DHAVAL INDRAVADAN GANDHI,SURAT V. ITO, WARD 2, BARDOLI

ITA 601/SRT/2025

AI Insights

The case involves an appeal by Shri Dhaval Indravadan Gandhi against the order of the Ld. Addl./Joint Commissioner of Income-tax (Appeals) - 2, Nagpur, for the assessment year 2012-2013. The primary contention revolves around the reassessment of income where the assessee was accused of making unexplained investments in shares amounting to Rs. 12,64,005 in M/s. Dhwanil Chemicals Ltd., treated as a 'penny stock'. The Assessing Officer, based on information from the Ahmedabad Investigation Wing, treated these investments as unexplained and added them to the assessee's income. The CIT(A) upheld this decision, leading to the present appeal. The Tribunal found contradictions in the assessee's submissions and remitted the case for further verification of facts and proper adjudication.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 782903 (ITAT-SURAT)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAMITA PATEL
• Assessee Lawyers: SHAUNAK K. ZAVERI
• Keywords: Set aside; Reassessment proceedings; Corroborative evidences; Unexplained investment; Reopening of assessment; Accommodation entries; Source of fund; Bogus
• Section: 148; 143(3); 142(1); 271(1)(c); 69

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH “SMC” SURAT BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 601/SRT/2025 Assessment Year: 2012-2013 Shri Dhaval Indravadan Gandhi, At and Post Areth, Tal Mandvi, Surat-394160. Vs. ITO Ward-2, Aayakar Bhavan, Janta Nagar Society, Bardoli-394601. PAN NO. AJJPG 4246 J Appellant Respondent Assessee by : Mr. Shaunak K. Zaveri, CA Revenue by : Ms. Namita Patel, Sr. DR Date of Hearing : 08/10/2025 Date of pronouncement : 30/10/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 28.03.2025 passed by the Ld. Addl./Joint Commissioner of Income-tax (Appeals) – 2, Nagpur [hereinafter shall be referred as ‘the Ld. CIT(A)’] for assessment year 2012-2013, raising following grounds: 1.0(a) That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi [here-in-after referred to as Ld. CIT(Appeals)] was not justified and grossly erred by without considering the facts, evidences and documents submitted by the appellant. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. order passed u/s. 143(3) r.w.s 147 of the I.T. Act, 1961 which is incomplete and also bad on facts. Printed from counselvise.com 1.0(b) Without prejudice to above ground that on facts and in the circumstances of the case, the Ld. CIT(Appeals) was n justified and grossly erred in confirming the action of the AO in reopening of assessment was not justified because instead of the AO recording his satisfaction, initiated action at the behest of The Investigating Wing, Ahmedabad 2.0(a) That on the fact the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in by accepting the addition of unexplained investment in shares of Rs. 12,64,005/ 2.0(b) Without prejudice to above and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. by erred in treating long term capital gain as accommodation entries and bogus entries 2.0(c) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. by not proving right for cross the director and or promoters and or broker of the company in which investment was made. 2.0(d) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confi the action of the AO where sole reliance was placed on report of Ahmedabad Investigation Wing report. 3.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred and indirectly confirming the a erred in confirming the initiated penalty proceedings u/s. 271(1)(c) r.w.s. 274 of the Act. 4.0 That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated here above, either before or at the time of hearing of this appeal. 2. Briefly stated, the material facts giving rise to the present appeal are that the assessee filed his return of income for the relevant assessment year on of Rs. 5,15,480/-. information that the assessee had allegedly entered into transactions involving a so M/s. Dhwanil Chemicals Ltd. ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi 1.0(b) Without prejudice to above ground that on facts and in the circumstances of the case, the Ld. CIT(Appeals) was n justified and grossly erred in confirming the action of the AO in reopening of assessment was not justified because instead of the AO recording his satisfaction, initiated action at the behest of The Investigating Wing, Ahmedabad 2.0(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in by accepting the addition of unexplained investment in shares of Rs. 12,64,005/-. 2.0(b) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. by erred in treating long term capital gain as accommodation entries and bogus entries. 2.0(c) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. by not proving right for cross- examining ctor and or promoters and or broker of the company in which investment was made. 2.0(d) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the AO where sole reliance was placed on report of Ahmedabad Investigation Wing report. 3.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred and indirectly confirming the action of the A.O. in not justified and erred in confirming the initiated penalty proceedings u/s. 271(1)(c) r.w.s. 274 of the Act. 4.0 That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated here above, either before or at the time of hearing of this appeal. Briefly stated, the material facts giving rise to the present appeal are that the assessee filed his return of income for the relevant assessment year on 07.03.2013, declaring a total income . Subsequently, on receipt of specific information that the assessee had allegedly entered into transactions involving a so-called “penny stock” in the scrip of M/s. Dhwanil Chemicals Ltd., and had purportedly pu ITA No. 601/SRT/2025 2 Shri Dhaval Indravadan Gandhi 1.0(b) Without prejudice to above ground that on facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the AO in reopening of assessment was not justified because instead of the AO recording his satisfaction, initiated action at the behest s and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. in by accepting the addition of grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the action of the A.O. by erred in treating long term capital gain 2.0(c) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) was not justified and grossly erred in confirming examining ctor and or promoters and or broker of the company in 2.0(d) Without prejudice to above grounds, that on the facts and in the circumstances of the case and in law, the Ld. rming the action of the AO where sole reliance was placed on report 3.0 That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred and ction of the A.O. in not justified and erred in confirming the initiated penalty proceedings u/s. 4.0 That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated here-in- Briefly stated, the material facts giving rise to the present appeal are that the assessee filed his return of income for the , declaring a total income Subsequently, on receipt of specific information that the assessee had allegedly entered into called “penny stock” in the scrip of , and had purportedly purchased Printed from counselvise.com shares aggregating to recorded reasons to believe that income chargeable to tax had escaped assessment. Consequently, a notice under the Income-tax Act, 1961 2.1 The assessee did not initially comply with the said notice. Thereafter, statutory notices under issued, whereupon the assessee intimated that the return of income originally filed may be treated as a return in response the notice under section 148. 2.2 During the reassessment proceedings, the assessee was called upon to produce his source of investment Ltd. The assessee, however, failed to furn regarding the source of such investment. The Assessing Officer, relying upon information received from the Ahmadabad, in consequence of search proceedings under 132 in the case of Shri Sanjay Shah and Shr alleged operators of bogus Long came to the conclusion that the assessee was one of the beneficiaries of accommodation entries in the guise of share transactions. 2.3 The Assessing Officer, therefore, treated the investment of Rs. 12,64,005/- in shares of M/s. Dhwanil Chemicals Ltd. as unexplained investment under section 69 the same to the total income of the assessee, initiating penalty ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi shares aggregating to Rs. 12,64,005/-, the Assessing Officer recorded reasons to believe that income chargeable to tax had escaped assessment. Consequently, a notice under section 148 of tax Act, 1961 (“the Act”) was issued on 31.03.2019 The assessee did not initially comply with the said notice. Thereafter, statutory notices under section 142(1) of the Act were issued, whereupon the assessee intimated that the return of income originally filed may be treated as a return in response the notice under section 148. During the reassessment proceedings, the assessee was called upon to produce his demat statement and to explain the source of investment in the shares of M/s. Dhwanil Chemicals Ltd. The assessee, however, failed to furnish satisfactory evidence regarding the source of such investment. The Assessing Officer, relying upon information received from the DDIT (Inv.) , in consequence of search proceedings under Shri Sanjay