JAIN,MUMBAI vs. ITO WARD 19(3)(1), MUMBAI

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ITA 208/MUM/2026Status: DisposedITAT Mumbai20 May 2026AY 2015-168 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that while the assessee's admission under the Vivad se Vishwas Scheme is significant, the AO did not independently verify the documentary evidence. Therefore, the matter was restored to the AO for independent verification of the genuineness of the transactions.

What were the facts?

The assessee claimed exemption for Long Term Capital Gain (LTCG) under Section 10(38). During assessment, the assessee offered the LTCG for taxation under the Vivad se Vishwas Scheme and paid the first installment, but failed to pay the remaining due to financial constraints. The Assessing Officer (AO) made an addition of the entire LTCG, which was upheld by the CIT(A).

What were the issues?

Whether the LTCG claimed as exempt under Section 10(38) can be taxed based on an admission made under a failed settlement scheme, without independent verification by the AO. Whether the AO properly adjudicated the claim of exemption and the genuineness of the transactions.

Which sections of the Income-tax Act were involved?

Section 10(38),Section 143(3),Section 234A,Section 234B,Section 234C,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE SANDEEP GOSAIN & HON’BLE BIJAYANANDA PRUSETH

For Respondent: Shri Hemanshu Joshi, SR DR

आदेश / ORDER

PER SANDEEP GOSAIN, JUDICIAL MEMBER: This appeal is filed by the Assessee against the order of Ld. CIT(A) NFAC vide DIN: ITBA/APL/S/250/2025-26/1082631901(1) dated 14-Nov-2025 for the Assessment Year 2015-16. The Assessee has raised the following grounds of appeal:

GOA No 1: Addition of LTCG of Rs 66,05,554/-:

The L.d. CIT(A) crred in confirming the addition of 266.05.554/- on account of Long Term Capital Gain, without appreciating the facts and law applicable to the case.

The Ld. CIT(A) erred in confirming the addition of Rs. 66,05,554 as taxable Long Term Capital Gain, instead of allowing exemption u/s 10(38) of the Act on the documented sale of listed equity shares effected through recognized stock exchange after payment of STT

GOA No 2: Effect of Void Declaration:

The Ld. CIT(A) failed to appreciate that once the declaration under the Vivad Se Vishwas Scheme became void, the same could not be used against the Appellant for making or sustaining the addition.

The L.d. CIT(A) erred in treating the LTCG of Rs. 66,05,554 as taxable merely because the declaration made under the Income Declaration Scheme, 2016/ Vivad se Vishwas Scheme was rendered void for non-payment of instalments, without appreciating that a void declaration is deemed never to have been made and cannot, by itself, convert otherwise genuine exempt income into taxable income.

On facts and in law, the learned CIT(A) erred in upholding the addition solely on the basis that the assessec/AR "offered the amount during assessment, without examining the evidentiary record, the legal claim of exemption u/s 10(38), and the explanation that the offer was made under a mistaken belief and in the context of a failed settlement declaration.

GOA No 3: Lack of Independent Adjudication:

The Ld. CIT(A) erred in law in upholding the addition solely on the basis of declaration under the Scheme, without examining the issue on merits as required under the Act.

On facts and in law, the authorities below failed to appreciate that the assessee had fully discharged the onus to establish genuineness of LTCG through demat statements, contract notes, bank statements and other supporting documents, and that there was no material on record demonstrating that the share transactions were sham or that any unaccounted money of the assessee had been introduced in the garb of LTCG.

On facts and in law, the learned CIT(A) erred in not adjudicating and dealing with the specific factual submissions and binding judicial precedents cited by the assessee in support of the claim that documented LTCG on listed shares, including so-called penny stocks, cannot be taxed as unexplained income in the absence of cogent contrary material or opportunity of cross-examination.

GOA No 4 Violation of Principles of Natural Justice:

The order passed by the Ld. CIT(A) is bad in law for not dealing with the submissions and evidences placed on record by the Appellant.

GOA No 5: Levy of Interest:

The Ld. CIT(A) erred in confirming the levy of interest u/s 234A. 234B and 234C, which is consequential and requires appropriate relief.

GOA No 6: Initiation of Penalty u/s 271(1)(C):

On facts and in law, the learned CIT(A) erred in upholding initiation/continuation of penalty proceedings u/s 271(1)(c) (or corresponding provisions), though the issue is debatable and the income, if any, has been disclosed and explained; the same be directed to be dropped.

GOA No 7: General Ground:

The Appellant craves leave to add, amend, alter or withdraw any ground of appeal at or before the time of hearing or add, amend, alter, rectify anything stated herein above or anything stated herein after.

2.

All the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in confirming the additions made by the AO amounting to Rs.

66,05,554. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

3.

The Ld. AR appearing on behalf of the assessee relied upon the statement of facts filed before us in support of the grounds raised and the same are reproduced herein below:

4.

Whereas, on the contrary, the Ld. DR appearing on behalf of the Revenue relied upon the orders passed by the Revenue Authorities.

5.

We have heard the counsel for both the parties, perused the material placed on record, the judgments cited before us, as well as the orders passed by the Revenue Authorities. From the records, we noticed that the assessee, being an individual, filed his return for the year under consideration declaring income and also claiming exemption under Section 10(38) of the Act on account of Long-Term Capital Gain (LTCG) amounting to Rs. 66,05,554. During the course of assessment proceedings, the assessee opted for the Vivad se Vishwas Scheme and offered the said LTCG for taxation. The assessee had also paid the first installment under the said scheme.

6.

However, as per the specific submission of the assessee, the remaining amount could not be paid due to financial constraints, and consequently, the declaration made under the Vivad se Vishwas Scheme could not materialize. Thereafter, the AO completed the assessment on merits under Section 143(3) of the Act by making an addition of the entire LTCG and treating the same as taxable, which was also upheld by the Ld. CIT(A).

7.

The assessee has now submitted before us that the Revenue Authorities, particularly the AO, did not properly verify the documentary evidence furnished by the assessee in order to prove the genuineness of the transactions, and merely made the additions on the basis that the assessee had applied for settlement under the Vivad se Vishwas Scheme and had offered the said LTCG for taxation.

8.

In our view, since the assessee himself made an admission with regard to the facts of the present case, the principle embodied in the Indian Evidence Act that “facts admitted need not be proved” becomes applicable. The assessee had voluntarily entered into settlement proceedings with the Department, offered the LTCG for taxation, and also paid the first installment thereunder. By doing so, the assessee submitted to the jurisdiction of the Department and admitted that the LTCG was liable to tax. Although the assessee has now contended that such a stand was taken under a “mistaken belief,” in our considered opinion, the assessee cannot be permitted to approbate and reprobate in the same breath, nor can he be allowed to take a complete U-turn and raise altogether new pleadings.

9.

At the same time, it is an admitted position that the AO did not carry out any independent verification with regard to the documentary evidence filed by the assessee. Therefore, in our considered view, the ends of justice would be met if the matter is restored to the file of the AO with a direction to independently verify the documents placed on record by the assessee in support of the claim that the transactions entered into for earning the LTCG were genuine. Thereafter, the AO shall pass a fresh order in accordance with law after providing adequate opportunity of hearing to the assessee.

10.

In the result, appeal filed by the Assessee is allowed for statistical purpose.

Order pronounced in the open court on 20.05.2026.

Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 20.05.2026 Copy to: TARUN SURESHKUMAR JAIN, ROOM NO 9, 3RD FLOOR, RAJESH BUILDING, OPP LAMINGTON ROAD, 1 POLICE STREET, GRANT RAOD, MUMBAI-400007, MAHARASHTRA ITO WARD 19(3)(1), ROOM NO 405, PIRAMAL CHAMBERS, 2 LALBAUG, PAREL, MUMBAI-400012, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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