Loading judgment…
Facts
The assessee, a practicing Chartered Accountant, filed his return of income. The Assessing Officer (AO) initiated scrutiny based on penny stock data and conducted a survey. The AO estimated income from bogus share transactions based on information received and the assessee's representation of third parties involved.
Held
The Tribunal observed that the AO lacked cogent material and proceeded solely on estimation without sufficient evidence. The Tribunal found that the assessment was made without application of mind and inclined to delete the addition.
Key Issues
Whether the addition made by the AO based on estimation without cogent material is sustainable? Whether the assessment order was passed without application of mind?
Sections Cited
132, 143(3), 144, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Order
: 07.11.2025 O R D E R
PER S.RIFAUR RAHMAN, AM:
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax Appeals-29, New Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 21.10.2024 for Assessment Year 2015-16 raising following grounds of appeal :- “(A) That Ld CIT-A vide impugned order passed order u/s 250 dated 21.10.2024 erred in not quashing the impugned assessment order passed u/s 143(3)/144 dated 22.12.2017 which is ex facie passed without any application of mind, in most arbitrary manner as evident from fact that sec 143(3) and sec 144 are used interchangeably.
(B) That. Ld CIT-A vide impugned order passed u/s 250 dated 21.10.2024 erred in not quashing the impugned assessment order passed u/s 143(3)/144 dated 22.12.2017 as said assessment order patently displays total lack of any relevant material in support of impugned ADHOC/estimated addition of Rs.50,00,000. (C) That Ld CIT-A vide impugned order passed u/s 250 dated 21.10.2024 erred in not quashing the impugned assessment order passed u/s 143(3)/144 dated 22.12.2017 as same is passed in most abdicated and dictated manner. (D) That Ld CIT-A vide impugned order passed 250 dated 21.10.2024 erred in not quashing the impugned assessment order passed u/s 143(3)/144 dated 22.12.2017 as same is passed with clear legal malice on part of Ld AO; (E) That Ld CIT-A vide impugned order passed u/s 250 dated 21.10.2024 erred in not quashing the impugned assessment order passed u/s 143(3)/144 dated 22.12.2017 as casual remand cannot be made just/or giving one more innings where impugned asst itself is jurisdictionally and fundamentally flawed. (F) That Ld CIT-A vide impugned order passed u/s 250 dated 21.10.2024 erred in not quashing the impugned assessment order passed u/s 143(3)/144 dated 22.12.2017 as same is passed contrary to mandate of 1961 Act.”
At the time of hearing, ld. AR of the assessee brought to our notice that assessee filed its return of income on 22.02.2016 declaring an income of Rs.7,32,380/-. He read from the assessment order that notice under section 132 of the Income-tax Act, 1961 (for short ‘the Act’) was issued and served on the assessee. Subsequently, further notices were issued to the assessee. However, the Assessing Officer observed that the case was selected for manual scrutiny because of penny stock data. No reply was received from the assessee. Further AO observed that a survey was also conducted on 23.07.2015 and the statement of the assessee was recorded on oath on 23.07.2015. Subsequently, some more information was called for and none appeared on behalf of the assessee and no compliance was made from the assessee even though final notice was issued u/s 144 of the Act.
Further ld. AR brought to our notice that assessee is a practicing Chartered Accountant and his income from profession has been declared at Rs.7,99,298/- out of total receipt in cash of Rs.9,39,298/- claiming expenses of Rs.1,40,000/- incurred in cash. Further he brought to our notice that Assessing Officer has observed that there is information on record that assessee is dealing in share transactions which are bogus in nature and the main persons helping him in carrying out the bogus transactions were Mukesh Kumar and Deepak Aggarwal. Assessee had obtained their Power of Attorney as a Chartered Accountant to appear before them which were produced by him before the DDIT, Investigation Unit 2(2), New Delhi. Therefore, the Assessing Officer estimated the income from bogus share transaction at Rs.50,00,000/-.
Aggrieved with the assessment order, assessee preferred an appeal before the ld. CIT (A)-29, New Delhi and filed detailed submissions. After considering the detailed submissions, ld. CIT (A) remitted the issue back to the file of Assessing Officer for fresh assessment.
5. In this regard, ld. AR submitted that the whole issue raised by the Assessing Officer is based on some dealings in share transactions with Mukesh Kumar and Deepak Aggarwal who were claimed to be involved in bogus transactions. Since assessee has filed Power of Attorney to represent them before Investigation Wing, the Assessing Officer has estimated the income considering the share transactions carried on by the third parties to whom assessee was representing, the addition was made in the hands of the assessee. Therefore, the addition is made purely on the basis of estimation and there was no material with the Assessing Officer and the assessment is bad in law. He prayed that the addition made by the Assessing Officer may be deleted.
On the other hand, ld. DR of the Revenue submitted that no information was filed before the Assessing Officer even though several opportunities were granted to the assessee and even ld. CIT (A) has remitted the issue back to the file of Assessing Officer to redo the assessment and he relied on the findings of lower authorities.
Considered the rival submissions and material available on record. We observe that Assessing Officer has not found any cogent material at his disposal and merely because assessee has obtained Power of Attorney of Mukesh Kumar and Deepak Aggarwal who were involved in carrying out bogus transactions, he proceeded to estimate the income from bogus transactions in the hands of the assessee. It clearly shows that Assessing Officer has no material at his disposal and proceeded to estimate the income. We observe that the assessee is a practicing Chartered Accountant and he has declared his income by filing return of income and there is no material whatsoever brought on record by the Assessing Officer during the course of assessment proceedings except estimating the undisclosed income of that person. Therefore, we are inclined to delete the addition proposed by the Assessing Officer on the basis of estimation. Therefore, we allow the grounds raised
by the assessee.
8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 7th day of November, 2025.