ACIT, CIRCLE-1, BHAVNAGAR, BHAVNAGAR vs. MOHMEDARIF HARUNBHAI LAKHANI, BHAVNAGAR

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ITA 500/AHD/2026Status: DisposedITAT Ahmedabad19 May 2026AY 2014-157 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee failed to provide sufficient evidence to the AO regarding the share transactions. The CIT(A)'s reliance on a previous case was deemed misplaced due to a lack of identical facts and evidence. Therefore, the matter was set aside to the AO for further verification.

What were the facts?

The Assessing Officer (AO) reopened the assessee's case based on information about share transactions in KDJ Holidayscape and Resorts Ltd., where long-term capital gains were claimed as exempt. The AO treated the sale proceeds as an accommodation entry and added it to the income due to a lack of evidence from the assessee.

What were the issues?

Whether the CIT(A) erred in deleting the addition without proper verification of the share transaction evidence. Whether the assessee's transactions were genuine or sham, and if the facts were identical to a previously decided case.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 10(38),Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: MS SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Sarju Mehta, AR
For Respondent: Shri Abhijit, SR-DR
Hearing: 18.05.2026Pronounced: 19.05.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 03.12.2025 for the Assessment Year (A.Y.) 2014-15 in the proceeding u/s 147 r.w.s. 144 of the Income Tax Act (hereinafter referred as “the Act”).

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2014-15 on 30.09.2014 declaring income of

ITA No. 500/Ahd/2026 ACIT Vs Mohmedarif Harunbhai Lakhani, A.Y. 2014-15 2 Rs.24,83,590/-. The case of the assessee was reopened u/s. 147 of the Act on the basis of information that the assessee has transacted into shares of a company KDJ Holidayscape and Resorts Ltd. and earned long term capital gain. As per information received from Investigation wing, a search action u/s. 132 of the Act was conducted in Jatia Group on 17.04.2018 and the premises of KDJ Holidayscape and Resorts Ltd. was covered u/s. 133A of the Act. It was found that the share price of KDJ Holidayscape and Resorts Ltd. was artificially manipulated in spite of the fact that this company had mostly incurred losses and had earned meagre profits in certain years. In the course of survey Shri Vinod Deora, Director of the company could not produce any evidence for preferential allotment of shares done on 07.12.2011. As per information received, the assessee had carried out transactions in the shares of M/s KDJ Holidayscape and Resorts Ltd. and the LTCG of Rs. 67,50,645/- earned in these transactions was claimed as exempt u/s. 10(38) of the Act. In the course of assessment, no evidence regarding the transactions in this share was brought on record. Therefore, the AO had treated the entire sale proceeds of Rs.79,42,200/- as accommodation entry and added to income as unexplained investment. The assessment was completed u/s. 147 r.w.s. 144 of the Act on 31.03.2022 at total income of Rs. 1,05,34,143/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A) vide the impugned order and the appeal of the assessee was allowed. Th

4.

Now the Revenue is in appeal before us. The following grounds have been taken in this appeal:

ITA No. 500/Ahd/2026 ACIT Vs Mohmedarif Harunbhai Lakhani, A.Y. 2014-15 3 1. Whether on facts and circumstances and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 79,42,200/- made u/s 69 which the assessee had received on sale of penny scrips of M/s Confidence Finance to M/s KDJ Holidayscape and Resort Limited and claimed exempt u/s 10(38) of the Act, without appreciating the facts of the case. .2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in ignoring the fact that the assessee has claimed bogus long term capital gain on sale of penny scrips by way of sham transactions with M/s KDJ Holidayscape and Resort Limited, an entity which is a shell company and a part of a major racket of accommodation entry providers. 3. The appellant craves leave to amend OR alter any ground OR add a new ground, which may be necessary. 4. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.

5.

Shri Abhijit, the Ld. SR-DR, submitted that before the AO no evidence was filed by the assessee regarding the transactions done in respect of shares of KDJ Holidayscape and Resorts Ltd. He has drawn our attention to specific finding given by the AO in para 9.1 of the assessment order. The Ld. SR-DR submitted that the Ld. CIT(A) had allowed the relief on the basis of decision of the Co-ordinate bench of this Tribunal in another case of Ismail Abdulaziz Lakhani [ITA No. 803/Ahd/2025] without examining as to whether the facts of the two cases were identical. He further submitted that the evidences as brought on record by the assessee were accepted by the Ld. CIT(A) without verifying the correctness of the same. Ld. SR-DR submitted that the assessee had filed certain evidences before the AO on 30.03.2022 i.e. one day prior to time baring date. Thus, the assessee had deliberately pre-empted the AO from making any enquiry in the matter. Under the circumstances, the Ld. CIT(A) should have verified the correctness of the evidences filed by the assessee. The Ld. Sr. DR, therefore, requested that the mater may be set

ITA No. 500/Ahd/2026 ACIT Vs Mohmedarif Harunbhai Lakhani, A.Y. 2014-15 4 aside to the file of AO with a direction to verify the evidences as brought on record by the assessee.

