ANIL KUMAR RASTOGI,MORADABAD V. DCIT, CIRCLE-II, MORADABAD

ITA 7145/DEL/2019

AI Insights

The case involves Anil Kumar Rastogi, who appealed against the order of the Commissioner of Income-tax (Appeals), Moradabad, which confirmed the addition of Rs. 30,88,386 as income from long-term capital gains (LTCG) on the sale of shares, claiming exemption under section 10(38) of the Income Tax Act. The Assessing Officer (AO) had initially disallowed the exemption based on an investigation report suggesting the transactions were part of a scheme to convert black money into white. The Tribunal, however, found that the AO and the CIT(A) had not adequately addressed the specific evidence provided by the assessee, including contract notes, bank statements, and demat statements, which proved the transactions were genuine and conducted through proper channels.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777584 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 29-08-2019
• Other Referred Cases: Shri Deepak Nagar Vs. ACIT, Swati Luthra & Ors. Vs ITO, Ward-51 (5)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: MAYANK PATWARI; AKASH OJHA
• Keywords: Salary income; Capital Gains; Principle of natural justice; Accommodation entries; Wrong claim; Bogus
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No.7145/Del/2019 Assessment Year: 2015-16 Anil Kumar Rastogi, Neelkanth Colony, Civil Lines, Moradabad – 244 001, Uttar Pradesh. PAN: ABIPR7993J Vs DCIT, Circle-II, Moradabad.. (Appellant) (Respondent) Assessee by : Shri Mayank Patwari, Advocate & Shri Akash Ojha, Advocate Revenue by : Ms Harpreet Kaur Hansra, Sr. DR Date of Hearing : 24.07.2025 Date of Pronouncement : 30.09.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the assessee against the order dated 14.06.2019 of the Commissioner of Income-tax (Appeals), Moradabad (hereinafter referred to as the ld. First Appellate Authority or ‘the Ld. FAA’ for short) in Appeals No.Sl.No.102 arising out of the appeal before it against the order dated 30.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT-II, Moradabad (hereinafter referred to as the Ld. AO). Printed from counselvise.com ITA No.7145/Del/2019 2 2. Heard and perused the records. The facts in brief are that, assessee is engaged in the proprietorship business in the name of M/s Catlarry, Jayantipur, Moradabad and is engaged in the business of manufacturing and export of SS Ware, Brass Ware and other Indian handicrafts. The assessee also derived income from wind mill at Tehsil Kellaparoor, Tamil Nadu. The electricity generated from wind mill is sold to Tamil Nadu Electricity Board. The assessee is also a partner in M/s Ashoka Farms (50% share), M/s Ashiana Communications (33%) and M/s A.R. Properties (50%). The assessee received salary income as pension from LIC. The assessee also derives income from capital gain and income from other sources. The assessee has filed two separate audited accounts and tax audit report as required u/s 44AB. The case of the assessee was selected for limited scrutiny, but, was converted into full scrutiny after due approval. The issue under examination was claim of capital gain exempt u/s 10(38) of the Act. During the year under consideration, the assessee had made transaction in shares in the following manner:- Name of the Scrip No. of shares sold and date of sale Cost of purchase and date of purchase Sale consideration Capital gain RISA International 20000 (06.05.2014) 1,00,000/- (08.09.2011) 2,17,19,474/- 2,16,19,474/- TRNKNIT 23500 (25.11.2014) 75000 (26.11.2014) 1000(27.11.2014) 9,75,855/- (03.09.2012) (24.09.2012) 30,88,386/- 21,12,531/- 3. The AO, taking into consideration the investigation report on bogus LTCG, concluded that the claim of the assessee is not genuine and made an Printed from counselvise.com ITA No.7145/Del/2019 3 addition of Rs.2,48,07,860/- u/s 68 of the Act. The AO observed that the assessee has revised computation of income in regard to exempt claim u/s 10(38) of the Act in respect of shares of M/s RISA International and deposited the tax demand in that regard. The assessee has challenged the addition before the ld.CIT(A) where the assessee failed for which the assessee is in appeal raising the following grounds:- “1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad in law and on facts. 2. That the Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 30,88,386- in respect of genuine Long Term Capital Gain on sale of equity shares viz. Triknit eligible for exemption u/s 10(38), despite the transaction having been done through proper banking channels, the purchase and sale of shares of listed company were made online through registered broker after payment of STT and the appellant brought on record all evidences and material to prove the genuineness of the transaction as required to discharge the onus on part of the appellant. 3. That the Ld. CIT(A) has erred in law and on facts in confirming the addition on account of capital gains in respect of scrip viz Risa International inspite of the fact that the assessee during the course of assessment proceedings has surrendered to tax the income pertaining to long term capital gains from the said scrip and duly paid tax on the same being an admitted position vide para 21 of AO order itself. 4. That the addition of Rs. 30,88,386 in respect of scrip Triknit has been confirmed despite the same having been made without there being any direct adverse material against the appellant and based only on suspicion, conjecture and surmises. 5. That on the facts and circumstances of the case and in the law the Ld. CIT(A) has erred in confirming the addition of Rs. 30,88,386 in respect of scrip Triknit u/s 68 that has been made by the AO solely on the basis of information received from the Investigation wing without any independent finding/ enquiry/ application of mind on part of the AO which is grossly unsustainable in law in view of the various decision, interalia, from Hon’ble Supreme Court, High Courts including jurisdictional High Court & ITAT on the issue. Printed from counselvise.com ITA No.7145/Del/2019 4 6. That importantly on the facts and circumstances of the case and in the law the CIT(A) just failed to appreciate that the Investigation wing report relied by the AO being the basis of addition does not contains the name of scrip Triknit which was apprised to AO in the course of assessment proceedings. 