INCOME TAX OFFICER WARD 1.2.1, AHMEDABAD vs. BHAVIN SURYAKANTBHAI PARIKH HUF, AHMEDABAD
What did the Tribunal hold?
The Tribunal held that the contention that a loss should be accepted as genuine simply because the assessee was not directly involved in share manipulation cannot be accepted. The substance of transactions and surrounding circumstances must be examined. Even if the assessee did not actively participate, if they benefited from artificially generated loss, the burden is on them to prove the genuineness of the transactions. The Tribunal found that the assessee failed to satisfactorily establish that the claimed loss represented a genuine commercial loss. Therefore, the loss claimed by the assessee cannot be accepted as genuine solely on the ground of passive beneficiary status. The Tribunal also noted that the facts and circumstances were tightly knit, with the Revenue investigating the factual operation of price volatility. The Tribunal declined to affirm the Ld. CIT(A)'s order, holding that the alleged long-term capital gain claimed by the assessee was bogus and the AO was justified in treating it as undisclosed income. The appeal of the Revenue was allowed.
What were the facts?
The Revenue has appealed against the order of the Ld. CIT(A) for Assessment Year 2018-19. The assessee, Bhavin Suryakantbhai Parikh HUF, claimed exemption of Rs. 13,64,304/- under Long Term Capital Gains and Rs. 11,49,061/- as Short Term Capital Loss on shares of Kushal Ltd. The assessee also claimed interest expenses of Rs. 25,34,981/- against interest income of Rs. 29,95,627/-. The Assessing Officer (AO) found the short-term capital loss to be not genuine. The Ld. CIT(A) granted relief, stating the AO provided no evidence of the assessee's involvement in share manipulation. The Revenue is aggrieved by this decision.
What were the issues?
1. Whether the Tribunal can accept a claimed loss as genuine merely because the assessee was not directly involved in the manipulation of shares, but was a passive beneficiary (mixed question of law and fact, concerning the genuineness of transactions under the Income Tax Act, 1961). Assessee's contention: The Ld. AR relied on the Ld. CIT(A)'s order, arguing that if the assessee's involvement in the manipulation of M/s. Kushal Ltd. scrip is not proven, the assessee cannot be held at fault. Revenue's contention: The Ld. DR supported the AO's order and the Investigation Officer's reports.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI RAHUL CHAUDHARY
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:
- The captioned appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as “Ld. CIT(A)”), National Faceless Appeal Centre (NFAC), Delhi vide order dated 07.11.2025, under section 250 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2018-19. 2. During the year under consideration, the assessee claimed exemption of Rs.13,64,304/- under the head “Long Term Capital Gains”, incurred Short Term Capital Loss in respect of shares of Kushal Ltd
The order continues below.
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