6.

Per contra, Shri Sarju Mehta, the Ld. AR of the assessee submitted that the assessee had duly filed the evidences for purchase and sale of shares before the AO. He explained that all the transactions were made through recognized broker on stock-exchange and were duly recorded in the demat account. The Ld. AR submitted that the Ld. CIT(A) after considering the evidences filed by the assessee had given a finding that the transactions carried out by the assessee were genuine. Further, the finding was also given that the facts of the assessee were identical to the facts of the Ismail Abdulaziz Lakhnai, decided in favour of the assessee by the Co-ordinate bench of this Tribunal. He, therefore, strongly supported the order of the Ld. CIT(A).

7.

We have carefully considered the rival submissions. From the assessment order, it is evident that no materials were brought on record in support of the transactions carried out by the assessee in the shares of KDJ Holidayscape and Resorts Ltd. The AO in para 9.1 of the assessment order has given a specific finding that the assessee had failed to explain the source of funds utilized for purchase of shares and the details and evidences for sale of shares was also not brought on record. The assessee has brought on record a copy of its submissions made before the AO on 30.03.2022, whereby the copy of contract notes, delivery register and bank account were filed before the AO. The assessee, however, could not explain as to why these details were filed before the AO at the fag end of limitation period on 30.03.2022, when the case was getting bared on limited on 31.03.2022. In the absence of any explanation

ITA No. 500/Ahd/2026 ACIT Vs Mohmedarif Harunbhai Lakhani, A.Y. 2014-15 5 in this regard, one can only conclude that the assessee had deliberately pre-empted the AO from making any enquiry in the matter.

8.

It transpires that the Ld. CIT(A) had considered the evidences filed before the AO on 30.03.2022 and on that basis held the transaction of the assessee as genuine. He has merely relied on the statement of the assessee that the shares were acquired through recognized stock- exchange and held in the demat account. In fact, the copy of the demat account was neither filed before the AO nor it is available in the paper- book filed by the assessee. The reliance placed by the Ld. CIT(A) on the decision of co-ordinate bench of this Tribunal in the case of Ismail Abdulaziz Lakhani is also found to be misplaced, as the exact facts of that case has not been discussed by the Ld. CIT(A). The documentary evidences brought on record in the case of Ismail Abdulaziz Lakhani are found to be as under:

i. Copy of invoice showing purchase of shares of M/s Gomti Finlease Limited through a registered broker,

ii. Copy of the bank statement reflecting the purchase of shares of M/s Gomti Finlease Limited;

iii. Copy of balance sheet reflecting the impugned investment made in shares of M/s Gomti Finlease Limited,

iv. Copy of demat account reflecting the shares so purchased of Gomti Finlease Limited being parked therein and also demat account reflecting shares being held in the name of the amalgamated company ie. M/s. KDJ Holidayscape and Resort Limited subsequent to amalgamation,

v. The fact of there being split in the shares on amalgamation of M/s Gomti Finlease Limited in M/s. KDJ Holidayscape and Resort Limited, which was affected with the approval of the Jurisdictional High Court,

ITA No. 500/Ahd/2026 ACIT Vs Mohmedarif Harunbhai Lakhani, A.Y. 2014-15 6

vi. The demat account statement of the assessee reflecting shares of this amalgamated company also being held in the demat account right from this conversion; vii. Documents evidencing transfer or sale of shares on the platform of the recognized stock exchange through a registered broker;

viii. Documents evidencing transaction of sale of shares being subjected to levy of Securities Transaction Tax by way of contract notes;

ix. Copy of bank accounts showing receipt of sale consideration of share through banking channels.

9.

In the present case, however, all the above evidences were not brought on record by the assessee. The ratio of the that decision could have been applied only if it was demonstrated that the facts of the two cases were identical, which is missing in the order of the Ld. CIT(A). We, therefore, deem it proper to set aside the matter to the file of the Jurisdictional AO with a direction to allow another opportunity to the assessee to produce all the evidences in respect of purchase and sale of shares. The assessee will be also free to bring on record all the evidences as considered in the case of Ismail Abdulaziz Lakhani or any other evidence as deemed fit before the AO in the course of set aside proceeding. The AO will be free to make investigation in respect to the evidences filed by the assessee, as deemed fit. Thereafter, the AO should re-adjudicate the matter in accordance with provisions of law after allowing an opportunity of being heard to the assessee.

ITA No. 500/Ahd/2026 ACIT Vs Mohmedarif Harunbhai Lakhani, A.Y. 2014-15 7

10.

In the result, the appeal of the Revenue is allowed for statistical purpose.

Order pronounced in the Court on 19/05/2026 at Ahmedabad.

Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 19th May, 2026 Neelesh, Sr. PS (True Copy) आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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