ACIT CIRCLE-12, PUNE, PUNE V. DHIRAJ BHAUSAHEB NIKAM, PUNE

ITA 1375/PUN/2025

AI Insights

The case involves an appeal by the Revenue against the order of the Ld. CIT(A) / NFAC, which had deleted the addition made by the Assessing Officer regarding the non-genuineness of a long-term capital gain claimed by the assessee under section 10(38) of the Income Tax Act, 1961. The assessee, Dhiraj Bhausaheb Nikam, had claimed a deduction for long-term capital gains on the sale of shares, which the Assessing Officer deemed a sham transaction. The CIT(A) had deleted the addition without adequately addressing the findings of the Assessing Officer, leading to the Revenue's appeal. The Tribunal found the CIT(A)'s order to be cryptic and lacking in detailed reasoning, thus remanding the case for a thorough re-examination.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 836268 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2026
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 27-05-2025
• Other Referred Cases: M/s Andaman Timber Industries vs Cammr. of Central Excise, Kolkata, CIT vs. Jansampark Advertising and Marketing P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DEEPAK KUMAR KEDIA
• Keywords: Capital asset; Opportunity of being heard; Unexplained cash credit; Opportunity of cross examination; Bogus
• Section: 148; 142(1); 68; 131; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA No.1375/PUN/2025 Assessment year : 2014-15 ACIT, Circle – 12, Pune Vs. Dhiraj Bhausaheb Nikam 515/516, Purva Plaza, Sadashiv Peth, Pune – 411030 PAN: AAHPN5137C (Appellant) (Respondent) Assessee by : None Department by : Shri Deepak Kumar Kedia, JCIT (through virtual) Date of hearing : 10-02-2026 Date of pronouncement : 11-02-2026 O R D E R PER R.K. PANDA, VP: This appeal filed by the Revenue is directed against the order dated 14.03.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2014-15. 2. None appeared on behalf of the assessee when the name of the assessee was called. A perusal of the order sheet entries shows that this appeal was fixed for a number of times and due to non-appearance of the assessee, notice was served through the DR. Despite notice being served on the assessee through the Income Tax Department, none appeared on behalf of the assessee nor any application seeking adjournment of the case has been filed. Under these circumstances, we deem it proper to decide this appeal on the basis of material available on record and after hearing the Ld. DR. Printed from counselvise.com 2 ITA No.1375/PUN/2025 3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 30.09.2014 declaring total income of Rs.26,73,269/- after claiming deduction of Rs.40,43,305/- as exempt u/s 10(38) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) being the long term capital gain on sale of listed shares. The case of the assessee was selected for scrutiny through CASS and accordingly statutory notice u/s 143(2) of the Act was issued. The Assessing Officer thereafter issued notice u/s 142(1) of the Act along with a questionnaire in response to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 4. During the course of assessment proceedings the Assessing Officer noted that the assessee has made purchase of 38500 shares of M/s. Anukaran Commercial Enterprises Ltd on 20.09.2011 at Rs.24/- each i.e. for the total consideration of Rs.9,24,000/- from M/s Mountain View Developers Pvt Ltd. The assessee has purchased these shares in lieu of exchange of shares (sale of shares) of M/s Shree Ganesh Spinners Ltd. (Now Known as Yantra Natural Resources Ltd.). The assessee has sold 49025 shares of Shree Ganesh Spinners Ltd. on 16.09.2011 at Rs.18.85 per share valuing Rs.9,24,000/-. The assessee in his submission stated that he has transferred his shares in M/s Shree Ganesh Spinners Ltd to M/s Mountain View Developers Pvt Ltd on 29.02.2012 whereas M/s Mountain View Developers Pvt. Ltd. has transferred the shares of M/s Anukaran Commercial Enterprises Ltd on 16.03.2012 in DMAT account. The Assessing Officer noted that Printed from counselvise.com 3 ITA No.1375/PUN/2025 M/s Mountain View Developers Ltd. is a promoter of M/s Anukaran Commercial Enterprises Ltd. and it is acting as Person Acting in Concert (PAC) for M/s Anukaran Commercial Enterprises Ltd. He noted that M/s Anukaran Commercial Enterprises Ltd has submitted data to SEBI and BSE for insider trading which shows the date of sale by M/s Mountain View Developers Pvt. Ltd is 16.03.2012. He, therefore, held that the submission of the assessee that the shares are purchased on 20.09.2011 is totally wrong. He noted that the broker / contract notes submitted by the assessee are made by himself and backdated. Further, the assessee has not submitted DIS or RIS slip during assessment proceedings to prove the exact date of purchase of shares. He further noted that although the assessee has exchanged the shares of M/s Shree Ganesh Spinners Ltd. for M/s Anukaran Commercial Enterprises Ltd., however, the assessee has not offered the capital gain, if any, that arose from this transaction as exchange is also treated as transfer within the meaning of section 2(47) of IT Act, 1961. In absence of any satisfactory details, the Assessing Officer was of the opinion that the entire transaction appears to be sham. 5. The Assessing Officer analyzed the share price of M/s Anukaran Commercial Enterprises Ltd and M/s. Shree Ganesh Spinners Ltd on different dates for comparison and observed that there are huge changes in prices of shares of scrip traded particularly shares of M/s. Shree Ganesh Spinners Ltd between the date of shares sold as claimed by the assessee and the date on which the shares got Printed from counselvise.com 4 ITA No.1375/PUN/2025 dematerialized. Further the assessee has purchased the shares offline. The assessee could not produce the share transfer certificate or share transfer form and also the shares got dematerialized very late i.e. four to five months after the date of transaction. This according the Assessing Officer is in clear violation of Securities Contract Regulation Act, 1956. He noted