DEPUTY COMMISSIONER OF INCOME -TAX CENTRAL CIRCLE-1(1), AHMEDABAD, AHMEDABAD, GUJARAT vs. HARSHA RAJESHBHAI JHAVERI, AHMEDABAD, GUJARAT

ITA 972/AHD/2025Status: DisposedITAT Ahmedabad30 September 2026AY 2018-1912 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed Ground No. 1 as academic, having confirmed the CIT(A)'s order on merits. For Ground Nos. 2 and 3, the Tribunal found that the assessee was a regular share trader with documented transactions on recognized stock exchanges. The CIT(A)'s finding that there was no material connecting the assessee to accommodation entries remained uncontroverted. The Tribunal held that the preponderance of probabilities supported the assessee's stand that the losses were incurred in the ordinary course of business. For Ground No. 4, the Tribunal upheld the CIT(A)'s decision to delete the addition for undervaluation of closing stock. It was noted that a demerger scheme approved by NCLT led to the transfer of Safal Realty Pvt. Ltd.'s project division, and the assessee received OCDs in resulting companies. The original cost of acquisition was apportioned, and the CIT(A) correctly appreciated that the pre-demerger valuation was distorted. The adjustment to Rs. 1,800/- per share reflected the adjusted cost post-demerger, aligning with ICDS VIII's provision on actual cost being the fair value of acquired security in exchange for another asset. The Tribunal found no legal or factual infirmity in the CIT(A)'s order on this issue.

What were the facts?

The Revenue appealed the Commissioner of Income Tax (Appeals) [CIT(A)] order dated 24/02/2025, which partly allowed the assessee's appeal against an assessment order dated 28/03/2023, passed under Section 147 for Assessment Year 2018-2019. The reassessment was initiated based on information alleging the assessee was a beneficiary of accommodation entries. The Assessing Officer (AO) rejected the assessee's objections and made additions for a Rs. 1,000/- trading loss in Padmanabh Industries Ltd shares, a Rs. 54,734/- trading loss in Kushal Ltd shares, and Rs. 4,30,00,000/- for undervaluation of closing stock of Safal Realty Pvt. Ltd. shares, citing ICDS-VIII. The CIT(A) had quashed the assessment order on jurisdictional grounds and also deleted the additions on merits.

What were the issues?

1. Whether the assessment order passed under Section 147 is valid, considering the notice under Section 148A was issued based on information of accommodation entries, and the additions were based on seized digital data. - Revenue's contention: The AO followed due procedure under Section 148A(b) and 148A(d), and additions were based on incriminating seized digital data. - Assessee's contention: Not recorded. 2. Whether the CIT(A) erred in deleting the disallowance of Rs. 1,000/- trading loss in Padmanabh Industries Limited shares. - Revenue's contention: The AO correctly applied the doctrine of human probability, and the losses were non-genuine. - Assessee's contention: The assessee was a regular trader in over 100 scripts, transactions were on recognized stock exchanges, supported by contract notes, Demat statements, STT, and banking channels. The Rs. 1,000/- profit was offered to tax, and the loss was incurred in the ordinary course of business. 3. Whether the CIT(A) erred in deleting the disallowance of Rs. 54,734/- trading loss in Kushal Limited shares. - Revenue's contention: The AO correctly applied the doctrine of human probability, and the losses were non-genuine. - Assessee's contention: Similar to issue 2, the assessee was a regular trader, transactions were genuine and supported by documentation. The assessee also booked a loss of Rs. 22,91,960/- on closing stock of Kushal Ltd. 4. Whether the CIT(A) erred in deleting the addition of Rs. 4,30,00,000/- for undervaluation of closing stock of Safal Realty Pvt. Ltd. shares by invoking ICDS-VIII. - Revenue's contention: The AO correctly invoked ICDS-VIII notification dated 29.09.2016. - Assessee's contention: Due to a demerger scheme approved by NCLT, the project division of Safal Realty Pvt. Ltd. was transferred, and the assessee received OCDs in resulting companies. The original cost of acquisition was apportioned, and the value of Safal Realty Pvt. Ltd. shares reduced. The AO failed to consider the effect of demerger and the documentary evidence supporting the adjusted valuation of Rs. 1,800/- per share.

Which sections of the Income-tax Act were involved?

Section 147,Section 148A,Section 148A(b),Section 148A(d),Section 143(3),Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, A” BENCH, AHMEDABAD

Per Rahul Chaudhary, Judicial Member:

1.

The present appeal has been preferred by the Revenue against the Order, dated 24/02/2025, passed by the Commissioner Of Income Tax, (Appeals)-11 Ahmedabad[hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had partly allowedthe appeal against the Assessment Order, dated 28/03/2023, passed under Section 147of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2018-2019. 2. The Revenue has raised following grounds of appeal:

1.

The Ld. CIT(A) has erred in law and on facts by quashing the

The order continues below.

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