ASHOK KUMAR JAIN,GHAZIABAD vs. DEPUTY COMMISSIONER, NOIDA

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ITA 3335/DEL/2024Status: DisposedITAT Delhi06 February 2026AY 2016-175 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal set aside the orders of the lower authorities and remanded the matter back to the Assessing Officer (AO). The primary reason for this decision was that the AO had made additions based on information from the Investigation Wing, treating the sale of M/s. Achal Investment Ltd. shares as a bogus penny stock transaction. The assessee claimed to have filed all necessary evidence to prove the LTCG as genuine. Crucially, the assessee argued that no opportunity was provided to cross-examine the persons whose statements formed the basis for alleging the transaction as sham. The Tribunal, in the larger interest of justice, directed the AO to provide the assessee with an opportunity to cross-examine the Revenue's witnesses, specifically those whose statements were relied upon to deem the transaction bogus. All grounds of appeal raised by the assessee were allowed for statistical purposes. The issue of penalty proceedings under sections 271(1)(b) & 271(1)(C) was implicitly addressed by the remand, as the primary additions are subject to further verification.

What were the facts?

The assessee, Ashok Kumar Jain, is in appeal against the order of the Ld. Commissioner of Income Tax (Appeal) dated 30.05.2024. This order arose from an assessment order dated 26.05.2023 passed by the DCIT, Central Circle-1, Noida, under sections 143(3)/147 of the Income Tax Act, 1961, for the Assessment Year 2016-17. The case was re-opened based on information received on 12.03.2021 from the DDIT (Inv.) alleging bogus Long Term Capital Gain (LTCG) in the scrip of M/s. Achal Investment Ltd. The Assessing Officer (AO) made additions of INR 1,19,63,230/- for the sale transaction treated as bogus and INR 3,58,890/- as commission on this amount, treating it as unexplained expenditure. The total assessed income was INR 1,37,16,250/-. The Ld. CIT(A) dismissed the assessee's appeal.

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the addition of Rs. 1,19,63,230/- under section 68 of the Income Tax Act, treating the sale proceeds of M/s. Achal Investments Ltd. shares as bogus, is justified (mixed law and fact). 2. Whether the addition of Rs. 3,58,890/- under section 69C of the Income Tax Act, treating commission as unexplained expenditure, is justified (mixed law and fact). 3. Whether the Ld. CIT(A) erred by not providing an opportunity for cross-examination of the Investigation Wing's findings (mixed law and fact). 4. Whether the Ld. CIT(A) failed to consider the assessee's submissions and evidence regarding the exemption claim under section 10(38) for LTCG (mixed law and fact). 5. Whether the Ld. CIT(A) failed to consider binding judgments cited by the assessee (mixed law and fact). 6. Whether penalty proceedings under sections 271(1)(b) & 271(1)(C) were wrongly proposed (mixed law and fact). Assessee's contentions: The AO made additions treating capital gains as unexplained credit under section 68 and commission as unexplained expenditure under section 69C without providing an opportunity to cross-examine witnesses. All purchase and sale details were filed, and the request for cross-examination was denied. Therefore, the additions should be deleted. Revenue's contentions: The Ld. Sr. DR supported the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C,Section 10(38),Section 143(3),Section 147,Section 148,Section 250,Section 271(1)(b),Section 271(1)(C)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI “A” BENCH: NEW DELHI

Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL

For Appellant: Shri Raghav Goel, CA &, Ms. Arushi Goel, CA
For Respondent: Shri Krishna Kumar
Hearing: 03.12.2025Pronounced: 06.02.2026

ORDER

PER MANISH AGARWAL, AM :

1.

The present appeal is filed by assessee against the order dated 30.05.2024 by Ld. Commissioner of Income Tax (A)-3, Noida [“Ld. CIT(A)”] in Appeal No. CIT(A), Kanpur-4/10889/2015-16 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 26.05.2023 passed u/s 143(3)/147 of the Act pertaining to Assessment Year 2016-17.

2.

Brief facts of the case are that an information was received on ITBA System dated 12.03.2021 which was uploaded by DDIT (Inv.), Unit-6(3), New Delhi that assessee had obtained bogus Long Term Page | 1 Capital Gain (“LTCG”) in the scrip of M/s. Achal Investment Ltd. during the year under appeal. In view of the above information, the case of the assessee was re-opened for the year under consideration and notice u/s 148 was issued to the assessee company on 30.06.2021 after taking prior approval from Competent Authorities. Thereafter, reassessment proceedings were initiated and AO made the additions of INR 1,19,63,230/- in respect of sale transaction of penny stock of M/s Achal Investments Ltd. treated as bogus and INR 3,58,890/- in respect of commission @ 3% on INR 1,19,63,230/- is treated as unexplained expenditure. Finally, the AO assessed the income of the assessee at INR 1,37,16,250/- vide assessment order dated 26.05.2023 passed u/s 143(3)/147 of the Act.

3.

Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 30.05.2024, dismissed the appeal of the assessee.

4.

Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:-

1. “That the Learned Commissioner of Income Tax (Appeal) erred in law as well as on fact in making addition of Rs. 1,19,63,230/- u/s 68 of the Income Tax Act by treating the entire sale proceeds of listed shares of M/s Achal Investments Ltd as bogus which is based merely on assumptions and which is totally unjustified and baseless.

2. That the Learned Commissioner of Income Tax (Appeal) erred in law as well as on fact in making addition of Rs. 3,58,890/- u/s 69C of the Income Tax Act by assuming that the assessee has paid commission for arranging the entry and treated as unexplained expenditure which is based merely on assumptions and is totally unjustified and baseless.

3. That the Learned Commissioner of Income Tax (Appeal) erred in law as well as on fact by not giving any opportunity of being heard or cross examining the findings of the Investigation Wing of the Department which is formed as the base to proceed with the whole case.

4. That the Learned Commissioner of Income Tax (Appeal) has not considered the appellants submissions/evidences in respect of claim of exemption of u/s 10(38) on long term capital gain on sale of listed equity shares, which is illegal and unjustified.

5. That the Learned Commissioner of Income Tax (Appeal) while passing the order has not considered the various binding judgments by Honorable Courts and Tribunals as cited by the Appellant during the course of proceedings. 6. That the Learned Commissioner of Income Tax (Appeal) wrongly proposed to initiate the penalty proceedings u/s 271(1)(b) & 271(1)(C) of the I.Tax Act.”

5. Ld.AR for the assessee submitted that claim of the assessee is that AO has made the addition by treating the capital gains declared from the sale of scrip of M/s. Achal Investment Ltd. of INR 1,19,63,230/- as unexplained credit u/s 68 of the Act and further, made addition of INR 3,58,890/- being commission @ 3% for arranging such accommodation entries, without providing any opportunity to cross-examine the witnesses which action was confirmed by Ld. CIT(A). The assessee further claimed that all the details with respect to the purchases and sales, were filed before the AO and further requested for the cross-examination of the witnesses of the Revenue however, the said opportunity was not given and therefore, requested that the additions be deleted.

6.

On the other hand, Ld. Sr.DR for the Revenue supported the orders of the lower authorities.

7.

Heard the contentions of both parties and perused the material available on record. AO had made the addition on account of LTCG declared by the assessee from the sale of shares of M/s. Achal Investment Ltd. which was treated as penny stock by the AO based on the inquiries and investigations carried out by the Investigation Wing of the Department. The assessee claimed that all the evidences were field to prove the LTCG as genuine however, no opportunity was provided by the AO of the persons based on whose statements, genuine transaction was alleged as sham transaction. In view of the these facts, and in the larger interest of justice, we set aside the orders of the lower authorities and remand the matter back to the file of the AO with the directions to provide an opportunity to the assessee for cross-examination of the witnesses of the Revenue i.e. persons whose statements are relied upon for holding the transaction of sale of scrips of M/s. Achal Investment Ltd. in the hands of the assessee as bogus. With these directions, all Grounds of appeal raised by the assessee are allowed for statistical purposes.

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