DCIT, CIRCLE-I, LUDHIANA, LUDHIANA V. HEMANT SOOD (HUF), LUDHIANA

ITA 890/CHANDI/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle-1, Ludhiana as the appellant and M/s Hemant Sood (HUF) as the respondent. The core issue revolves around the deletion of an addition of Rs. 2,37,85,131/- by the CIT(A), which was initially added by the Assessing Officer (AO) treating the gains from the sale of shares as LTCG. The Revenue challenged the CIT(A)'s decision, arguing that the reopening of the assessment was procedurally incorrect and that there was tangible material to support the AO's findings. The Tribunal found procedural compliance in the reopening of the assessment but upheld the CIT(A)'s decision on the substantive issue of the LTCG claim.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717358 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 21-08-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: ASHWANI KUMAR
• Keywords: Income from undisclosed sources; Capital Gains; Tangible material; Bogus
• Section: 147; 148

Judgement Text

"आयकर अपीलȣय अͬधकरण, चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘A’, CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT & SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 890/CHD/2024 Ǔनधा[रण वष[ / Assessment Year : 2015-16 Deputy Commissioner of Income Tax, Circle-1, Ludhiana. बनाम Vs. M/s Hemant Sood (HUF), H.No 417-2, Sohi Street, College Road, Ludhiana. èथायी लेखा सं./PAN NO: AADHH2051P अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent ( Physical Hearing ) Ǔनधा[ǐरती कȧ ओर से/Assessee by: Sh. Ashwani Kumar, CA राजèव कȧ ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT Sr.DR सुनवाई कȧ तारȣख/Date of Hearing : 24.06.2025 उदघोषणा कȧ तारȣख/Date of Pronouncement : 11.08.2025 आदेश/Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the assessee against the order dated 24-06-2024 of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi. 2. Grounds of appeal are as under: (i) That the Ld. CIT(A), NFAC, Delhi erred on facts and law, the Ld. CIT(A) erred in ignoring the Printed from counselvise.com 890-Chd-2024 Hemant Sood (HUF), Ludhiana 2 direct and circumstantial evidence brought on record by the Assessing Officer to establish that the assessee is a beneficiary to the generation of bogus LTCG manipulation of the share prices of M/S Virtual Global Education Limited, with a view to record fictitious Long Term Capital Gains of Rs. 2,37,85,131/- claiming these as exempt from taxation. (ii) That the Ld. CIT(A), NFAC, Delhi erred on facts and law, the Ld. CIT(A) erred in ignoring the facts brought on record establishing manipulation of share prices of M/S Virtual Global Education Limited, as part of colorable device as confirm by the Investigation Wing in their report to generate fictitious LTCG with the aim to evade taxes due. (iii) That the Ld. CIT(A), NFAC, Delhi erred on facts and law, the Ld. CIT(A) erred in deleting the disallowance of exemption u/s 10(38) of Long Term Capital Gains of Rs. 2,37,85,131/- overlooking the fact that the entire transaction were stage managed with the object to facilitate the assessee to bring back its unaccounted income in the form of fictitious Long Term Capital Gains and claim bogus exemption. (iv) That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off. 3. When the case came up for hearing on 7.5.2025, it was pointed out by the ld. Counsel for the Assessee that the Ld. CIT(A) has dismissed the appeal on the basis that the reopening of the Printed from counselvise.com 890-Chd-2024 Hemant Sood (HUF), Ludhiana 3 case was held void ab initio by the Ld. CIT(A) in his order, therefore, nothing could be argued or heard on merit as Revenue had not filed the appeal on the issue of reopening. The Bench gave its findings on this issue on that date as under: “Dated : 07.05.2025 ITA No. 890/CHD/2024 Assessment Year : 2015-16 Present for Assessee : Shri Ashwani Kumar, C.A. Present for Department : Shri Vivek Vardhan, Addl. CIT Sr.DR The Revenue is in appeal against the order of ld. CIT(A) dated 24.06.2024 passed for assessment year 2015-16. 2. The Revenue has taken four grounds of appeal but its grievance revolves around a single issue, namely, ld. CIT(A) has erred in deleting the addition of Rs.2,37,85,131/- which was added by the AO by disallowing the exemption claimed by the assessee on treating the sale of shares as Long Term Capital Gain under Section 10(38) of the Income Tax Act. The ld. DR has concluded his arguments on merit. 3. The ld. Counsel for the assessee, while rebutting the argument of the ld. DR submitted that AO has passed the assessment order under Section 147 read with Section 143(3). In other words, assessment was reopened by issuance of a notice under Section 148. This re-opening has not been upheld by the ld. CIT(A). The re-opening has been declared as bad in the eyes of law. Printed from counselvise.com 890-Chd-2024 Hemant Sood (HUF), Ludhiana 4 The Revenue has not challenged the order of the CIT(A) on this issue, hence arguments of ld. DR on merit are not tenable. 