INCOME TAX OFFICER WARD-3(3)(2), AHMEDABAD, AHMEDABAD vs. KAPIL ARUN AGRAWAL, AHMEDABAD
आयकर अपीलीय अिधकरण, अहमदाबाद ायपीठ “सी“, अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
“ C ” BENCH, AHMEDABAD
ी संजय गग, ाियक सद एवं
ीमित अ पूणा गु"ा, लेखा सद के सम&।
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Before Shri Sanjay Garg, Judicial Member And Smt. Annapurna Gupta, Accountant Member
आयकर अपील सं /ITA No.672/Ahd/2025
िनधारण वष /Assessment Year : 2015-16
Income Tax Officer
Ward-3(3)(2)
Ahmedabad
बनाम/
v/s.
Kapil Arun Agrawal
B-130 Pushp Industrial Park
Near Shital Cinema, Gomtipur
Rakhial
Ahmeabad – 390 021
थायी लेखा सं./PAN: AGUPA 1914 H
(अपीलाथ)/ Appellant)
(*+ यथ)/ Respondent)
Assessee by :
Ms. Urvashi Sodhan, AR
Revenue by :
Shri Ravindra, Sr.DR
सुनवाई की तारीख/Date of Hearing : 28/08/2025
घोषणा की तारीख /Date of Pronouncement: 04/09/2025
आदेश/O R D E R
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the revenue against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless
Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated
02/01/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2015-2016. 2. The Revenue, in this appeal, has been taken the following grounds of appeal:
Asst. Year : 2015-16
“(a) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 74,67,960/- made by AO on account of Sale of Penny Script M/s. Oasis Tradelink
Ltd treated as unexplained income u/s. 68 of IT Act, despite the fact that credible information was received from Investigation wing that the Script M/s Oasis
Tradelink Ltd is used by Shri Naresh Jain and its associates to rig the stock and to provide accommodation entries and assessee has traded in such penny script and obtained accommodation entry of bogus STCG in his books.
(b) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.80,17,829/- made by AO on account of Sale of Script M/s Indus Ind Bank Ltd treated as unexplained income u/s. 68 of IT Act on technical grounds and without adjudicating the issue on merits despite the fact that the assessee has failed to furnish supporting evidences to substantiate its claim.
(c) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.3,09,716/- made by AO on account of Commission expenses paid to Entry
Operator out of unaccounted money u/s. 69C of IT Act, on technical grounds and without adjudicating the issue on merits, despite the fact that the assessee has availed accommodation entries in its books by trading in penny scripts.
(d) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.”
The brief facts of the case are that the Assessing Officer (AO) received information from the Insight Portal that a search and survey action was conducted on a syndicate of persons led by one Shri Naresh Jain by the Investigation Wing on 19/03/2019. During the search action, it was found that Shri Naresh Jain was indulged in share price rigging of the shares of the various companies and thereby facilitating bogus Long Term Capital Gains/Losses in several scrips to various parties. The following penny stocks were found of which share prices were rigged: 1. VMS Industries Ltd 2. Aditya Consumer Marketing Limited (ACML) 3. Steel Exchange Limited 4. Scan Steels Limited 5. Nyssa Corporation Ltd 6. Divine Multimedia India Ltd / Kaleidoscopic Films Ltd Asst. Year : 2015-16
Shantanu SheorayAquakult Ltd/52 Weeks Entertainment Ltd. 8. Aagam Capital Ltd (Old Name: Shubhkam Capital Ltd) 9. Oasis Tradelink Ltd 10.Monotype India Ltd. 11. Diamant Infrastructure Ltd. 12. Riddhi Steel & Tube Limited
1. The AO further noted that the assessee was also beneficiary of accommodation entry to the tune of Rs.70,28,400/- from the aforesaid bogus concerns managed and controlled by Shri Naresh Jain. The AO on the basis of the said information, reopened the assessment of the assessee u/s.147 r.w.s.148 of the Act. During the assessment proceedings, the assessee explained that the assessee has not received any accommodation entries from the aforesaid person, namely, Shri Naresh Jain nor from any of the companies allegedly managed by Shri Naresh Jain. It was further explained that the assessee, however, had traded in the shares of M/s.Oasis Tradelink Ltd., wherefrom the assessee had not claimed any capital gain, rather the Short Term Capital Loss (STCL) of Rs.92,040/- only. It was also explained that the shares of the said company, M/s.Oasis Tradelink Ptd. were received by the assessee by IPO/initial allotment which were sold for Rs.69,87,960/- thereby making a loss of Rs.92,040/-. That the assessee had not taken any accommodation entry as alleged by the AO. The AO, however, did not agree with the contention of the assessee and observed that the said Oasis Tradelink Ltd. was a penny stock company and the assessee was beneficiary of the bogus Short Term Capital Loss (STCL). The AO further observed that the assessee had also traded in the shares of Indusind Bank Ltd. which was also a penny stock, wherefrom the assessee had shown LTCG of Rs.76,24,746/- which was claimed exemption u/s.10(38) of the Act. He, treating both the transactions as bogus, added the total sale consideration of the assessee in ITO vs. Kapil Arun Agrawal Asst. Year : 2015-16
respect of the shares sold of the aforesaid companies i.e. Rs.74,67,960/- in respect of Oasis Tradelink Ltd. and Rs.80,17,829/- in respect of shares of Indusind Bank Ltd., totaling to Rs.1,54,85,789/-. He also made addition of Rs.3,09,716/- on account of alleged commission income paid by the assessee to obtain the aforesaid bogus LTCG/STCL.
Being aggrieved by the said order of the AO, the assessee preferred appeal before the Ld.CIT(A).
