ARUN KUMAR SARUP,MUMBAI V. DY. COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1), MUMBAI, MUMBAI

ITA 4709/MUM/2025

AI Insights

The case involves Arun Kumar Sarup, who appealed against the order of the National Faceless Appeal Centre (NFAC) which confirmed the additions made by the AO under section 69 of the Income Tax Act, 1961, for the assessment year 2015-2016. The additions were based on the premise that the Long Term Capital Gains claimed by the assessee from the sale of shares of M/s Excel Castronics Ltd were bogus. The Tribunal examined the evidence provided by the assessee, including the method of purchase and sale of shares, and the financial transactions through banking channels. The Tribunal noted that the assessee was not named as an operator or accused in any manipulation of the shares and that all transactions were documented and verifiable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 822682 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 24-07-2025
• Other Referred Cases: Land Acquisition Collector vs MST Kitji & Others, PCIT Vs. Swati Bajaj, Nidhi Manan Shah Vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MOHAN
• Assessee Lawyers: SATYAPRAKASH SINGH; JUSTIFIABLY; PROPERLY EXPLAINING
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Salary income; Capital Gains; Principle of natural justice; Accommodation entries; Share purchase agreement; Bogus
• Section: 148; 271(1)(c); 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER& SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 4709/Mum/2025 (Assessment Year: 2015-2016) Arun Kumar Sarup 2nd Floor, Amartara Pvt. Ltd. Saki Vihar Road, Powai, Mumbai – 400072. Vs. Dy. Commissioner of Income Tax Circle 1(1)(1), Mumbai 553, 5th Floor, Aaykar Bhavn, Maharshi Karve Road, Mumbai - 400020 PAN/GIR No. AAHPS2384Q (Applicant) (Respondent) Assessee by Shri Satyaprakash Singh Revenue by Shri Surendra Mohan Date of Hearing 11.12.2025 Date of Pronouncement 23.12.2025 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the assessee challenging the impugned order dt. 21.02.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2015-2016. The Assessee has raised the following grounds of appeal: Printed from counselvise.com 2 ITA No.4709/Mum/2025 Arun Kumar Sarup “1. The delay of 91 days in filing of present appeal may kindly be condoned as the appellant was prevented by sufficient cause and hence not file the appeal on time. 2. The order dated 21/02/2025 bearing No. ITBA/NFAC/S/250/2024-25/1073562405(1) by the CIT[A], National Faceless Appeal Centre, Delhi is arbitrary, against natural justice, unlawful, against the provisions of Income Tax Act, 1961 and therefore liable to be quashed. 3. On facts and in the circumstances of the case and in law the C.I.T. (Appeals) has erred in confirming the addition made u/s. 69 of the Income Tax Act, 1961 amounting to Rs.87,48,200/- on account of Long Term Capital Gain claimed by the appellant in respect of sale proceeds of the shares of M/s. Excel Castronics Ltd, even though all the details in respect of the same was submitted.” 2. Ground No. 1, This ground raised by the assessee relates to seeking condonation of delay of 91 days in filing the present appeal. In this regard an application for seeking condonation of delay has been separately filed by the assessee, wherein it has been mentioned as under: 1] I have filed the above appeal on 24/07/2025 which was due to be filed on 20/04/2025, Thus, there is delay of 91 days. 2] I am herewith submitting an affidavit for condonation of delay narrating all the facts. 3] I therefore, in the light of the above mentioned facts submit that the delay is due to the circumstances beyond my control. Accordingly request your Honour to condone the delay and entertain my appeal. MR. ARUN KUMAR SARUP S/o Mr. ANAND SARUP, aged about 80 years residing at 2nd Floor Amartara Pvt Ltd, Saki Vihar Road Powai, Mumbai 400072, do hereby solemnly affirm and state as under: - Printed from counselvise.com 3 ITA No.4709/Mum/2025 Arun Kumar Sarup 2. That, I am Individual Assessed to Income Tax vide PAN - AAHPS2384Q deriving Income from Salary, House property, Capital Gains & Other sources. 3. For the Assessment Year 2015-16, the Honourable CIT(Appeals), N.F.A.C., Delhi has dismissed my appeal vide their order dated 21/02/2025 passed under section 250 of Income Tax Act, 1961. The appeal before the I.T.A.T. was due to be file on or before 20/04/2025. Said appeal could not be filed in time due to situation beyond my control and for Genuine & Bonafide reason as explained hereunder. 