7. That on the facts and circumstances of the case the Ld. CIT(A) has erred in confirming the addition of Rs. 30,88,386 in respect of scrip Triknit u/s 68 ignoring the fact that the impugned shares are still being traded in the Stock Exchange and the additions has been made by the AO solely on the basis of information received from the Investigation wing without any independent finding/ enquiry/ application of mind on part of the AO. The identical issue is also covered by the decision of division bench of ITAT Delhi in case of Shri Deepak Nagar Vs. ACIT, (ITA No. 3212/DEL/2019) & also by another division bench decision of Delhi ITAT in a batch of cases titled Swati Luthra & Ors. Vs ITO, Ward-51 (5) in ITA No. 6480/Del/17 & ors dated 28/06/19. 8. That on the facts and circumstances of the case and in law, Ld. CIT(A) has failed to appreciate that the Assessing Officer made the additions on the basis of statements of third parties without giving an sort of opportunity to the appellant for their cross examination which is grossly against the law of natural justice. That in fact it has been admitted by the AO itself vide internal page 40 of its order that opportunity for cross examination was not given to the appellant / assessee. That the appellant craves leave to Add to and / or Amend, modify or withdraw the grounds outlined above before or at the time of hearing of the appeal.” 4. On hearing both the sides, we find that the ld. AO disallowed the exemption claimed u/s 10(38) on the sale of shares of M/s Risa International and M/s Trnknitt as the explanation offered by the assessee that the transaction is through stock exchange & payment made by cheque is very general in nature and found unsatisfactory. Ld. AO observed, on analysis of price history of shares of M/s Trnknit, it is found that price was at Rs. 12.136 in Dec’ 2012 and suddenly reached level of Rs.31.40/- in Dec 2014 when assessee liquidated his Printed from counselvise.com ITA No.7145/Del/2019 5 holdings. Further ld. AO observed that on going through the Annual report of M/s Trnknit, it was noticed that there was no operational activity during the concerned period and the said entity has earned very low income from operations. It further comes up that the ld. CIT dismissed the appeal on the basis that the plea of appellant that name of said entity not mentioned in attached report is not acceptable as directorate of investigation has carried out a detailed probe into nation-wide scam. Scrips have been identified which have been used for conversion of black money. Even if specific name is not listed anywhere, the action of AO is justified. It was observed that there is no merit in the submission of appellant that the sale consideration has been received through banking channel and shares were sold in stock exchange. Ld. CIT(A) concluded that the financial position of the said entities is very poor and do not seem to be carrying out regular business. The exponential rise in its share price is nothing else but a manipulation by the syndicate of operators involved in the scam. 5. Ld. AR has primarily relied the case as canvased before ld. CIT(A) while ld. DR submitted that ld. Tax authorities have thoroughly examined the facts and circumstance to hold that there was bogus claim of LTCG. 6. We have considered the rival contentions and at outset we find that during the course of assessment proceeding, the appellant submitted the following documents and the Ld. AO has acknowledged the same at page no.3 of the Assessment order.: • Contract notes from registered broker Printed from counselvise.com ITA No.7145/Del/2019 6 • Bank statement evidencing payments through banking channel. • Demat statement showing purchase and sale of shares. 6.1 The Ld. AO has not rejected or disapproved the authenticity or veracity of such documents. There is no finding in the assessment order that the transactions are non-genuine based on the appellant’s conduct or evidences. Infact the appellant had purchased the said scrip of M/s Vandana Knitwear limited in sept’2012 at an average price of Rs.12.80/- per share and sold the same in dec'2014 at price of Rs.31.40/- and thereby holding them for a period of more than 2 years, which does indicate that there was no possible malice in acquiring shares to claim bogus income after two years. 6.2 The Ld. AO has also failed to establish any cash trail or link showing that the sale proceeds are appellant’s own unaccounted money routed back. 6.3 During the F.Y. 2014-15 in which appellant sold the scrips, the company had a Net Worth of Rs. 10.88 Cr. and turnover of Rs. 4.68 Cr. reflecting a financially sound and operational entity. Merely because the scrip witnessed appreciation in market price does not by itself make the LTCG bogus especially when the entity had revenue generating activity. 7. Then what is relevant is that shares of M/s TRNKNIT @ M/s Vandana Knitwear limited not mentioned in the report of investigation wing exclusively relied upon by Ld. AO with regard to companies identified as providing accommodation entries for bogus LTCG to route the unaccounted money. However, it is an undisputed fact that the name of M/s Vandana Knitwear Printed from counselvise.com ITA No.7145/Del/2019 7 limited, the shares in which the appellant transacted does not appear in the said list. There is no material on record to link M/s Vandana Knitwear with the entities mentioned in the report. As a matter of fact, there is no adverse findings from SEBI or from any other regulatory authority that the scrip involved has been flagged or declared as a penny stock or shell company by SEBI or any other authority. Ld. AR submitted and ld. DR could not dispute that the shares of said entity are still actively trading on BSE. Thus to allege it to be shell company is not justified. 8. Thus we are inclined to sustain the grounds. The appeal is allowed. Impugned addition is deleted. Order pronounced in the open court on 30.09.2025. Sd/- Sd/- (AMITABH SHUKLA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30th September, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "