SUPRIYA VIVEK AGARWAL,MUMBAI vs. INCOME TAX OFFICER 22(3)(6), LALBAUG

At the outset, it is observed that there is the delay of 95 days in filling of the instant appeal, for which the assessee has claimed that the impugned order was not effectively served upon the assessee, as the same was neither received on registered Email-id nor through any SMS intimation and therefore, the assessee was under bonafide belief that the appeal filed before the Ld.CIT(A) was still pending. However, on checking the Income Tax portal regarding the status of the matter after 31.12.2025, the assessee first came to know that the order dated 28.08.2025 had in fact already been passed and thus the assessee immediately on becoming aware of this factual aspect, initiated the steps to prepare and file the appeal before the Hon’ble Tribunal and accordingly the present appeal has been e-filed on 03.02.2026 without any further delay. The assessee further claimed that in these circumstances, the delay has occurred solely due to non-receipt/non-communication of the impugned order in the ordinary and expected course and not on account of any deliberate lapse, negligence or in-action on its part. Further, as soon as the fact of the order came to his knowledge, the assessee acted with due diligence and promptness and therefore, the assessee is praying that delay in filing this appeal may be condoned in the interest of substantial justice and the appeal be admitted and heard on merits.

The assessee in support of its claim qua condonation of delay has also filed duly sworn affidavit.

Though, the Ld. DR refuted, the prayer of the assessee for condonation of the delay but not the aforesaid factual aspects as demonstrated / contended by the assessee.

Heard the parties and given thoughtful consideration to the contentions raised by the parties in respect of the condonation of delay. The reasons stated by the assessee for not filling the appeal within the period of limitation though non-substantiated with any evidence, however, the same appears to be bonafide and unintentional. Even, otherwise there is no material available or brought on record to contradict the claim of the assessee.

Thus, considering the peculiar fact and circumstances in totality, specific the prayer for condonation of delay and the reasons stated by the assessee for the same, which are otherwise supported with duly sworn affidavit, prima facie appears to be genuine, bonafide and unintentional. Thus, the delay occurred in filling of instant appeal is condoned.

Now coming to the merits of the case, it is observed that the assessee in the A.Y. 2012-13 and on dated 01.02.2012 had purchased 18,000 equity shares of M/s Santoshima Lease Finance & Investments (India) Limited (‘In short SLFI’) on consideration of Rs. 3,60,000/- from M/s. Silverice Multi-trading Private Limited (‘In short SMPL’) through account payee cheque drawn in favour of ‘SMPL’ from her bank account.

Thereafter, the shares were dematerialized.

Subsequently, in view of the amalgamation order dated 22.03.2013 passed by the Hon’ble Bombay High Court, ‘SLFI’ got amalgamated with M/s. Sunrise Asian Limited (‘In short SAL’) and thus, the assessee got allotted 18,000 shares of ‘SAL’ in ratio of 1:1 in demat account.

After holding the shares under consideration for more than one year, the assessee sold the same on the floor of Securities and Exchange Board of India (SEBI) registered stock exchange i.e. Bombay Stock Exchange (BSE) through registered broker on different dates i.e. 23.07.2013, 20.08.2013, 27.09.2013, and 29.10.2013 for total consideration of Rs. 88,18,683/- and consequently earned the long term capital gain of Rs. 84,58,683/- and claimed the same being exempt, under Section 10(38) of the Act.

The Assessing Officer based on the investigation carried out into 84 penny stock companies including M/s. Sunrise Asian Limited by the Kolkata Investigation Directorate, reopened the case of the assessee under Section 147 of the Act and thereafter issued the statutory notices to the assessee, who filed the relevant details and documents before the Assessing Officer.

Thereafter, the Assessing Officer examined the financials of the scrip involved i.e. ‘SAL’ and after analyzing the statements of the entry providers as recorded by the Investigation Wing, analysis of cash trade, SEBI report and its findings with regard to the accommodation entry providers and recording the statement of the assessee, ultimately made the addition of Rs. 88,18,683/-, being sale proceeds of the sale of shares, as undisclosed income under Section 68 of the Act, vide assessment order dated 27.12.2016 under Section 143(3) of the Act.

The assessee being aggrieved challenged the said addition by filling first appeal before the Ld. Commissioner, who affirmed the aforesaid addition more or less on the same footings, as of the Assessing Officer and therefore the assessee being aggrieved has preferred the instant appeal.

Heard the parties and perused the material on record. Admittedly the assessee purchased 18,000 shares of ‘SLFI’ on consideration of Rs. 3,60,000/- on dated 01.02.2012 through ‘SMPL’ by banking channels. Subsequently, the shares got materialized.

On being amalgamated, the assessee was allotted same quantity of shares of ‘SAL’ in ratio of 1:1 in Demat Account and after holding the shares for more than one year, the assessee sold the same on various dates in the year 2013 and consequently earned Rs. 84,58,863/- as capital long term again and claimed the same being exempt under Section 10(38) of the Act.

Admittedly, the assessee before the authorities below submitted the following documents, in order to discharge its prima-facie onus cast under Section 68 of the Act.

Admittedly, the assessee sold the shares after holding the same for more than one year and through recognized stock exchange and also paid STT on sale of shares. Further, admittedly no investigation has either been carried out against the assessee, nor any finding arrived at and/or penalty levied by any Investigation Wing/Agencies such as SEBI etc.

In our considered view, simply on the basis of the investigation carried out by the Investigation Wing, without any corroborative evidence directly connecting with the assessee, the claim lodged under Section 10(38) of the Act cannot be discarded, specifically in a case wherein the assessee by producing the relevant documents which are otherwise not controverted / doubted by the authorities below, discharged its prima facie onus cast under Section 68 of the Act.

We further observe, that the Hon’ble Coordinate Bench of the Tribunal in the case of Smt. Anjana Sandeep Rathi Vs. ACIT – Circle(1), Mumbai (ITA No. 4369/Mum/2018) decided on 20.07.2020 has also considered the identical scrip i.e. M/s. Sunrise Asian Limited and ultimately allowed the identical claim lodged under Section 10(38) of the act, by observing and holding as under: “5. We have heard the submissions made by rival sides and have perused the orders of authorities below. The assessee in appeal has assailed the findings of CIT (A) in disallowing benefit of section 10(38) of the Act on long term capital gain arising from sale of shares. The assessee during the relevant period had sold shares of M/s. Sunrise Asian Ltd. for a consideration of Rs.14,99,917/-. The authorities below held the sale transaction in aforementioned scripts as bogus and thus, made addition under section 68 of the Act. We find that similar disallowance was made in the case of Narayan R. Rathi (father-in-law of the present assesse/appellant) for the assessment year 2014-15. Narayan R. Rathi had also sold the shares of same company i.e. M/s. Sunrise Asian Ltd. The issue travelled to the Tribunal. The Co-ordinate Bench of the Tribunal in ITA No. 4811/Mum/2018 (supra) deleted the addition. The Tribunal while allowing the appeal of Narayan R. Rathi held that the principles of natural justice were violated, the benefit of cross examination was not afforded to the assessee, hence, the addition is unsustainable. The relevant extract of the finding of Tribunal are reproduced herein below:-

Thus, in view of the above findings, the claim of the assessee lodged under Section 10(38) of the Act, is liable to be allowed and thus the same is allowed. Consequently, the addition made by the Assessing Officer as affirmed by the Ld.CIT, is deleted.

Thus, in the result, the Assessee’s appeal is allowed.