LAHERIKANT SUNDARJI BHADRA HUF,MUMBAI vs. ITO , MUMBAI

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ITA 2094/MUM/2026Status: DisposedITAT Mumbai06 October 2026AY 2011-127 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal condoned the delay in filing the appeal, considering the genuine medical reasons cited by the assessee and the non-opposition from the Revenue, referencing the Supreme Court's decision in Collector, Land Acquisition v Mst. Katiji And Others. The Tribunal noted that the CIT(A)'s order was passed ex-parte due to the assessee's non-compliance with notices. However, the assessee expressed willingness to produce necessary evidence before the Tribunal. In the interest of justice, the Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A) for de novo adjudication. This was subject to the assessee paying a cost of Rs. 10,000/- to the Prime Minister's National Relief Fund within 30 days. The CIT(A) was directed to decide the matter on merits after affording an adequate opportunity of being heard. The Tribunal explicitly stated that it had not expressed any opinion on the merits of the case. Other grounds were rendered academic.

What were the facts?

The assessee, Laherikant Sundarji Bhadra (HUF), filed an appeal before the Income-Tax Appellate Tribunal (ITAT) against an order of the National Faceless Appeal Centre (CIT(A)) dated July 10, 2025, for Assessment Year 2011-12. The appeal was filed with a delay of 150 days, attributed by the assessee to the Karta's serious medical ailments. The Assessing Officer (AO) had reopened the assessment based on information from DGIT (Inv.), Kolkata, and made an addition of Rs. 99,39,960/- on account of sale proceeds of shares of Splash Media and Infra Limited, treating it as unexplained cash credit under Section 68 of the Income-tax Act, 1961, and denying exemption under Section 10(38). The CIT(A) upheld the AO's action after the assessee failed to comply with multiple notices.

What were the issues?

1. Whether the Learned CIT(A) erred in passing the order without considering the merits of the case, thereby violating principles of natural justice, given the assessee's non-compliance with notices? 2. Whether the Learned CIT(A) erred in adding the entire sale consideration of Rs. 99,39,960/- on sales of shares of Splash Media and Infra Limited under Section 68 of the Act? 3. Whether the Learned CIT(A) erred in not considering the exemption under Section 10(38) of the Act in respect of long-term capital gains on the sale of shares of Splash Media and Infra Limited? Assessee's Contentions: The assessee argued that the CIT(A) failed to appreciate that evidence supporting the purchase and sale of shares was submitted, resulting in capital gains. The transactions were executed on the Bombay Stock Exchange, STT was paid, and the gains should be exempt under Section 10(38). The addition was based on suspicion and surmises by the AO, not on facts or evidence. The CIT(A) also erred in not considering the merits and making additions without evidence. Revenue's Contentions: The Revenue supported the order of the lower authorities, noting concurrent findings of fact regarding bogus long-term capital gain. The financials of the scrip did not justify the appreciation, and the sharp fall in price after sale by interested parties indicated manipulation. The Revenue had no objection if the matter was remanded back to the CIT(A) due to the ex-parte order.

Which sections of the Income-tax Act were involved?

Section 250,Section 10(38),Section 68,Section 143(1),Section 148,Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “A” BENCH, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.2094/MUM/2026 (AY: 2011-12) Laherikant Sundarji Bhadra (HUF) vs. ITO-32(2)(1), 201 Beach Apartment, Balraj Sahani Kautilya Bhavan, Bandra Kurla Road Opp. Novotel Hotel Juhu, Complex, Bandra (E), Mumbai- Mumbai-400049. 400051. PAN/GIR No: AAAHL6079C (Appellant) (Respondent) Assessee by Shri Vimal Punmiya, CA Revenue by Shri Surendra Mohan (SR DR) Date of Hearing 13.07.2026 Date of Pronouncement 06.10.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assessee emanates from the order passed under

section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the National Faceless

Appeal Centre [in short, ‘CIT(A)’], dated 10.07.2025 for the assessment year

(AY) 2011-12.

2.

The grounds of appeal raised by the assessee are as under:

“Regarding addition of Rs. 99,39,960/- being sale proceed of listed shares u/s. 68 1. On the facts and in the circumstances of the matter in the law, the Id CIT(A) erred in passing the order without considering the merits of the case. 2. The Learned CIT(A) erred in adding the entire sale consideration of Rs. 99,39,960/- on sales of shares of Splash Media and Infra Limited u/s 68 of the Act 3. The Learned CIT(A) failed to appreciate that the appellant had submitted evidence supporting the purchase and sale of shares of said company resulting in capital gains of Rs. 82,96,398/-

ITA No.2094/MUM/2026 Laherikant Sundarji Bhadra (HUF)

4.

The Learned CIT(A) erred in not considering the exemption u/s 10(38) of the Act in respect of long term capital gain accruing on sale shares of Splash Media and Infra Limited. 5. The Learned CIT(A) failed to appreciate the fact that the appellant's transactions of purchase & sale of shares of Splash Media and Infra Limited had been executed on the Bombay stock Exchange, a recognized stock exchange, on which Security Transaction tax (STT) had been duly paid. 6. The Learned CIT(A) erred in making the addition of sale proceeds on sale of shares Splash Media and Infra Limited u/s 68 on the basis of mere suspicion and surmises of the learned AO, and not based on facts or evidence as he failed to bring any evidence on record supporting the conclusions or controverting the evidence submitted by the appellant. Other Grounds 7. The Learned CIT(A) erred in findings and conclusions stated in para 25 of the assessment order without any evidence on record, either direct or otherwise. The conclusions are based on presumptions and surmises. General 8. The appellant craves leave to add to, amend, or delete any of the above grounds, if and when required.”

3.

There is a delay of 150 days in filing the appeal. The assessee filed an

affidavit in support of the application for condonation of delay in filing the present

appeal. In the affidavit, Shri Lehrikant Sundarji Bhadra, Karta of M/s Lehrikant

Sundarji Bhadra HUF submitted that the delay occurred due to genuine and

unavoidable medical reasons. It was stated that he was suffering from serious

medical ailments and was under continuous treatment, including treatment at

Madhuram Neuro Hospital, Jaunpur. Owing to his medical condition, severe

anxiety, continuous stress and psychological distress, he was unable to effectively

monitor the appellate proceedings, respond to statutory notices, coordinate with

his Chartered Accountant or pursue the appellate remedy within the prescribed

time. It was further stated that the non-compliance before the CIT(A) and the 2

ITA No.2094/MUM/2026 Laherikant Sundarji Bhadra (HUF) consequent delay in filing the appeal were neither deliberate nor intentional but

were solely attributable to his medical condition. Upon improvement in his

health, he immediately contacted his Chartered Accountant, collected the necessary documents and filed the appeal without any further delay. It was also

affirmed that the assessee has a good case on merits and that no prejudice would

be caused to the Revenue if the delay is condoned, whereas refusal to condone the delay would cause irreparable hardship to the assessee. The assessee,

therefore, prayed for condonation of the delay and admission of the appeal for adjudication on merits. On the other hand, the Ld. Sr. DR has not opposed the

prayer of the appellant. Considering the entire factual position as explained

before us and keeping in view the principles laid down by the Hon’ble Supreme Court in case of Collector, Land Acquisition v Mst. Katiji And Others-167 ITR 471

(SC), where it was held that when substantial justice and technical considerations

are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being

done because of a non-deliberate delay, we condone the delay.

4.

Facts of the case, in brief, are that the assessee filed return of income for the AY 2011-12 on 30.07.2011 declaring total income of Rs.3,66,368/-, claiming

exemption u/s 10(38) of the Act in respect of long-term capital gains arising from

sale of shares of Splash Media Works Ltd. The return was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the

DGIT (Inv.), Kolkata, the AO formed a belief that income chargeable to tax had

ITA No.2094/MUM/2026 Laherikant Sundarji Bhadra (HUF) escaped assessment and reopened the assessment by issuing notice u/s 148 of

the Act. During the reassessment proceedings, the assessee furnished

documentary evidence, including Demat statements, contract notes, broker's ledger and bank statements, in support of the impugned share transactions and

contended that the transactions were genuine and eligible for exemption u/s

10(38) of the Act. However, the AO, placing reliance on the investigation report of the DGIT (Inv.), statements of alleged entry operators and the findings of SEBI,

held the impugned long-term capital gains to be non-genuine, denied the exemption claimed u/s 10(38), treated the sale proceeds as unexplained cash

credits u/s 68 of the Act and made consequential addition towards alleged

commission. The total income was determined at Rs.1,03,06,330/- as against returned income of Rs.3,66,368/-.

5.

Aggrieved by the order of AO, the assessee filed appeal before the CIT(A).

The CIT(A) issued notices of hearing on 25.01.2021, 04.02.2021, 19.02.2021, 05.03.2021, 10.04.2024, 29.04.2024, 19.02.2025, 23.05.2025 and 02.06.2025.