4. The ld. DR at this stage made a prayer that Revenue be given some more time to modify grounds of appeal and submit a fresh Form 36. After discussing it with the ld. representatives, we deem it appropriate to adjourn the hearing for 24.06.2025. If Revenue wish to file fresh grounds of appeal, then it may do so before next date of hearing. The issue regarding admission of additional grounds would be adjudicated only after filing of such grounds by the Revenue. It be kept as part heard. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT” 4. Later on, it is found that the Revenue has taken the following additional / Revised grounds of appeal on this issue which is as under: - Revised/Additional Grounds of Appeal 1. When the reasons to believe has been recorded in stipulated time and approval of the specified authority has also been taken for the concerned year, then how can the Ld. CIT(A) state that the initiation of proceedings u/s 147 is not in accordance with the procedure in law ? Printed from counselvise.com 890-Chd-2024 Hemant Sood (HUF), Ludhiana 5 2. When there is a tangible material and reasons to believe are recorded in detail then how can the Ld. CIT(A) state that the initiation of proceeding u/s 147 is not in accordance with the procedure in law? 5. We have considered the additional ground and it is found that the case was reopened u/s 148 after recording the reasons by the Assessing Officer and taking approval of the specified authority within stipulated time. It is also argued by the Ld. DR that there was tangible material on record for recording reasons that the income had escaped assessment, therefore, the findings given by the Ld. CIT(A) against the reopening of the case is not justified. Accordingly, Departments appeal on this additional ground is allowed. 6. Regarding the other ground on merit i.e. Departmental appeal against the deletion of addition made by made by the Assessing Officer for long term capital gains of Rs. 2,37,85,131/-, we find that the Ld. Printed from counselvise.com 890-Chd-2024 Hemant Sood (HUF), Ludhiana 6 CIT(A) has given a very detailed and clear findings on this issue, which is as under:- “9 Perusal of the assessment order reveals that the A.O. has not mentioned anything about any information available with him. No inquiries were conducted to bring on any material to arrive at the conclusion of holding that the transactions pertain to sale of shares were a sham transaction. The A.O. has not mentioned anything in the body of order to suggest whether he had any information or any incriminating evidences in his possession to come to the conclusion that the purchase & sale transactions of shares were not genuine. The A.O. has discussed about the allegations of forming new paper companies and raising share capital artificially by routing different cheques and then selling companies to genuine buyer for commission. It is also alleged by the A.O. that new share holders purchased the shares from old share holders at a very normal price. The appellant further argued that the A.O. has discussed in the order that money was received from the final beneficiary mostly in the form of cash. In this regard, the A.O. failed to bring on records, any positive evidence of slow of cash or cash exchanged between the appellant and/or the final beneficiary. Further, the A.O. has nowhere Printed from counselvise.com 890-Chd-2024 Hemant Sood (HUF), Ludhiana 7 discussed the issue or the modus operandi alleged to be carried out by the appellant. The A.O. has also not zeroed down on the specific modus operandi employed if any for carrying out the suspected transactions. The A.O. has not made any inquiries to establish that the sale of shares was not carried out to the stock exchange. No evidences have been brought on record to indicate the sale of shares was not a genuine transaction. On the other hand, the appellant has furnished all the documentary evidence during the assessment proceedings as well as appellate proceedings to support its contention to substantiate that it is a genuine transaction of purchase & sale of shares. In view of the facts of the case and decisions rendered by various courts on this issue, the addition of Rs. 2,37,85,131/- made by the A.O. is not sustainable.” 7. The ld. Counsel for the Assessee, in fact, relied on the findings given by the Ld. CIT(A) on this issue. 8. Per contra, the Revenue could not rebut the findings given by the Ld. CIT(A) rather relied on the assessment order on this issue passed by the AO. Printed from counselvise.com 890-Chd-2024 Hemant Sood (HUF), Ludhiana 8 9. The Revenue could not rebut the finding given by the Ld. CIT(A) on this issue, which is a detailed one, very logical and categorical in nature, therefore, we are of this considered view that there is no need to make any interference in the finding given by the Ld. CIT(A) on this issue. Accordingly, Revenue’s appeal on this issue is dismissed. 10. In the result, Revenue’s appeal is partly allowed. Order pronounced on 11.08.2025. Sd/- Sd/- ( RAJPAL YADAV ) ( KRINWANT SAHAY) Vice President Accountant Member आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आयुÈत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "