INCOME TAX OFFICER, WARD-1(2)(1), SURAT, SURAT vs. DEEPESH VISHNU AGARWAL, SURAT

ITA No.168 & 122/Srt/2025/AY 19-20 Deepesh V Agarwal “i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer of Rs.1,15,37,991/- on account of unexplained investment ignoring the facts that these transactions are sham transactions fabricated through bogus paper concerns of M/s Kushal Limited which were engaged in providing accommodation entries. ii. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the AO has rightly made addition of Rs.1,15,37,991/- by invoking provisions of section 69 of the Act as for taking accommodating entry of the artificial LTCL/STCL generated through the transaction in penny stock of M/s Kushal Ltd. the assessee has paid equivalent amount of unaccounted cash. iii. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition made of commission of Rs.3,46,140/- u/s 69C of the Act purportedly incurred by the assessee toward payment to brokers who allegedly entered into the share transactions at the behest of the assessee overlooking the fact that the entire transactions were stage managed with the object to facilitate the assessee to plough back its unaccounted income in the form of fictitious Long Term Capital Loss/Short Term Capital Loss for taking benefit of the same. iv. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the entire addition ignoring the fact that bogus LTCL/STCL shown in the books of assessee from paper companies which were specifically formed to provide accommodation entries and the assessee re-routed its unaccounted income through the purchase transactions made from these paper companies to hide the true income of the assessee for the year under consideration. v. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing the claim ignoring the judicial pronouncement by the Hon’ble Supreme Court in the case of McDowell vs. CTO wherein it was held that “colourable devises cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious method. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.” vi. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A)ought to have upheld the order of the Assessing Office. vii. It is, therefore, prayed that the order of the Ld.CIT(A) may kindly be set aside that of the Assessing Officer be restored. viii. The appellant craves leave to add, alter, amend and/or withdraw any ground of appeal either before or during the course of the hearing of the appeal.” (AY 2019-20):

Since the jurisdictional issue is raised by the appellant, we shall first take up appellant’s appeal in ITA No.168/SRT/2025. In ground Nos. 1 and 2, the appellant has challenged the order of AO in upholding the validity of notice issued u/s 148A(b) of the Act and the order passed u/s 148A(d) of the Act which were issued by the JAO. The Ld. AR has filed a paper book containing the written submission before the CIT(A), notice issued u/s 148 by JAO and notice u/s 143(2) issued by FAO, purchase contract and sale contract notes, ledger account statement, Demat account statement etc. The Ld. AR also relied on the decisions in cases of Hexaware Technologies Ltd. (supra) and ITO vs. Guru Nanak Khalsa Sr. Sec. School SLP (Civil) Diary No.(S).17586/2025(SC). The Ld. AR submitted that he is reiterating the submission made before the CIT(A).

On the other hand, Ld. CIT-DR for the revenue relied on the order of CIT(A) on the issue of re-opening the assessment.

We have heard both the parties and perused the materials available on record. We have also deliberated the case law relied on by both the parties. We find that the appellant had not challenged the issue of notice u/s 148A(b), order u/s 148A(d) and notice u/s 148 of the Act issued by the JAO on 04.03.2023, 28.03.2023 and 28.03.2023 respectively. The appellant had not challenged the issue of the above notices before the AO. He challenged them only before the CIT(A) when appeal was filed by him on 23.02.2024. It is, therefore, clear that the & 122/Srt/2025/AY 19-20 Deepesh V Agarwal jurisdictional issue and challenged to the notices were raised for the first time much after the statutory period of one month from the issue of the notices. The CIT(A) has rightly referred to provisions of section 124(3) of the Act which disentitles a person to call in question the jurisdiction of an AO after the expiry of one month from the date on which he was served with the notice. The Hon’ble Delhi High Court in case of Abhishek Jain (supra), Hon’ble Punjab and Haryana High Court in case of Subash Chander (supra) and Hon’ble Karnataka High Court in case of Adarsh Developers (supra) have held that the appellant cannot challenge issue of jurisdiction after expiry of one month from the date on which the notice was served. The Hon’ble Supreme Court in case of Kalinga Institute of Industrial Technology (supra) has held that where High Court set aside notice issued u/s 143(2) in case of assessee on ground that jurisdictional office had not adjudicated upon returns as jurisdiction had been changed after returns were filed, since records revealed that assessee had participated pursuant to notice issued u/s 142(1) and had not questioned jurisdiction of Assessing Office, in such case order of High Court could not be sustained. The facts of the present case are similar to the facts of the cases decided supra. Hence, the ground Nos. 1 and 2 of the assessee are liable to the dismissed. 7.1 Be that as it may, we also find that the Hon’ble Delhi High Court in case of Yukti Export vs. ITO, WP(C) No.15024/2025, dated 26.09.2025, after considering various decisions including the decision of Hexaware Technologies Ltd. (supra), relied upon by the ld. AR, has held that both the JAO and FAO would have & 122/Srt/2025/AY 19-20 Deepesh V Agarwal concurrent jurisdiction to initiate proceedings for re-assessment. The Hon’ble High Court has also discussed about the dismissal of SLP by the Hon’ble Supreme Court in cases of Prakash Pandurang Patil vs. ITO, [2024: BHC-AS:32759-DB] (Bombay HC) and Deepanjan Roy vs. ADIT (IT), [WP No. 25753 of 2024] (Telangana HC) and observed that the Hon’ble Supreme Court while dismissing the appeal, had only stated that it did not find any merit in SLP, without giving any detailed reasons. After relying on a number of decisions by the Hon’ble Supreme Court on the issue of dismissal in limine, i.e., Fuljit Kaut vs. State of Punjab and Ors., (2010) 11 SCC 455, State of Orissa & Anr. Vs. Dhirendra Sundar Das & Ors., (2019) 6 SCC 270, Khoday Distrilleries Ltd. & Others vs. Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd., (2019) 4 SCC 376, the Hon’ble High Court held that the Hon’ble Supreme Court has only dismissed the SLP without dealing with the issue. Therefore, it re-affirmed its decision in case of TKS Builders Pvt. Ltd. vs. ITO, 167 taxmann.com 759, wherein it was held that both JAO and FAO would have concurrent jurisdiction to initiate proceedings for re- assessment. 7.2 Hence, respectfully following the decision of Hon’ble Supreme Court in case of Kalinga Institute of Industrial Technology (supra) and the decisions of Hon’ble High Courts cited supra, we find no infirmity in the order of CIT(A). Accordingly, the grounds are dismissed.

Ground No.3 is disallowance of STCL of Rs.91,78,253/- and LTCL of Rs.21,42,111/- (total Rs.1,15,37,991/-) by the CIT(A). In the assessment order, the & 122/Srt/2025/AY 19-20 Deepesh V Agarwal AO had disallowed Rs.1,15,37,991/- u/s 69 of the Act which pertains to unexplained investment. The Ld. AR has relied on the submission made by assessee before the CIT(A). He had given the contract notes for purchase and sale, ledge account and other details before the AO as well as CIT(A). He submitted that it was a genuine loss suffered by the assessee from purchase and re-sale of shares of Kushal Trading Ltd. 8.1 On the other hand, Ld. CIT-DR has relied on the order AO. He submitted that the AO has rightly observed that SEBI has clearly observed that these companies were found to be violating various norms and were involved in fraudulent trade despite being traded on the recognized Stock Exchange. In the show cause notice, he has mentioned that the assessee had routed unaccounted money through the use of the share transaction of Kushal Trading Ltd., which is penny stock listed in Bombay Stock Exchange. Hence, he added the said sum u/s 69 of the Act.

We have heard both the parties and perused the materials available on record. We have also deliberated on the decisions relied upon by the both the parties. We find that the appellant had claimed loss of Rs.1,15,37,991/- in the transaction of the scrip M/s Kushal Trade Ltd. There was a search u/s 132 of the Act in case of Kushal group of Ahmedabad where various incriminating seized papers and evidence were found. The CIT(A) has forwarded the additional evidence filed by the assessee to the AO and called for remand report. The report of the AO was forwarded to the appellant for rejoinder. The rejoinder of the & 122/Srt/2025/AY 19-20 Deepesh V Agarwal appellant was received by the CIT(A). All these submission and replies have been reproduced by the CIT(A) in appellate order. He has concluded that the Securities and Exchange Board of India (SEBI) has already given its report that these companies indulged in unfair trade practices. The SEBI is the apex regulatory body of India’s securities market with the role of protecting the investors, promoting market development and regulating the market. It prohibits unfair trade practices, curbs price rigging and prevents insider trading. It also enforces a code of conduct for the market participants. The order of the AO and CIT(A) is based on the report of SEBI, which has not been controverted by the ld. AR. Therefore, the manipulated loss returned by the appellant was liable to be disallowed. We do not find any infirmity in the order of CIT(A). The Ld. AR has not been able to controvert the finding of the CIT(A). He has simply relied on the submissions made before the CIT(A), which were duly rejected by the CIT(A). Since a loss in trading of penny stock was claimed by the appellant and no bogus exempt LTCG u/s 10(38) of the Act was shown in the return of income, he has rightly directed the AO to disallow the impugned loss of Rs.1,15,37,991/-. The order of CIT(A) is, accordingly, confirmed. This ground of assessee’s appeal is dismissed.

In the result, appeal of assessee is dismissed.

In the result, appeal of revenue is dismissed.

In combine result, both appeals of assessee and revenue are dismissed. Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 27/10/2025 in the open court.