that the assessee has made backward papers for purchase of shares. The Assessing Officer recorded the statement of the assessee and noted that the assessee did not produce DIS and RIS slip for purchase and sale of shares. To verify the genuineness of the transaction, the Assessing Officer issued notice u/s 133(6) of the Act to M/s. Mountain View Developers Pvt Ltd on 03.12.2016 but no response was received from the said party. The Assessing Officer also conducted enquiries on entry operators / share broker/sub- brokers and also went through the data received from the investigation wing in the ITS window in the ITD system of the department. Although the assessee made various submissions on different dates but the assessee was unable to substantiate the genuineness of the transactions and could not give any reason of entry into such transaction. He was unable to furnish any other proof of shares apart from the contract note which has not been verified by M/s. Mountain View Developers Pvt Ltd. The Assessing Officer further noted that during the course of enquiries by the investigation wing it has been admitted by a number of entry operators and share broker/sub-brokers that the share prices of M/s. Anukaran Commercial Enterprises Ltd has been jagged up through cartel of interlinked companies controlled and managed by entry operators for the purpose of providing accommodation entry of Printed from counselvise.com 5 ITA No.1375/PUN/2025 bogus long term capital gain. Rejecting the various explanations given by the assessee and relying on various decisions, the Assessing Officer rejected the claim of exemption u/s 10(38) of the Act and made addition of the same by observing as under: Printed from counselvise.com 6 ITA No.1375/PUN/2025 Printed from counselvise.com 7 ITA No.1375/PUN/2025 Printed from counselvise.com 8 ITA No.1375/PUN/2025 Printed from counselvise.com 9 ITA No.1375/PUN/2025 6. In appeal, the Ld. CIT(A) / NFAC held that the assessee was not given opportunity of cross examination. Relying on various decisions he deleted the addition made by the Assessing Officer. 7. Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds: 1. Whether on the facts and circumstances of the case and in law, the CIT(A) justified inholding that the LTCG of Rs.40,43,305 claimed by the assessee, is genuine, whereas the script was found to be a penny stock and entire transaction is sham transaction? 2. Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in disregarding the factual matrix of the case while allowing the appeal of the assessee and deleting the addition of Rs.40,43,305 made by the assessee? 3. Whether on the facts and circumstances of the case and in love, the CIT(A) in allowing the appeal of the assesses relying on the Decision of M/s Andaman Timber Industries vs Cammr. of Central Excise, Kolkata, whereas facts of the cases are different from the present case? Printed from counselvise.com 10 ITA No.1375/PUN/2025 4. The appellant craves to leave, add, amend, alter any of the above questions of law at the time of hearing of appeal. 8. The Ld. DR strongly challenged the order of the Ld. CIT(A) / NFAC in deleting the addition made by the Assessing Officer. He submitted that the Ld. CIT(A) / NFAC in a very cryptic order has deleted the addition without considering the various findings made by the Assessing Officer regarding non- genuineness of the transaction entered into by the assessee. He submitted that the decisions relied on by the Ld. CIT(A) / NFAC are distinguishable and are not applicable to the facts of the present case especially when the shares were purchased offline and that too in exchange of certain other shares. 9. Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs. Jansampark Advertising and Marketing P. Ltd. reported in (2015) 375 ITR 373 (Del), he submitted that where the Assessing Officer has failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion it is the obliation of the Ld. CIT(A) to ensure that effective enquiry was carried out. He accordingly submitted that he has no objection if the matter is restored to the file of the Ld. CIT(A) for adjudication of the issue afresh. 10. We have heard the Ld. DR and perused the record. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case rejected the claim of deduction u/s 10(38) and made addition of Printed from counselvise.com 11 ITA No.1375/PUN/2025 Rs.41,87,250/- by invoking the provisions of section 68 of the Act on the ground that the assessee was unable to substantiate the genuineness of the transaction and could not give any reason of entry into such transactions. We find the assessee was not able to give any plausible explanation as to how the shares were transmitted to the assessee located at Pune and who has signed the transfer form. Further, the assessee was unable to furnish any proof of purchase of shares apart from the contract note and has not given the DIS and RIS slip. Even the shares are transferred off market. The assessee was unable to deliver physically the shares or share transfer form. The various reasons for which the Assessing Officer made addition have already been reproduced in the preceding paragraphs. We find the Ld. CIT(A) / NFAC in a very cryptic order has deleted the addition without giving his own findings but simply relying on certain decisions which are distinguishable and not applicable to the facts of the present case. A perusal of the order of the Ld. CIT(A) / NFAC shows that it is a cryptic one and without addressing the allegations made by the Assessing Officer. 11. We find the Hon’ble Delhi High Court in the case of CIT vs. Jansampark Advertising and Marketing P. Ltd. (supra) has observed as under: “37. Thus, when the AO sets about seeking explanation for the unaccounted credit entries in the books of accounts of the assessee in terms of Section 68, it is legitimately expected that the exercise would be taken to the logical end, in all fairness taking into account the material submitted by the assessee in support of his assertion that the person making the payment is real, and not non-existent, and that such other person was actually the source of the money forming the subject matter of the transaction as indeed that the transaction is real and genuine, same as it is represented to be. Having embarked upon such exercise, the AO is not Printed from counselvise.com 12 ITA No.1375/PUN/2025 expected to short-shrift the inquiry or ignore the material submitted by the assessee. 