INCOME TAX OFFICER, WARD 19(1), NEW DELHI vs. M/S OVAL INVESTMENT PRIVATE LIMITED, DELHI

Year : 2017-18] ITO vs M/s. Oval Investment Pvt. Ltd. Ward-19(1) B-97, 2nd Floor, Amritpuri, Delhi Garhi East of Kailash, Delhi-110065. PAN-AAACO0373R APPELLANT RESPONDENT Revenue by Shri Shyam Manohar Singh, Sr.DR Assessee by Shri Mayank Patwari, Adv. & Shri Akash Ojha, Adv. Date of Hearing 25.09.2025 Date of Pronouncement 23.12.2025 ORDER

PER MANISH AGARWAL, AM :

1. Whether on the facts of the case and in law, the Ld. CIT(A), has erred in deleting the additions totaling to Rs. 1,80,37,381/-made by the A.O. on account of undisclosed income earned by the assessee during the year under consideration on sale of equity, F&O Profit and dividend income for which the assessee received Rs. 2,07,17,870/- and payment of STT totaling to Rs. 26,80,489/- on these transactions was made which is evident in Form 10DB which the assessee failed to explain during the assessment proceedings.

2. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,33,06,326/- made by the A.O. on account of bogus credit balance appearing in the books of the assessee against M/s RKS Distributors Pvt. Lid. which the assessee failed to explain during the assessment proceedings despite being provided ample opportunities to do so.

3. The appellant craves to be allowed to add any fresh ground(s) of appeal and or deleted or amend any of the ground(s) of appeal.”

6. Before us, Revenue has vehemently supported the order of the AO and submits that assessee was trading in shares and had not declared any income on account of profits earned from such trading in the return of income filed for the year under appeal though the same was appearing in AIS statement of the assessee. Ld. Sr. DR submits that all the transactions are appearing in the name of the assessee in Form 10B however, the assessee claimed that it had provided management services where the funds were received from M/s RKS Distributor Pvt. Ltd. and funds received from the said company were invested in the stock market and assessee earned 10% as commission on the profit earned from such transactions. Ld. Sr. DR submits that AO has observed that no formal agreement was filed by the assessee and further after examining the details filed and submissions of the assessee, concluded that entire profits earned from trading of shares and from F&O segment is the income of the assessee company and not of M/s RKS Distributor Pvt. Ltd. and accordingly, made the addition. He submits that order of Ld. CIT(A) deserves to be uphold.

7. On the other hand, Ld.AR for the assessee supported the order of ld. CIT(A) and submits that assessee has worked as management consultants in terms of agreement executed with M/s RKS Distributor Pvt. Ltd. which is placed at page 14 of the Paper Book filed by the assessee. As per the said agreement, there was an arrangement between the assessee and M/s RKS Distributor Pvt. Ltd. that M/s RKS Distributor Pvt. Ltd. will providing the funds to assessee for making investment I the stock market including F&O segment on its behalf and assessee will be eligible for 10% of the profit earned as commission for the services rendered. Ld. AR submits that as per this arrangement, funds were received from M/s. RKS Distributor Pvt. Ltd. from time to time which were invested in stock market and profits earned from such transactions were credited to the account of M/s. RKS Distributor Pvt. Ltd. maintained by the assessee, and remained payable at the end of the previous year. Ld. AR further drew our attention to the affidavit of Director of M/s RKS Distributor Pvt. Ltd., Shri Sanjay available at page 50 to 51 of the Paper Book, wherein he had admitted that the funds were provided by the company to the assessee for making investment in share market and the entire income received after deduction of commission paid to assessee, was offered for tax in the return of income filed by the company M/s RKS Distributor Pvt. Ltd. The necessary copy of the computation of the said company was also filed in the Paper Book alongwith affidavit. Ld. AR submits that the assessee has acted as an Agent for M/s RKS Distributor Pvt. Ltd. and income earned from share trading as well as F&O segment pertained to M/s RKS Distributor Pvt. Ltd. who offered the same for tax in its return of income filed. Ld. AR submits that Ld. CIT(A) after considering these facts has rightly deleted the additions made by AO and he prayed for the confirmation of the order of ld. CIT(A).

8. Heard the contentions of both the parties and perused the material available on record. It is seen that there was an arrangement between the assessee and M/s RKS Distributor Pvt. Ltd. according to which assessee has acted as Agent for M/s RKS Distributor Pvt. Ltd. who provided the funds to the assessee and the assessee invested such funds in stock market on behalf of M/s RKS Distributor Pvt. Ltd. and the assessee got 10% of the profit as commission. It is further seen that such commission is duly credited in the books of the assessee and declared as income in the Profit & Loss account. The profits earned from such transactions also stood credited in the ledger account of M/s. RKS Distributor Pvt. Ltd. in the books of assessee. As this income actually belonged to M/s. RKS Distributor Pvt. Ltd. who declared the same in its return of income, therefore same was not disclosed by assessee and there was mismatch with the information available in AIS statement. As observed above, M/s. RKS Distributor Pvt. Ltd. has accepted these transactions as belonged to it and further confirmed the balance appearing in the books and after including the profits in its income paid the taxes thereon. Ld. CIT(A) appreciated these facts and deleted the additions made. The relevant observation of Ld. CIT(A) as appearing in para 6.2 to 6.3.4 of the order are reproduced as under:-

9. Before us, Revenue has failed to controvert the findings given by Ld. CIT(A) who has based his findings after examining Balance Sheet of the assessee company as well as of M/s. RKS Distributor P.Ltd. wherein this income was disclosed by M/s. RKS Distributor P.Ltd. and taxes were paid on such income. It is also seen that company, M/s. RKS Distributor Pvt. Ltd. has accepted all the transactions and filed its confirmations which is available at page 49 of the Paper Book and it is also a matter of fact that no independent inquiry was made by AO from M/s. RKS Distributor PVT. Ltd. though all these details were filed by the assessee before him. It appears that AO has proceeded with pre-conceived notion and failed to make any independent inquiry before reaching to the conclusion that the profits from such transactions pertained to the assessee company and was its income.

Order pronounced in the open Court on 23.12.2025.