DCIT CC1 4 KOLKATA, KOLKATA vs. SUDHA AGARWAL, KOLKATA

ITA 2672/KOL/2025Status: DisposedITAT Kolkata07 October 2026AY 2015-1610 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged the onus by providing documentary evidence, including share application forms, cheques, bank statements, and demat statements, which established the identity of parties, genuineness of transactions, and source of investment. The Tribunal noted that the AO's addition was based on the Investigation Wing's report without specific material linking the assessee to manipulation. The Tribunal also considered that GCM Securities Limited was a profit-making company and that identical facts in the case of Smt. Rachna Agarwal (a family member) led to deletion of additions by the ITAT, with no appeal filed by the Revenue. The Tribunal found that the lower authorities were not justified in disallowing the assessee's claim for exemption under Section 10(38) amounting to ₹77,78,476/-. The order of the CIT(A) was set aside, and the AO was directed to delete the consequential addition and allow the exemption under Section 10(38). The Tribunal did not expressly leave any issue undecided.

What were the facts?

The Revenue appealed the order of the CIT(A) for Assessment Year 2015-16. The assessee, an individual, reported Long Term Capital Gain (LTCG) of ₹79,21,754/- from selling 1,20,000 equity shares of M/s GCM Securities Limited, purchased for ₹2,40,000/-, and claimed it as exempt under Section 10(38). The Assessing Officer (AO), relying on a Directorate of Investigation report alleging GCM Securities Limited as a "penny stock" used for "bogus LTCG," treated the entire gain as an unexplained cash credit and added it to the assessee's income under Section 68 read with Section 115BBE. The CIT(A) allowed the assessee's appeal, deleting the addition.

What were the issues?

1. Whether the Ld. CIT(A) was correct in deleting the addition of ₹83,18,151/- under Section 68 of the Income Tax Act, 1961, pertaining to the alleged bogus sale of shares of a company managed by an accommodation entry operator, contrary to the department's findings. 2. Whether the Ld. CIT(A) was justified in relying solely on routing confirmations and banking transactions, disregarding the Investigation Wing's and AO's findings, financial analysis, and surrounding facts that indicated the assessee routed unaccounted money as bogus LTCG. 3. Whether the Ld. CIT(A) was correct in deleting the addition on the ground that the assessee was not given an opportunity to cross-examine the accommodation entry provider, despite the CIT(A)'s power under Section 250(4) to conduct inquiries. 4. Whether the Ld. CIT(A) was correct in deleting the addition for bogus LTCG from penny stock sales, ignoring binding precedents like PCIT v. Swati Bajaj and PCIT v. Zulu Merchandise Pvt. Ltd. Assessee's Contentions: The assessee discharged the primary onus under Section 68 by providing credible documentary evidence of identity, genuineness of transactions, and creditworthiness. The AO's addition was based on the Investigation Wing's report without specific material connecting the assessee to manipulation. GCM Securities Limited was a profit-making company. Identical facts in the case of a family member, Smt. Rachna Agarwal, resulted in deletion of additions by the ITAT, and no appeal was filed by the Revenue. The assessee relied on judicial pronouncements including CIT v. Mukesh Ratilal Marolia, PCIT v. Parasben Kasturchand Kochar, PCIT v. Teju Rohit Kumar Kapadia, CIT v. Udit Narayan Agarwal, Andaman Timber Industries v. CCE, and Sreelekha Banerjee v. CIT. Revenue's Contentions: The Ld. CIT(A) erred in deleting the addition as the shares were of a company managed by an accommodation entry operator and lacked financial worth. The CIT(A) ignored the Investigation Wing's and AO's findings, financial analysis, and surrounding facts suggesting the assessee routed unaccounted money. The CIT(A) wrongly relied on routing confirmations and banking transactions. The CIT(A) should have exercised powers under Section 250(4) for cross-examination. The CIT(A) ignored binding precedents.

Which sections of the Income-tax Act were involved?

Section 10(38),Section 68,Section 115BBE,Section 143(2),Section 142(1),Section 250(4),Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

Per Pradip Kumar Choubey, Judicial Member:

This appeal filed by the Revenue is directed against the order dated 16.09.2025 of the Office of the Commissioner of Income Tax, Appeal passed under Section 143(3) of the Assessment Year 2015-16 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”).

2.

The brief facts of the case of the revenue is that the assessee is an individual assessee who filed his original return of income f

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 10(38)

All 3,113 judgments and leading authorities on Section 10(38) →

Recent GST High Court judgments

Search GST case law →