4. As mentioned above, I am Super Senior Citizen more than 80 years and was not keeping well since January 2025 as I was diagnosed for Cancer and was admitted in the Breach *o treatment my kidney has been removed and was advised complete bed rest and also 4643) regular radiation therapy. Due to this I was not attending any business related work as my INO movement was totally restricted. In view of this, the order passed under section 250 of Income Tax Act, 1961 by the CIT-Appeals, NFAC, Delhi escaped my attention and no appeal could be filed in time, as I did not informed my Chartered Accountants about the order. Copies of few letters etc. for my medical history is enclosed. 5. I had received a show cause notice of penalty under section 271(1)(c) of Income Tax Act, 1961 on 23/07/2025 and then I realize the lapse in filing the appeal in I.T.A.T. and I immediately approached my Chartered Accountants to file the same belatedly. 6. It is therefore prayed that the delay in filing in present appeal is due to the genuine and bonafide reason and beyond the control and may kindly be condone and oblige. Whatever stated above is true and to the best of my knowledge and belief. Printed from counselvise.com 4 ITA No.4709/Mum/2025 Arun Kumar Sarup 3. On the other hand Ld. DR refuted the claim of the assessee and requested to dismiss the application for seeking condonation of delay on the ground that there was no sufficient cause for condoning the delay. 4. After having heard the counsel for both the parties on this application and considering the entire factual position as explained before us and also keeping in view the principles laid down by the Hon’ble Supreme Court in the case of Land Acquisition Collector vs MST Kitji& Others, 1987, AIR, 1353 Supreme Court Wherein it has been held that where substantial justice is pitted against technicalities of non-deliberate delay, then in that eventuality substantial justice is to be preferred. In our view, the principles of advancing substantial justice are of prime importance. Hence, considering the explanation put forth by the assessee by justifiably and properly explaining the delay, which occurred in filing the appeal and construing the expression ‘Sufficient Cause’ liberally, we are inclined to condone the delay in filing the appeal. Consequently, the application filed by the assessee for seeking condonation of the delay stands allowed. The appeal is admitted to be heard on merits. Printed from counselvise.com 5 ITA No.4709/Mum/2025 Arun Kumar Sarup 5. Ground No. 2 & 3, Both these grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of Ld. CIT(A) in confirming the addition made by AO u/s 69 of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order. 6. We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records, we noticed that assessee being an individual filed its return of income for the year under consideration. However, the AO received information from the investigation wing that the assessee had purchased shares of M/s Excel Castronics Ltd, which was a penny stock company and was used to provide bogus LTCG / STCI to various beneficiaries and assessee was one such beneficiary. Therefore the case of the assessee was reopened and after providing opportunity of hearing to the assessee additions u/s 69 of the Act were made which were also confirmed by Ld. CIT(A). 7. As per AO the investigation wing of the Department found that M/s Excel Castronics limited was a penny stock company, share price of the stock was manipulated by operators, this company was engaged in providing accommodation entries in the form of bogus LTCG/STCL to Printed from counselvise.com 6 ITA No.4709/Mum/2025 Arun Kumar Sarup various beneficiaries. The beneficiary held the shares for certain period of time and when the price reaches the desired level, the beneficiary who bought the shares at a particular price are then made to sell the shares at a price controlled by the operator. 8. It was submitted by Ld. AR that the assessee acquired 50,000/- shares of M/s Excel Castronics for a consideration of Rs. 5,00,000/- and in the impugned year sold 33,850/- shares and had Long Term Capital Gains of Rs. 83,60,321/-. The assessee submitted that the AO wrongly made addition of Rs. 87,48,200/- u/s 69 of the Act, as in none of the findings of the Investigation Wing, the assessée was named as an operator or accused of converting black money into white. The assessee further submitted that all the transactions were made through banking channel. But the revenue authorities while relying upon the decision of Hon’ble Kolkata High Court in the case of PCIT Vs. Swati Bajaj (IA No. GA/2/2022 in ITAT/6/2022) had confirmed the addition. 9. From the records, we noticed that assessee had purchased 50000 equity shares of M/s. Excel Castronics Ltd and in support thereof had submitted following documents: i. Application for purchase of shares ii. Copy of cheque issued for shares purchased Printed from counselvise.com 7 ITA No.4709/Mum/2025 Arun Kumar Sarup iii. Bank Statement iv. Share Certificate v. Demat Account of the appellant. 10. Out of the above total shares, assessee had sold 33,850 shares of M/s. Excel Castronics Ltd in the month of April to August 2014 on Bombay Stock Exchange through Broker M/s. Pilot Capital Pvt. Ltd, which is a leading public sector stock broker at the prevalent market rates then. In support of the said sale, the assessee had furnished the following detail to the AO during the course of assessment proceedings, i. Copy of contract note ii. Copy of Bank statement iii. Copy of Demat Account iv. computation of Long term Capital Gain v. Brokers Ledger vi. Form 10DB 11. We further noticed that in none of the investigation carried out by the investigation unit, the assessee had been named as either operator or accused of converting black money into while. In fact, the assessee had only been named as beneficiary. Whereas on the contrary no other evidence except the report of the investigation wing had been relied upon by the AO and the said report itself is general in nature and is not pointing out the particular Printed from counselvise.com 8 ITA No.4709/Mum/2025 Arun Kumar Sarup role of the assessee. Even the AO had not found any defect in the documentary evidences filed by the assessee. 12. After considering the documents placed on record, we found that the genuineness of the transaction had been clearly proved by the assessee by discharging his initial onus as from the following documents we noticed that il Contract notes issued by the broker which are system generated and which clearly mentions the following details- a) Details of the broker b] DP ID c) Client ID d] Contract number with trade date, order no, order time, trade no. e) Scrip name f Quantity of shares sold, rate at which sold, brokerage g) Amount of STT charged, service tax levied ii) Bank statement showing the sales consideration received from the broker. iii) Demat statement showing the holding of shares for more than 12 moths. iv] Share Application letter, Share Certificate, Demat statement indicating the payment made for acquisition of shares. v. Demat Statement showing the dematerialization of shares. 13. Reliance has also been placed by Ld. AR on the decision of the Coordinate Bench of ITAT in the case of Nidhi Manan Shah Vs. ITO in ITA Nos 3255, 3256 & 3257/Mum/2023, wherein the same script was in question Printed from counselvise.com 9 ITA No.4709/Mum/2025 Arun Kumar Sarup and the said case also pertains to the same assessment year. The operative portion of the decision of the Coordinate Bench in the case of Nidhi Manan Shah (supra) is reproduced herein below: 3. The facts relating to the above said issue are discussed in brief. The AO received information that the assessee has sold shares of a company named M/s. Excel Castronics Limited during the three years under consideration and earned long term capital gains, which was claimed to be exempt u/s 10(38) of the Act. The Investigation Wing of Income Tax Department, Ahmedabad had conducted enquiries with regard to the manipulations done in the shares of certain companies named as ‘Penny stock companies’. It revealed that certain persons are manipulating and rigging the prices of shares of penny stock companies and in that process were generating bogus capital gains/capital losses. M/s. Excel Castronics Limited was identified as one of the penny stock companies and the prices of its shares were rigged by certain individuals. It was noticed that the assessee herein has purchased and sold the shares of M/s. Excel Castronics Limited in these three years, thus earning Long term capital gains and claiming the same as exempt. Since the Investigation Wing has reported that the transactions in the shares of above said company are bogus in nature, the AO took the view that the long term capital gains declared by the assessee is bogus in nature and accordingly formed the belief that there is escapement of income in the hands of the assessee herein in these three years. Hence, the AO reopened the assessment of these three years under consideration by issuing notices u/s. 148 of the Act. In the reopened assessment, the AO rejected the claim of exemption u/s. 10(38) of the Act and added the following amounts to the total income of the assessee:- Assessment year Amount Added (Rs.) 2014-15 55,37,746 2015-16 1,12,91,924 Printed from counselvise.com 10 ITA No.4709/Mum/2025 Arun Kumar Sarup 2016-17 25,80,038 The Ld CIT(A) also confirmed the above said additions and hence the assessee has filed these three appeals. 4. The Ld A.R submitted that the assessee has purchased One lakh shares of Rs.10/- each of M/s Excel Castronics Ltd on 01-02-2012 from the company itself by paying consideration of Rs.10.00 lakhs through banking channels. He submitted that all these shares were sold through stock exchange platform during the years relevant to AYs. 2014-15 to 2016-17. He submitted that there was stock split on 21-11-2014, i.e., face value of shares was reduced from Rs.10/- to Rs.2/- per share and hence, the assessee received additional shares. The Ld A.R explained the details of availability of shares as under:- Initial purchase of shares - 1,00,000 shares Sold during the years relevant to AY 2014-15 21,423 shares AY 2015-16 41,500 shares 62,923 shares -------------- Balance available 37,077 shares Due to split of face value of shares from Rs.10/- to Rs.2/-, the assessee received five shares in lieu of one share held by her. Accordingly, the assessee received 1,85,385 shares in lieu of 37,077 shares. All the 1,85,385 shares were sold during the year relevant to AY 2016-17. 5. The Ld A.R submitted that the assessee has furnished all the documents evidencing purchase and sale of shares. Further the payments were made/received through banking channels only. The shares have entered and exited the demat account of the assessee. The AO has not found fault with any of the documents furnished by the assessee. He submitted that the AO has mainly relied upon the report given by the Investigation Wing without making any independent enquiry with regard to the transactions carried on by the assessee. Further, the AO Printed from counselvise.com 11 ITA No.4709/Mum/2025 Arun Kumar Sarup has not shown that the assessee was part of the group that were allegedly rigging and manipulating the prices of shares of above said company. The SEBI has not conducted any enquiry with regard to the transactions carried on by the assessee. Accordingly, he submitted that there is no reason to suspect the transactions of the assessee. Accordingly, he prayed that the orders passed by the tax authorities be set aside. 6. On the contrary, the Ld D.R submitted that the Investigation Wing has found that the share prices of M/s Excel Castronics Ltd has been rigged, which is proved by the fact that the shares prices were not commensurate with the fundamentals of the company. The astronomical rise in the prices is beyond the preponderance of human probability. In this regard, the Ld.CIT(A) has placed reliance on the decision rendered by Hon’ble Kolkatta High Court in the case of PCIT vs. Swati Bajaj (IA No.GA/2/2022)(ITAT No.06 of 2022). Accordingly, he contended that the orders passed by Ld.CIT(A) do not call for any interference. 7. In the rejoinder, the Ld A.R submitted that the decisions rendered by the Hon’ble Bombay High Court would state that it is required to show that the assessee was also involved and part of the group which was rigging the prices of shares. Further, the AO should find deficiencies or fault in the documents furnished by the assessee in support of purchase and sale of shares. Then only, the AO could disbelieve the transactions. However, in the instant cases, the AO has simply placed his reliance on the generalized report given by the Investigation Wing and did not find fault with any of the documents furnished by the assessee. He further submitted that the AO has not shown that the assessee was part of the group allegedly manipulating the prices of shares. He submitted that the assessee has invested and sold the shares as an ordinary investor. Accordingly, he submitted that the tax authorities are not justified in disbelieving the long term capital gains declared by the assessee. 8. We heard rival contentions and perused the record. On the perusal of the documents furnished by the assessee, we Printed from counselvise.com 12 ITA No.4709/Mum/2025 Arun Kumar Sarup notice that the copies of share certificates were not furnished by the assessee. The assessee has only furnished a copy of bank statement evidencing the payment of Rs.10.00 lakhs to M/s Excel Castronics Ltd. There should not be any doubt that the payment made by the assessee to the company, per se, cannot be taken as purchase of shares. The factum of date of purchase of shares can be recognized only when the shares were allotted to the assessee. In this case, the assessee has not furnished any evidence to show the actual date of allotment of shares to her. In the absence of evidence for allotment of shares to the assessee, it would be difficult to identify the date of purchase of shares. Thus, we notice that the assessee has failed to prove the date of purchase of shares. 9. We noticed that the assessee has furnished copies of Demat statement and in that statement, the shares of above said company are shown. The said statement only gives the date on which the physical shares were dematerialized. It will not show the date of allotment of shares. One thing that can be accepted is that the dematerialization of shares shall take place only when physical shares were surrendered to the bank/broker for getting it dematerialized, meaning thereby, the assessee had been allotted shares sometime earlier to dematerialization of shares. In this view of the matter, we are of the view that the purchase of shares cannot be doubted, but the date of purchase/allotment of shares is still required to be proved by the assessee. 10. We notice that the assessee has furnished all the evidences to support the claim of sale of shares in the stock exchange platform. Hence, sale of shares has been proved by the assessee. 11. With regard to the genuineness of capital gains declared by the assessee, we notice that the AO has not conducted any independent enquiry to show that the trading transactions conducted by the assessee were not genuine. Further, the AO has not shown that the assessee was part of the group which was indulging in manipulation of prices of the shares of above said company. Further, it is not shown that the transactions Printed from counselvise.com 13 ITA No.4709/Mum/2025 Arun Kumar Sarup entered by the assessee were found to be bogus by SEBI. On the contrary, the contention of the assessee is that she was not subjected to any enquiry by SEBI. Barring the failure of the assessee to prove actual date of purchase of shares, the assessee has furnished the details of demat account and details of sale of shares and those documents were not found to be not correct. Under these set of facts, we are of the view that the claim of purchase and sale of shares cannot be doubted with, in the facts and circumstances of the case. Depending upon the actual date of allotment/purchase of shares, the capital gains earned by the assessee are required to be categorized into Short term or Long term. 12. Thus, for determining the question – whether the assessee has earned long term capital gains or short term capital gains, it is necessary to ascertain the holding period of shares, i.e., time period commencing from the date of allotment of shares and ending with the date of sale of shares needs to be found out. We noticed that the assessee has failed to prove the date of allotment/purchase. Accordingly, in the interest of natural justice, we are of the view that the assessee may be provided with one more opportunity to prove the date of allotment/purchase of shares. Accordingly, the orders passed by the Ld.CIT(A) in all these years are set aside and all the matters are restored to the file of the AO. The assessee is directed to furnish details regarding date of allotment/purchase of shares and on that basis, the AO may compute the capital gains either short term or long term in accordance with law. The assessee shall be provided adequate opportunity of being heard. We also direct the assessee to fully co-operate with the AO for expeditious completion of the assessment. 13. In the result, all the three appeals are treated as allowed for statistical purposes. 14. Therefore after taking into consideration the entire facts and circumstances as discussed by us above and also considering the decision of the Coordinate bench of ITAT in the case of Nidhi Manan Shah (Shah), wherein additions Printed from counselvise.com 14 ITA No.4709/Mum/2025 Arun Kumar Sarup made in the identical scrip had already been deleted and the said decision also pertains to the same assessment year as in question. Therefore following the principles of judicial discipline and judicial consistency we are of the view that the claim of purchase and sale of shares of M/s. Excel Castronics Ltd cannot be doubted with. Therefore, we direct the AO to delete the additions. we order accordingly. Therefore these grounds raised by the assessee stands allowed. 15. In the result, the appeal filed by the assessee stands allowed. Order pronounced in the open court on 23.12.2025 Sd/- Sd/- (PRABHASH SHANKAR) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 23/12/2025 KRK, Sr. PS Printed from counselvise.com 15 ITA No.4709/Mum/2025 Arun Kumar Sarup आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u000eथ / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण,मु\u0003बई/ DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/BY ORDER, स\u000eािपत ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai Printed from counselvise.com "