KARSHANBHAI V PATEL-HUF,AHMEDABAD vs. ITO, WARD-3(3)(8), AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. No. 305/Ahd/2019 (Assessment Year: 2015-16) Karshanbhai V. Patel-HUF, Vs. Income Tax Officer, C/o. Ketan H. Shah, Advocate, Ward-3(3)(8), 512, Times Square-I, Opp. Ram Ahmedabad Baug Bungalow, Thaltej Shilaj Road, Thaltej, Ahmedabad-380059 [PAN No.AAGHK8487D] (Appellant) .. (Respondent) Appellant by : Shri Ketan Shah & Shri Aman Shah, ARs Respondent by : Smt. Kakoli Uttam Ghosh, Sr. D.R. 07.04.2026 Date of Hearing Date of Pronouncement 29.05.2026 O R D E R PER: SUCHITRA KAMBLE, JUDICIAL MEMBER: The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”)-3, Ahmedabad on 24.01.2019 for A.Y. 2015-16.

“1. The CIT(A) has erred in not appreciating the facts that, the Assessing Officer has wrongly made addition of Rs. 74,59,010/- in account of investment in shares, it is said that, as per statement of facts referred above, and evidences produced therewith he ought not to have made such addition and same is required to be deleted. 2. The CIT(A) has erred in not appreciating the facts that The Lr. AO has given wrong finding as per para 4.6 to 8 as well as para 10 to para 11 of the order which is perverse on facts and also on law and therefore, the addition made may please be deleted. 3. The CIT(A) has erred in not appreciating the facts that the Lr. Assessing Officer has not provided the inquiry details as referred by him in Assessment Order in connection with SEBI Investigation and even otherwise, the jurisdiction under the SEBI law is

ITA No. 305/Ahd/2019 Karshanbhai V. Patel-HUF vs. ITO Asst.Year–2015-16 - 2 - altogether different in compare to the Income Tax Act and therefore, the same cannot be followed. 3.1 The CIT(A) has erred in not appreciating the facts that the Lr. Assessing Officer has not provided the Inquiry details as referred by him in his order page 6 para 7 u/s. 133A, it is stated that no addition can be made simply based on the Investigation Wing report and even otherwise without providing cross-examination of the concern person and therefore, the addition made may please be deleted. 4. The Lr. CIT(A) has also erred in not appreciating the facts that the assessee has purchased the shares out of regular source of income. of past years and books of accounts has been accepted as such without applying sec. 145 and therefore, the purchase made cannot be doubted on this ground and consequently the addition made may please be deleted. 5. The Lr. CIT(A) has also erred in not appreciating the various submissions and case laws cited before him as per two submissions dated 23-11-2017 and 24-11-2017 as well as Paper book page 1 upto 288 and based on this submission he ought to have deleted the whole addition.” 3. The assessee filed return of income on 02.12.2015 declaring taxable income of Rs. 1,79,620/-. The assessee has shown interest income apart from exempted Long Term Capital Gain. The assessee’s case was selected for scrutiny by issuing notice under Section 143(2) of the Act on 29.07.2016. Subsequently, notice under Section 142(1) r.w.s. 129 of the Act was issued on 16.06.2017. In response to the statutory notices the assessee’s Authorised Representative attended the assessment proceedings and filed the details. The Assessing Officer observed that the assessee is one of the beneficiary who has sold the scrips of Lifeline Drugs and PHA Ltd. for the amount of Rs. 75,09,750/- during the assessment year 2015-16. The said scrip of Lifeline Drugs and PHA Ltd. was put under suspension by SEBI for illegal trade practices adopted by the said company in the Investigation Report Directorate of Investigation (Kolkata) in respect of organise represent of generating bogus entries of Long Term Capital Gain. The details of purchase of shares and the details of selling the said shares are as follows:

ITA No. 305/Ahd/2019 Karshanbhai V. Patel-HUF vs. ITO Asst.Year–2015-16 - 3 - Scrip Purchased Lifeline Drugs & PHA Ltd. No. of shares purchased 2850 Date of purchase 01.04.2013 Amount paid Rs.1,03,644/- Broker through whom purchased Offline purchase through Vijay Bhagwandas & Co. No. of shares sold 2850 Date of sale/Settlement date 10.09.2014/ 12/09/2014 Name of Broker M/s. Vijay Bhagwandas & Co. Amount received Rs. 74,59,010/- The Assessing Officer found that the assessee indulged in bogus Long Term Capital Gain and claimed the amount of Rs. 74,59,010/- as exempted under Sectio 10(38) of the Act. During the course of survey under Section 133A the assessee admitted that the assessee purchase penny stock by various share brokers and entry operators. The assessee’s representative has furnished the contract details of M/s. Vijay Bhagwandas & Co. from whom the assessee purchase the shares. After taking cognizance of the assessee’s details, the Assessing Officer made addition of Rs. 74,59,010/- as unexplained credit under Section 68 of the Act.

ITA No. 305/Ahd/2019 Karshanbhai V. Patel-HUF vs. ITO Asst.Year–2015-16 - 4 - assessee has been accepted as such without applying Section 135. Therefore, the purchase made cannot be doubted. The Ld. AR further submitted that the decision of Hon’ble Calcutta High Court in case of Principal Commissioner of Income-tax vs. Swati Bajaj [2022] 139 taxmann.com 352 (Calcutta) will also be not applicable in assessee’s own case because in the present case the assessee has purchased the shares of two companies namely Lifeline Drugs and Pharma Ltd. through M/s. Vijay Bhagwandas & Co. The assessee has purchased shares much before the date of investigation of the SEBI proceedings in case of Lifeline Drugs. The assessee traded the share in August 2014 and January 2015. The said scrip was suspended for the period January 10, 2013 to May 30 2015. 6. The Ld. DR relied upon the decision of the Tribunal in case of Shri Rupesh Vyas vs. ACIT (ITA No. 909/Ind/2018 order dated 07.12.2022). The Ld. DR relied upon the assessment order and the order of the Ld. CIT(A). The Ld. DR further submitted that the assessee’s relying on the sister concern decision in case of Shailesh M. Patel-HUF (ITA No. 280/Ahd/2019 order dated 29.10.2021) but the said order will not be applicable in assessee’s cae as in the assessment order of the present assessee, the Assessing Officer on the very basis of doubtful purchase and the mode of payment for the purchase of shares (which was under scrutiny before the Assessing Officer) has taken a stand which is justified and logically concluded by the Assessing Officer as well as CIT(A). 7. The Ld. AR relied upon the following decisions:-

ITA No. 305/Ahd/2019 Karshanbhai V. Patel-HUF vs. ITO Asst.Year–2015-16 - 5 - (i) Vijay K. Patel-HUF vs. ITO (ITA No. 313/Ahd/2019 dated 08.06.2022) (ii) Chandra Prakash Jhunjhunwala vs. DCIT (ITA No. 2351/Kol/2017 dated 09.08.2019) (iii) The Income Tax Officer vs. M/s. Ice Worth Reality LLP (ITA Nos. 565&566/Ahd/2020 dated 13.03.2023) (iv) Principal Commissioner of Income Tax-1 vs. Parasben Kasturchand Kochar (2021) 130 taxmann.com 177 (SC) (v) Principal Commissioner of Income Tax vs. Sandipkumar Parsottambhai Patel (2023) 150 taxmann.com 192 (Gujarat) (vi) The DCIT vs. Shri Ambalal Chimanlal Patel (ITA No. 2398/Ahd/2018 dated 20.01.2023) (vii) ITO vs. M/s. Indravadan Jain HUF (ITA No. 4861/Mum/2014 dated 27.05.2016) (viii) Dipesh Ramesh Vardhan vs. DCIT (ITA No. 7648/Mum/2019 dated 11.08.2020) (ix) DCIT vs. Saurabh Mittal (ITA No. 16/Jp/2018 dated 29.08.2018) (x) Mrs. Neeta Bothra vs. ITO (2022) 137 taxmann.com 463 (Chennai – Trib.) 8. We have heard both the parties and perused all the relevant material available on record. From the perusal of records, it can be seen that the assessee has not out rightly purchased the said scrip of Lifeline Drugs & PHA Ltd. from M/s. Vijay Bhagwandas & Co. and in fact Page No. 13 of the Paper Book (factual Paper Book dated 07.12.2020) has categorically given pool holding certificate without mentioning the amount received by the said broker / M/s. Vijay Bhagwandas & Co. and the very next stage i.e. Page No. 14 gives

ITA No. 305/Ahd/2019 Karshanbhai V. Patel-HUF vs. ITO Asst.Year–2015-16 - 6 - the details of transfer of shares without mentioning the date of the said letter except mentioning the date of purchase date 09.09.2014. The Demat details were also given but that was the date near to the scrip when the assessee sold through Trade Bull Securities Pvt. Ltd. The certificates itself creates doubt as to the actual payment of the said amount of purchase. In fact there is a cash details mentioned at Page 23 & 24 which was also doubtful related to the purchase of said scrip. Thus, the Assessing Officer has doubted the purchase and confronted the same to the assessee after verifying the document produced during the assessment proceedings. Because the purchase was not genuinely reflected in his account i.e. assessee’s account, merely having the cash in hand cannot be the criteria that the genuinity of transaction will be established. It is to be seen that how the cash is generated should have been explained by the assessee, when the assessee was confronted by the Assessing Officer, which in this case, the assessee failed to do so. The decisions cited by the assessee of various Tribunals and various High Courts are commenting on those cases and unique facts of those cases only. But in the present assessee’s case, the fact clearly shows that the purchase was doubtful and the assessee has not given the proper answer of the cash from which the assessee has received those shares as the said Vijay Bhagwandas & Co. was holding the shares and that also in their pool account on behalf of assessee. This is clearly a case relating to syndicate of the company stock of which price of stock can be determined by the individuals such as assessee. The argument of the Ld. AR that the assessee was not involved in price manipulation related to the suspicion of the said scrip for the period of January 2013 to May 2015 is not correct and not in sync with the conduct/practice of the assessee while purchasing and selling the said

ITA No. 305/Ahd/2019 Karshanbhai V. Patel-HUF vs. ITO Asst.Year–2015-16 - 7 - scrip. In fact the pool holding certificate was issued on 05.04.2014 which is the very period when the company stock of Lifeline Drugs & PHA Ltd. was suspended. The SEBI order is not the whole and sole reasoning given by the Assessing Officer, but the assessee’s conduct of purchase and selling the shares was confronted to the assessee and the satisfied answer and the detail cash generation for purchase of those shares were not explained properly by the assessee. Therefore, the doubt which was raised by the Assessing Officer was not at all clarified by the assessee. Therefore, the Assessing Officer as well as the CIT(A) has rightly come to the conclusion that the said transaction to the claim for Long Term Capital Gain exemption under Section 10(38) of the Act is unexplained and in fact it is a pool holding purchase on behalf of assessee through a broker as claimed by the assessee. Thus, it is rightly added under Section 68, as unexplained credit. Hence, the appeal of the asessee is dismissed.

Sd/- Sd/- (DR. BRR KUMAR) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 29/05/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad