PRIYNKA SINGHAL,NEW DELHI vs. ITO WARD 8(1), DELHI

ITA 1167/DEL/2026Status: DisposedITAT Delhi28 September 2026AY 2014-155 pages
AI SummaryAllowed

What were the facts?

The assessee, Priynka Singhal, filed her income tax return for Assessment Year 2014-15 declaring an income of Rs. 4,26,370. Her case was selected for scrutiny, and the Assessing Officer (AO) completed the assessment under Section 143(3) on December 30, 2016, determining the total income at Rs. 56,27,463. This included additions of Rs. 49,53,422 as unexplained cash credit under Section 68 and Rs. 2,47,671 as unexplained expenditure under Section 69C. The assessee appealed to the Ld. CIT(A), who dismissed the appeal. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT). The assessee had purchased shares of Panchshul Mercantile Private Limited, which were later exchanged for shares of Kailash Auto Finance Limited due to amalgamation. She sold a portion of these shares, claiming Long Term Capital Gains (LTCG) exemption under Section 10(38). The AO relied on SEBI and Investigation Wing reports, deeming the shares as penny stock and the transaction as a means to generate LTCG, thus invoking Section 68. The AO also made an addition under Section 69C based on a presumed commission.

What did the Tribunal hold?

The Tribunal held that the AO erred in law and on facts by passing the assessment order without proper jurisdiction. The assessment order was based on a notice issued by an ITO who did not have jurisdiction over the assessee's case, and there was no order under Section 127 for the transfer of the case. Therefore, the assessment order was void ab initio. The Tribunal also noted that the SEBI report, which formed the basis for the additions, was later revoked by SEBI, further weakening the AO's findings. Regarding the additions under Section 68, the Tribunal found that the assessee had provided substantial documentary evidence, including bank statements, D-mat statements, contract notes, and broker statements, which the AO failed to controvert. The Tribunal observed that the AO's reasoning that a prudent person would not make such an investment was subjective and not a valid ground to disregard the evidence. Crucially, the Tribunal held that Section 68 is applicable only when books of account are maintained by the assessee and a sum is found credited therein. Since the assessee did not maintain books of account, the provisions of Section 68 were not applicable, neither for the full transaction amount nor for a part of it. Consequently, the addition made under Section 68 was deleted. As the addition under Section 68 was deleted, the consequential addition made under Section 69C for commission was also deleted as it was based on the presumption of commission on the unexplained expenditure. The appeal of the assessee was allowed in its entirety.

What were the issues?

1. Whether the AO erred in law and on facts by passing the assessment order without jurisdiction, specifically concerning the notice issued under Section 143(2) by another ITO and the absence of a Section 127 order for case transfer. Assessee's contention: The AO lacked jurisdiction as the assessment order was based on a notice issued by an unauthorized ITO and without a proper transfer order under Section 127. The assessee relied on the Supreme Court decision in Dy. Commissioner of Income Tax, New Delhi Vs. Mastech Technologies Pvt Ltd. Revenue's contention: Not recorded. 2. Whether the AO erred in law and on facts by making additions based on a SEBI report that was subsequently revoked by SEBI itself. Assessee's contention: The basis of the addition, the SEBI report, was later revoked by SEBI, rendering the addition unsustainable. Revenue's contention: Not recorded. 3. Whether the AO erred in law and on facts by invoking the provisions of Section 68 of the Act for making additions, particularly when the assessee had provided documentary evidence and no books of account were maintained. Assessee's contention: The AO did not point out any discrepancies in the provided evidence. The identity of purchasers was established, and there was no evidence suggesting the assessee's own money was brought back. The AO discarded explanations based on his subjective view. Section 68 is not applicable as the assessee does not maintain books of account. Revenue's contention: Not recorded. 4. Whether the AO erred in law and on facts by treating the capital gains of Rs. 49,53,422/- as income from other sources under Section 68 of the Act. Assessee's contention: This is a consequence of the incorrect invocation of Section 68, as detailed in issue 3. Revenue's contention: Not recorded. 5. Whether the AO erred in law and on facts by making an addition of Rs. 2,47,671/- under Section 69C of the Act based on presumption. Assessee's contention: This addition was based on a presumed commission and is not justified, especially if the addition under Section 68 is deleted. Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 68,Section 69C,Section 147,Section 142(1),Section 120,Section 124,Section 127,Section 10(38)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI

Before: SHRI SUDHIR KUMAR & SHRI MANISH AGARWAL

For Respondent: Ms. Harpreet Kaur Hansra, Sr. DR

PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of the Ld. Addl/JCIT(A)-1, Ludhiana [hereinafter referred to as (“Ld. CIT(A)”] vide order dated 08-12-2025 arising out of the order of the Assessing Officer passed u/s. 143(3) of the Act vide order dated 30.12.2016 for A.Y. 2014-15. 2. The assessee has raised the following grounds in appeal:-

1.

The AO has erred in law and on facts while passing the assessment order

The order continues below.

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