The Ld.CIT(A), however, deleted the additions so made by the AO observing that the the reasons mentioned by the Ao on the basis of which he formed the belief that the income of the assessee has escaped assessment stating that the assessee had obtained bogus accommodation entry of Rs.70,28,400/- were factually incorrect. Further that, even the assessee had not shown any LTCG by trading in this scrip of M/s.Oasis Tradelink Ltd., rather, the assessee had incurred Short Term Capital Loss of Rs.92,040/-. Therefore, there was no justification on the part of the AO to make any addition in respect of transaction entered into by the assessee on sale of shares of M/s.Oasis Tradelink Ltd. He, further, observed that since the very issue upon which the assessment was reopened, had not culminated into an any addition, therefore, the subsequent addition in respect of transactions relating to sale of shares of Indusind Bank Ltd. was not sustainable. He, in this respect, relied upon the decision of Hon’ble Mumbai High Court in the case of “CIT vs. Jet Airways (I) Ltd.” reported in (2010) 195 Taxman 117, and further on the decision of the Hon’ble Delhi High Court in the case of “CIT vs. Adhunik Niryat Ispat Ltd.” reported in (2011) 63 DTR 0212 (Delhi HC). Asst. Year : 2015-16
Being aggrieved by the said order of the Ld.CIT(A), the Revenue is in appeal before us.
We have heard the rival contentions of the parties and gone through the record. We find no infirmity in the order of the Ld.CIT(A). In this case, firstly, the reopening of the assessment was bad in law. The only information mentioned in the reasons recorded for assessment, the copy of which has been placed at page No.21 of the paper-book was that the AO had information that the assessee was beneficiary of accommodation entry of Rs.70,28,400/- from the companies managed and controlled by Shri Naresh Jain. However, it has not been mentioned in the reasons recorded as to what was the nature of transaction, from which company managed and controlled by Shri Naresh Jain the assessee had obtained the accommodation entry and in what manner. The information available to the AO on Insight Portal was general and vague information. The AO did not correlate the said information with the accounts of the assessee. Even the said information on the basis of which the assessment was reopened, was found factually incorrect.
As noted above, the Assessing Officer, in this case, has reopened the assessment solely on the basis of the general and vague information available on the insight portal of the department without verifying the veracity and truthfulness of such information. Hon’ble Supreme Court in the case of “Dr. Jagmittar Sain Bhagat & Ors vs Dir. Health Services, Haryana” in Civil Asst. Year : 2015-16
decision of the Hon’ble Supreme Court in the case of “Sushil Kumar Mehta v. Gobind Ram Bohra” (1990) 1 SCC 193 and further placing reliance on the other decisions of the Hon’ble Supreme Court in the cases of “Premier
Automobiles Ltd. v. K.S. Wadke & Ors.”, (1976) 1 SCC 496; “Kiran Singh v.
Chaman Paswan”, AIR 1954 SC 340; and “Chandrika Misir & Anr. v.
Bhaiyalal”, AIR 1973 SC 2391 has observed that where a statute places obligation and enforces the performance in specified manner, performance cannot be forced in any other manner. Under the relevant provisions of section 147 & section 148 of the Income Tax Act, for assuming juri iction to reopen an assessment by the Assessing Officer, there is a condition precedent that the Assessing Officer must have reasons to believe that the income of the assessee for that year has escaped assessment. It has been held time and again that such reasons to believe must have a material bearing on the question of escapement of income. It does not mean a purely subjective satisfaction of the assessing authority, such reason should be held in good faith and cannot merely be a pretence. The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Assessing Officer and the formation of belief regarding escapement of income. The powers of Assessing Officer to reopen an assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". There can be no manner of doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without juri iction if the reason for his belief that the conditions are satisfied
Asst. Year : 2015-16
does not exist or is not material or relevant to the belief required by the section. Such an action of the Assessing Officer regarding formation of belief of escapement of assessment and thereby in starting proceedings u/s 147 is open to challenge in a court of law. The entire law as to what would constitute
"reason to believe" has been summed up by the Hon’ble Supreme Court in the case of “Income Tax Officer vs. Lakhmani Mewaldas” (1976) 103 ITR 437. Reliance in this respect can also be placed on the decision of the Hon'ble
Punjab & Haryana High Court in the case of 'CIT vs. Paramjit Kaur' (2008)
311 ITR 38 (P&H), wherein, making identical observations, the Hon'ble High
Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment, the issuance of notices u/s. 148 of the Act was not valid. In view of this, the reopening of the assessment in this case was bad in law.
Moreover, the assessee has not shown any capital gains earned from the scrip of shares of Oasis Tradelink Ltd. The assessee in this case had shown STCL of Rs.92,040/-,therefore, the impugned addition of Rs.74,67,960/- in respect of transaction relating to shares of M/s.Oasis Ltd. Asst. Year : 2015-16
has rightly applied the ratio of laid down by the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (supra). We, therefore, do not find any infirmity in the order of the ld.CIT(A) and the same is hereby upheld.
In the result, appeal of the Revenue stands dismissed. Order pronounced in the Open Court on 04 /09/2025. ( Smt. Annapurna Gupta ) Accountant Member अहमदाबाद/Ahmedabad, िदनांक/Dated 04/09/2025
टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to :
अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)- (NFAC), Delhi 5. िवभागीय #ितिनिध , अिधकरण
अपीलीय
आयकर
,
अहमदाबाद/DR,ITAT, Ahmedabad.
6. गाड फाईल /
Guard file.
आदेशानुसार/ BY ORDER,
स&ािपत #ित ////
सहायक पंजीकार (Asstt.