However, there was non-compliance by assessee to all these notices. Thereafter,

the CIT(A) observed that the assessee had claimed exemption u/s 10(38) of the Act in respect of long-term capital gains arising from sale of shares of Splash

Media & Infra Ltd., which was found to be a penny stock. Relying upon the

investigation conducted by the Investigation Wing, statements recorded during the course of search proceedings, the financial position of the company, the

pattern of price movement of the scrip and the test of human probabilities as laid

ITA No.2094/MUM/2026 Laherikant Sundarji Bhadra (HUF) down by the Hon'ble Supreme Court in Sumati Dayal v. CIT and CIT v. P.

Mohanakala, as well as the decisions in SEBI v. Rakhi Trading (P.) Ltd., Suman

Poddar v. ITO and Satish Khare v. ITO, the CIT(A) upheld the action of the AO in treating the impugned long-term capital gains as non-genuine and sustaining the

addition made u/s 68 of the Act. Accordingly, the grounds raised by the assessee

were dismissed and the appeal was rejected. 6. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Ld. AR has filed written submission, legal paper book and factual details such as ITR, capital account and balance sheet, ledger accounts, bank statements etc. The Ld. AR has relied upon the decisions of the co-ordinate Bench in the case of related party and submitted that under similar facts, the Tribunal decided the issue in favour of the assessee concerned. 7. On the other hand, the Ld. Sr. DR supported the order of lower authorities. He submitted that there is concurrent finding of fact by both lower authorities

regarding the bogus long-term capital gain (LTCG) on sale of equity shares which

was claimed exempt u/s 10(38) of the Act. The financials of the impugned scrip does not inspire such huge appreciation in the price of the scrip. It was further

submitted that the price fell sharply after sale by the interested parties, which

itself proves that the impugned gain was manipulated to provide exempt LTCG to the assessee. He, however, submitted that the revenue would have no objection

if the matter is remanded back to CIT(A), who has passed an ex parte order due

to non-compliance by assessee.

ITA No.2094/MUM/2026 Laherikant Sundarji Bhadra (HUF) 8. We have heard both sides and perused the materials on record. We have deliberated on the decisions relied upon by both sides. It is noticed that the appellate order u/s 250 of the Act against the assessee order 143(3) r.w.s. 147 of the Act was decided by the CIT(A) on the basis of materials on record due to failure of assessee to comply with any of the 9 notices u/s 250 of the Act issued by the CIT(A). The submissions, details and the decisions relied upon by the Ld. AR presently before us were not before the CIT(A) during the appellate proceedings. The CIT(A) had issued the notices starting from 25.01.2021 to 02.06.2025 which did not elicit any response from the assessee. Therefore, the order of the CIT(A) cannot be said to be in violation of the principles of natural justice. However, before us, the assessee has expressed willingness to produce the necessary books of account and other documentary evidence in support of the genuineness of the claim of LTCG. In the interest of justice, we deem it proper to set aside the impugned order of the CIT(A) and restore the matter to the file of the CIT(A) for de novo adjudication after affording adequate opportunity of being heard to the assessee. However, we find that the explanation given by the assessee for non- compliance is suboptimal and leaves something more to be desired. In view of these facts, we set aside the order of CIT(A) and restore the matter to the file of CIT(A) for fresh adjudication subject to payment of cost of Rs.10,000/- (Rupees Ten thousand only) to the credit of the Prime Minister’s National Relief Fund within 30 days from receipt of this order. Subject to such payment, the CIT(A) shall decide the matter on merits in accordance with law after granting adequate and

ITA No.2094/MUM/2026 Laherikant Sundarji Bhadra (HUF) reasonable opportunity of being heard of the assessee. The ground is allowed for

statistical purpose.

8.1 We make it clear that we have not expressed our opinion on merit of the

case, which the CIT(A) shall independently decide as per law.

9.

Since we have set aside the order of CIT(A) and remanded it to his file for

fresh adjudication, the other grounds become academic in nature and do not

require adjudication.

10.

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

Order is pronounced on 06.10.2026.

Sd/- Sd/- (ANIKESH BANERJEE) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER *Aniket Chand; Sr. PS MUMBAI Date: 06.10.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order Digitally signed by ABHINAV ABHINAV ANANT ANANT GAVANDE GAVANDE Date: 2026.10.13 16:41:35 +05'30' Assistant Registrar ITAT, MUMBAI

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