38. The provision of appeal, before the CIT (Appeals) and then before the ITAT, is made more as a check on the abuse of power and authority by the AO. Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact- finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on facts would naturally shift to the door of the said appellate authority. For such purposes, we only need to point out one step in the procedure in appeal as prescribed in Section 250 of the Income Tax Act wherein, besides it being obligatory for the right of hearing to be afforded not only to the assessee but also the AO, the first appellate authority is given the liberty to make, or cause to be made, \"further inquiry\", in terms of sub-section (4) which reads as under:- “The Commissioner (Appeals) may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the Assessing Officer to make further inquiry and report the result of the same to the Commissioner (Appeals)”. 39. The further inquiry envisaged under Section 250(4) quoted above is generally by calling what is known as \"remand report\". The purpose of this enabling clause is essentially to ensure that the matter of assessment reaches finality with all the requisite facts found. The assessment proceedings re- opened on the basis of preliminary satisfaction that some part of the income has escaped assessment, particularly when some unexplained credit entries have come to the notice (as in Section 68), cannot conclude, save and except by reaching satisfaction on the touchstone of the three tests mentioned earlier; viz. the identity of the third party making the payment, its creditworthiness and genuineness of the transaction. Whilst it is true that the assessee cannot be called upon to adduce conclusive proof on all these three questions, it is nonetheless legitimate expectation of the process that he would bring in some proof so as to discharge the initial burden placed on him. Since Section 68 itself declares that the credited sum would have to be included in the income of the assessee in the absence of explanation, or in the event of explanation being not satisfactory, it naturally follows that the material submitted by the assessee with his explanation must itself be wholesome or not untrue. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on him would shift leaving it to the AO to start inquiring into the affairs of the third party. 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our view, unjustifiably criticized the AO for not having confronted the assessee with the facts regarding return of some of the summons under Section 131 or not having given opportunity for the identity of all the share applicants to be properly established. The order sheet entries taken note of in the order of CIT (Appeals) seem to indicate otherwise. The order of CIT (Appeals), which was confirmed by ITAT in the second appeal, does not demonstrate as to on the basis of which material it Printed from counselvise.com 13 ITA No.1375/PUN/2025 had been concluded that the genuineness of the transactions had been duly established. There is virtually no discussion in the said orders on such score, except for vague description of the material submitted by the assessee at the appellate stage. Whilst it does appear that the time given to the assessee for proving the identity of the third party was too short, and further that it is probably not always possible for the assessee placed in such situation to be able to enforce the physical attendance of such third party (who, in the case of share applicants vis-à-vis a company, would be individuals at large and may not be even in direct or personal contact), the curtains on such exercise at verification may not be drawn and adverse inferences reached only on the basis of returning undelivered of the summonses under Section 131. Conversely, with doubts as to the genuineness of some of the parties persisting on account of non-delivery of the processes, the initial burden on the assessee to adduce proof of identity cannot be treated as discharged. 41. We are inclined to agree with the CIT (Appeals), and consequently with ITAT, to the extent of their conclusion that the assessee herein had come up with some proof of identity of some of the entries in question. But, from this inference, or from the fact that the transactions were through banking channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established. 42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a \"further inquiry\" in exercise of the power under Section 250(4). This approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld.” 12. In view of the above discussion and considering the fact that the Ld. CIT(A)/ NFAC has not addressed the allegations made by the Assessing Officer in the body of the order, we deem it proper to restore the issue back to his file with a direction to re-adjudicate the issue by passing a speaking order. Needless to say the Ld. CIT(A) / NFAC shall provide due opportunity of being heard to the assessee and Printed from counselvise.com 14 ITA No.1375/PUN/2025 decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes. 13. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the open Court on 11th February, 2026. Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 11th February, 2026 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपील र्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune Printed from counselvise.com 15 ITA No.1375/PUN/2025 S.No. Details Date Initials Designation 1 Draft dictated on 10.02.2026 Sr. PS/PS 2 Draft placed before author 11.02.2026 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Office Superintendent 10 Date on which file goes to the A.R. 11 Date of Dispatch of order Printed from counselvise.com "