ACIT-23(1), MUMBAI, MUMBAI vs. GORDHANBHAI GOVINDBHAI KAKADIYA , MUMBAI

5." Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the addition Rs. 2,56,01,928/- claimed as Long Term Capital Gain made on account of penny stock transaction without appreciating the facts that the assessee has entered into penny stock transaction, which was arranged transaction, which involve the series of preconceived steps and lack of commercial content and totally an artificially structured transaction entered into with the sole intent to evade taxes?"

3 ITA 5333/Mum /2045 Gordhanbhai Govindbhai Kakadiya 7. "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the addition made on account of penny stock transaction without appreciating the nature of the transactions by accepting the documentation presented by the assessee at face value, without adequately considering the underlying fraudulent intent and the orchestrated steps taker to present these transactions as genuine. The assessment of the true character and intent behind these transactions was crucial and has been overlooked."

11.The tax effect involved in this case is Rs. 90,95,682/- which is above the prescribed limit as per CBDT's latest Circular No. 05/2024 Dated. 15.03.2004. However, this case falls under the exception within the ambit of exceptional clause 3.1(h), of the CBDT's Circular mentioned above, wherein it is stated to in cases lying Organized Tax Evnion" including of capital gain loss through Penny stocks, the decision to file appeal / SLP shall be taken on merit without regard to the tax effect and the monetary limit. Hence, the appeal u/s 253 of the Act is being filed before Hon'ble ITAT. The appellant craves leave to amend or alter any grounds or add a new ground whih may be necessary.”

4 ITA 5333/Mum /2045 Gordhanbhai Govindbhai Kakadiya 3. When the appeal was called up for hearing, none appeared on behalf of the assessee. An adjournment petition dated 14.07.2025 was filed by M/s Mohanlal Jain & Co., Chartered Accountants, seeking adjournment of the matter. However, the Registry has informed that no Power of Attorney has been filed by the assessee in support of such representation. It is further noted from the record that the assessee was granted adjournments on multiple occasions in the past and was specifically directed to file a valid Power of Attorney. Despite such directions, the assessee has failed to comply with the same and continued to seek adjournments through the Chartered Accountant without furnishing the requisite authority. In view of the above non-compliance and lack of representation despite sufficient opportunities, and considering the material available on record, we are of the view that there is no justification to further adjourn the matter. Accordingly, we proceed to dispose of the present appeal ex parte qua the assessee, after hearing the submissions of the Ld. DR and upon perusal of the documents placed on record.

5 ITA 5333/Mum /2045 Gordhanbhai Govindbhai Kakadiya “Conclusion and Prayer In conclusion, the Revenue's case is that the LTCG of Rs.2.56 crore claimed by the assessee was fictitious, generated through manipulative trade practices and abuse of the securities market, and rightly brought to tax by the AO using Section 68 (cash credit) and Section 69C (unaccounted expenditure). The assessee failed to discharge his onus of proving the genuineness of this windfall gain as a legitimate investment outcome. On the other hand, the Department marshaled significant evidence: an Investigation report identifying the assessee as a beneficiary of a known scam, the SEBI order confirming price manipulation in the specific stock, and the inherent improbabilities in the transaction. The law, as elucidated by multiple court decisions, favors looking at such transactions realistically and not formalistically. When that is done, one can only conclude that this was a sham transaction, a facade for converting undeclared income to ostensibly exempt income. We respectfully submit that the CIT(A)'s interference in the assessment was unwarranted. He appears to have been swayed by the existence of transaction records and a misplaced notion of lack of inquiry, whereas he ought to have appreciated the larger picture and the ample evidence of wrongdoing. The CIT(A)'s order, if allowed to stand, would essentially provide a blueprint for tax evaders to escape by simply ensuring their transactions are routed through regular channels. This would defeat the purpose of the law and incentivize abuse of legitimate exemptions. In contrast, restoring the AO's addition would be in line with the string of decisions that have cracked down on this very type of tax evasion. We therefore pray that the Hon'ble ITAT: • Set aside the order of the CIT(A) to the extent that it deleted the additions on account ' of LTCG and commission; • Uphold the assessment order in treating Rs.2,56,01,928/- as taxable income (unexplained cash credit) and Rs. 12,80,0967- as unexplained expenditure;

6 ITA 5333/Mum /2045 Gordhanbhai Govindbhai Kakadiya • Consequently, deny the exemption under Section 10(38) on the said amount and uphold the chargeability of tax (including under Section 115BBE, if applicable, at the higher rate on unexplained income, as was done by AO). This will effectively allow the Revenue's appeal. We also seek clarity that with the addition being upheld, the protective initiation of penalty u/s 271(1)(c) (ground 7 before CIT(A)) stands revived and can be pursued as per law (subject of course to disposal in separate penalty proceedings). Respectfully submitted.”

6. We have heard the submissions of the Ld. DR and perused the material available on record. It is observed that the Ld. DR has raised objections regarding the acceptance of fresh evidence by the Ld. CIT(A) without affording a reasonable opportunity of rebuttal to the Assessing Officer. It is further noted that the Ld. CIT(A), while passing the impugned order, did not appropriately address the issue relating to the exit provider. Moreover, the assessee failed to appear before the Bench or produce any evidence in support of his claim. No Power of Attorney authorizing any Authorized Representative (AR) was filed. It is evident from the conduct of the assessee that there has been consistent non-compliance with the directions of the Bench, which appears to be a deliberate attempt to avoid the proceedings. In view of the above, we find merit in the submissions of the Ld. DR and deem it appropriate to remand the matter back to the file of the Ld. CIT(A) for fresh adjudication, after granting a reasonable opportunity of hearing to the Assessing Officer in respect of the fresh evidence furnished by the assessee. We make it clear that we are not expressing any opinion on the merits of the case so as not to cause prejudice to the decision-making process of the Ld. CIT(A).

7 ITA 5333/Mum /2045 Gordhanbhai Govindbhai Kakadiya Needless to state, the assessee shall be afforded adequate opportunity of being heard in accordance with law, and in turn, the assessee is expected to be diligent and cooperative during the remand proceedings before the Ld. CIT(A). 7. In the result, the appeal filed by the revenue bearing is allowed.