Shah and Shri Jignesh Shah alleged operators of bogus Long-Term Capital Gain schemes came to the conclusion that the assessee was one of the beneficiaries of accommodation entries in the guise of share The Assessing Officer, therefore, treated the investment of in shares of M/s. Dhwanil Chemicals Ltd. as unexplained investment under section 69 of the Act and added the same to the total income of the assessee, initiating penalty ITA No. 601/SRT/2025 3 Shri Dhaval Indravadan Gandhi the Assessing Officer recorded reasons to believe that income chargeable to tax had section 148 of 31.03.2019. The assessee did not initially comply with the said notice. of the Act were issued, whereupon the assessee intimated that the return of income originally filed may be treated as a return in response to During the reassessment proceedings, the assessee was and to explain the in the shares of M/s. Dhwanil Chemicals ish satisfactory evidence regarding the source of such investment. The Assessing Officer, DDIT (Inv.)–1(3), , in consequence of search proceedings under section i Jignesh Shah— Term Capital Gain schemes— came to the conclusion that the assessee was one of the beneficiaries of accommodation entries in the guise of share The Assessing Officer, therefore, treated the investment of in shares of M/s. Dhwanil Chemicals Ltd. as of the Act and added the same to the total income of the assessee, initiating penalty Printed from counselvise.com proceedings under section The relevant finding of ld AO is reproduced as under “4. In the instant case, information was received from DDIT(Inv.) 1.3, Ahmedabad that during the course of Search proceedings u/s 132 of the IT Act o and Jignesh Shah certain incriminating digital and documentary evidences regarding unaccounted cash, synchronized trading and providing bogus LTCG were found and seized. On perusal of incriminating documents, it entered into transactions in penny stock namely; Dhvanil Chemicals Limited and has purchased shares of Rs. 12,64,005/ during the year under consideration. The persons who have traded through/with Shri Sanjay Shah and Jignes found to have indulged into the bogus transactions in the disguise of share trading and the Assessee was one of such beneficiary. 4.1 During the course of assessment proceedings, the Assessee was asked to furnish details of share transactions ( sales) made during the year along with supporting evidences especially in the shares of M/s Dhvanil Chemicals Ltd. The Assessee was also requested to furnish copy of Demat account statement and explain the source of investment. In compliance, The Assessee could submit copy of DP transaction report of M/s Sykes & Ray Equities (1) Limited only. Except this no details regarding purchase of shares of M/s Dhvanil Chemicals Limited amounting to Rs. 12,64,005/ Neither the Assessee has furnished copy of Demat account nor explained source of investment of Rs. 12,64,005/ Therefore, show cause notice was issued to the Assessee on 09.12.2019 requiring the Assessee to explain as to why an amount of Rs. 12,64, investment and added to total income. In reply of the same, the Assessee submitted that each and every transaction made in shares through the registered broker with SEBI and STT has already been paid on these tran was considered and not found convincing as the Assessee has failed to furnish any documentary evidences to substantiate his claim. The Assessee has not furnished any details in respect of transaction made with M/s Dhvanil Ch failed to furnish any details regarding source of investment. Therefore, în absence of any supporting evidences, investment of Rs. 12,64,005/ Limited is treated as unexplained and added to t of the Assessee. Since, the Assessee has concealed his particulars of true income, therefore, penalty proceedings u/s 271(1)(c) of the IT Act are initiated separately. 2.4 Upon appeal, the ld CIT(A) upheld the findings of the Assessing Officer, by a reasoned and detailed order, thereby ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi s under section 271(1)(c) for concealment of income. The relevant finding of ld AO is reproduced as under 4. In the instant case, information was received from DDIT(Inv.) 1.3, Ahmedabad that during the course of Search proceedings u/s 132 of the IT Act on 11.09.2018 in the case of Shri Sanjay Shah and Jignesh Shah certain incriminating digital and documentary evidences regarding unaccounted cash, synchronized trading and providing bogus LTCG were found and seized. On perusal of incriminating documents, it was found that the Assessee has entered into transactions in penny stock namely; Dhvanil Chemicals Limited and has purchased shares of Rs. 12,64,005/ during the year under consideration. The persons who have traded through/with Shri Sanjay Shah and Jignesh Shah were found to have indulged into the bogus transactions in the disguise of share trading and the Assessee was one of such beneficiary. 4.1 During the course of assessment proceedings, the Assessee was asked to furnish details of share transactions (purchase and sales) made during the year along with supporting evidences especially in the shares of M/s Dhvanil Chemicals Ltd. The Assessee was also requested to furnish copy of Demat account statement and explain the source of investment. In compliance, The Assessee could submit copy of DP transaction report of M/s Sykes & Ray Equities (1) Limited only. Except this no details regarding purchase of shares of M/s Dhvanil Chemicals Limited amounting to Rs. 12,64,005/- were furnished by the Assessee. the Assessee has furnished copy of Demat account nor explained source of investment of Rs. 12,64,005/- in Penny Stock. Therefore, show cause notice was issued to the Assessee on 09.12.2019 requiring the Assessee to explain as to why an amount of Rs. 12,64,005/- should not be treated as unexplained investment and added to total income. In reply of the same, the Assessee submitted that each and every transaction made in shares through the registered broker with SEBI and STT has already been paid on these transactions. Reply of the Assessee was considered and not found convincing as the Assessee has failed to furnish any documentary evidences to substantiate his claim. The Assessee has not furnished any details in respect of transaction made with M/s Dhvanil Chemicals Limited and also failed to furnish any details regarding source of investment. Therefore, în absence of any supporting evidences, investment of Rs. 12,64,005/- made in shares of M/s Dhvanil Chemicals Limited is treated as unexplained and added to the total income of the Assessee. Since, the Assessee has concealed his particulars of true income, therefore, penalty proceedings u/s 271(1)(c) of the IT Act are initiated separately.” Upon appeal, the ld CIT(A) upheld the findings of the Assessing Officer, by a reasoned and detailed order, thereby ITA No. 601/SRT/2025 4 Shri Dhaval Indravadan Gandhi for concealment of income. The relevant finding of ld AO is reproduced as under: 4. In the instant case, information was received from DDIT(Inv.)- 1.3, Ahmedabad that during the course of Search proceedings u/s n 11.09.2018 in the case of Shri Sanjay Shah and Jignesh Shah certain incriminating digital and documentary evidences regarding unaccounted cash, synchronized trading and providing bogus LTCG were found and seized. On perusal of was found that the Assessee has entered into transactions in penny stock namely; Dhvanil Chemicals Limited and has purchased shares of Rs. 12,64,005/ during the year under consideration. The persons who have h Shah were found to have indulged into the bogus transactions in the disguise of share trading and the Assessee was one of such beneficiary. 4.1 During the course of assessment proceedings, the Assessee purchase and sales) made during the year along with supporting evidences especially in the shares of M/s Dhvanil Chemicals Ltd. The Assessee was also requested to furnish copy of Demat account statement and explain the source of investment. In compliance, The Assessee could submit copy of DP transaction report of M/s Sykes & Ray Equities (1) Limited only. Except this no details regarding purchase of shares of M/s Dhvanil Chemicals Limited were furnished by the Assessee. the Assessee has furnished copy of Demat account nor in Penny Stock. Therefore, show cause notice was issued to the Assessee on 09.12.2019 requiring the Assessee to explain as to why an should not be treated as unexplained investment and added to total income. In reply of the same, the Assessee submitted that each and every transaction made in shares through the registered broker with SEBI and STT has sactions. Reply of the Assessee was considered and not found convincing as the Assessee has failed to furnish any documentary evidences to substantiate his claim. The Assessee has not furnished any details in respect of emicals Limited and also failed to furnish any details regarding source of investment. Therefore, în absence of any supporting evidences, investment of made in shares of M/s Dhvanil Chemicals he total income of the Assessee. Since, the Assessee has concealed his particulars of true income, therefore, penalty proceedings u/s Upon appeal, the ld CIT(A) upheld the findings of the Assessing Officer, by a reasoned and detailed order, thereby Printed from counselvise.com affirming the addition made on account of unexplained investment. 3. Before us, the learned Counsel for the assessee tendered a paper book comprising pages 1 to 61 and contended that the assessee had not entered into any transaction whatsoever shares of M/s. Dhwanil Chemicals Ltd. He relied upon an affidavit sworn by the assessee, wherein the deponent has averred that: 3. That during th submitted documentary evidence including a copy of my DP transaction statement from M/s. Sykes & Ray Equities (1) Limited, clearly demonstrating that I had not entered into any transaction for the purchase of shares Limited amounting to 12,64,005/ relevant assessment year. 4. That I categorically affirm before the Hon'ble Income Tax Appellate Tribunal, Surat Bench, that I have not entered into any transaction for the purchase of shares of Mis. Dhwanil Chemical Limited amounting to 12,64,005/ any other time relevant to the assessment in question. 5 That I further state that there was and is no intention on my part to cause any loss Department or Hon'ble Income Tax Appellate Tribunal, Surat Bench in anymanner. In the event that any of the statements made in this affidavit are found to be false or misleading, I undertake full personal respon 4. The assessee further affirmed that there was neither intention to cause loss to the Revenue nor any attempt to mislead the authorities. 4.1 In contrast, the invited our attention to copy of the letter dated 10.12.2019 the Assessing Officer, wherein the assessee himself admitted that ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi affirming the addition made on account of unexplained Before us, the learned Counsel for the assessee tendered a mprising pages 1 to 61 and contended that the not entered into any transaction whatsoever shares of M/s. Dhwanil Chemicals Ltd. He relied upon an sworn by the assessee, wherein the deponent has That during the course of reassessment proceedings, I submitted documentary evidence including a copy of my DP transaction statement from M/s. Sykes & Ray Equities (1) Limited, clearly demonstrating that I had not entered into any transaction for the purchase of shares of M/s. Dhwanil Chemical Limited amounting to 12,64,005/- or any other amount during the relevant assessment year. 4. That I categorically affirm before the Hon'ble Income Tax Appellate Tribunal, Surat Bench, that I have not entered into any r the purchase of shares of Mis. Dhwanil Chemical Limited amounting to 12,64,005/- during the relevant year, or at any other time relevant to the assessment in question. 5 That I further state that there was and is no intention on my part to cause any loss to the revenue or to mislead the Income Tax Department or Hon'ble Income Tax Appellate Tribunal, Surat Bench in anymanner. In the event that any of the statements made in this affidavit are found to be false or misleading, I undertake full personal responsibility and liability for the same. The assessee further affirmed that there was neither intention to cause loss to the Revenue nor any attempt to mislead In contrast, the learned Departmental Representative (DR) invited our attention to para -3 of page–2 of paper book letter dated 10.12.2019 addressed by the assessee to the Assessing Officer, wherein the assessee himself admitted that ITA No. 601/SRT/2025 5 Shri Dhaval Indravadan Gandhi affirming the addition made on account of unexplained Before us, the learned Counsel for the assessee tendered a mprising pages 1 to 61 and contended that the not entered into any transaction whatsoever in the shares of M/s. Dhwanil Chemicals Ltd. He relied upon an sworn by the assessee, wherein the deponent has e course of reassessment proceedings, I submitted documentary evidence including a copy of my DP transaction statement from M/s. Sykes & Ray Equities (1) Limited, clearly demonstrating that I had not entered into any of M/s. Dhwanil Chemical or any other amount during the 4. That I categorically affirm before the Hon'ble Income Tax Appellate Tribunal, Surat Bench, that I have not entered into any r the purchase of shares of Mis. Dhwanil Chemical during the relevant year, or at 5 That I further state that there was and is no intention on my to the revenue or to mislead the Income Tax Department or Hon'ble Income Tax Appellate Tribunal, Surat Bench in anymanner. In the event that any of the statements made in this affidavit are found to be false or misleading, I sibility and liability for the same. The assessee further affirmed that there was neither intention to cause loss to the Revenue nor any attempt to mislead learned Departmental Representative (DR) of paper book, being a addressed by the assessee to the Assessing Officer, wherein the assessee himself admitted that Printed from counselvise.com the name of the company “ subsequently changed to “ profit of Rs. 59,959/- 5. We have heard the rival submissions at length and perused the record. The core issue for adjudication before us is twofold: (i) Whether the assessee had, in fa involving the scrip of (ii) If so, whether the explained. 5.1 Upon careful consideration, we observe a clear contradiction between the assessee’s the Assessing Officer from the said scrip— Tribunal, wherein he categorically denies any such transaction. The relevant extract of the as placed at PB pages 1 trading in the scrip (under its changed name “Jagpro”) and acknowledged a profit thereon. letter filed by the assessee before the ld AO is reproduced as under: “From: Dhaval Indravadan Gandhi At Areth, Po: Areth, Tal: Mandvi, Bardoli, SURAT ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi the name of the company “Dhwanil Chemicals Ltd. subsequently changed to “Jagpro”, and that he had earned a - there from. We have heard the rival submissions at length and perused the record. The core issue for adjudication before us is twofold: (i) Whether the assessee had, in fact, entered into transactions involving the scrip of M/s. Dhwanil Chemicals Ltd. (ii) If so, whether the source of investment stands satisfactorily Upon careful consideration, we observe a clear contradiction between the assessee’s own communication dated 10.12.2019 the Assessing Officer—wherein he acknowledged profit derived —and the subsequent affidavit filed before this Tribunal, wherein he categorically denies any such transaction. The relevant extract of the assessee’s letter dated 10.12.2019, PB pages 1–2, records that the assessee admitted trading in the scrip (under its changed name “Jagpro”) and acknowledged a profit thereon. For ready reference letter filed by the assessee before the ld AO is reproduced as Dhaval Indravadan Gandhi 10th December, 2019. ITA No. 601/SRT/2025 6 Shri Dhaval Indravadan Gandhi Dhwanil Chemicals Ltd.” had been ”, and that he had earned a We have heard the rival submissions at length and perused the record. The core issue for adjudication before us is twofold: ct, entered into transactions M/s. Dhwanil Chemicals Ltd.; and stands satisfactorily Upon careful consideration, we observe a clear contradiction communication dated 10.12.2019 to wherein he acknowledged profit derived filed before this Tribunal, wherein he categorically denies any such transaction. sessee’s letter dated 10.12.2019, , records that the assessee admitted trading in the scrip (under its changed name “Jagpro”) and For ready reference, relevant letter filed by the assessee before the ld AO is reproduced as 10th December, 2019. Printed from counselvise.com To, The Income Tax Officer, Ward-1, Bardoli, SURAT Sub: Reply against your s Ref :- Your notice dated 09/12/2019 having number ITBA/AST/F/147(SCN)/2019 Respected Sir, 1.0 This is with reference to the above captioned subject, I have received your above notice dated 09.12.2019 20/1021998587(1) for the year under consideration. In this connection, I have to submit my written submission on or before 13.12.2019. The humble submission is as under: 2.0 As per the Show Cause notice mentioned that M/s. Dhavanil Chemicals Ltd of 40200 amounting to Rs. 12,64,005/ goodself have treated such script as Penny Stock. In this connection, I would like to know how can your goodself treat such stock as \"Penny\" and on whic such stock treated as \"Penny\". So, I request your goodself that kindly provide me the facts/details on which basis your goodself have treated such script/stock as penny stock. 3.0 Furthermore, I would like to intimate your goodself that I have not any script in the name of M/s. Dhavnil Chemicals Ltd. But, I would like to intimate your goodself that such script name was changed from M/s, Dhavanil Chemicals Ltd to \"Jagpro\". In this script of shares I have net earned profit amounting to Rs.59,959/ income. The details profit earned from such transaction are duly attached for your ready reference from the books of Sykes and Ray Equities. And, also due taxes were already paid by me. 4.0 The source of investment in such script was out of my regular income as well as earlier years saving. Each and every transactions made in such shares were duly covered demate account and due security transaction taxes were already paid by me. The transactions SEBI. So, it is requested your goodself not treat such script/share transaction as \"Penny\" and also requested your goodself that not to make any addition amounting to Rs. 12,64,005/ Should your honour require same. Thanking you, Yours faithfully.” 5.2 This contradiction, going to the very root of the matter, necessitates verification of the correctness and veracity of the statements so made. While the affi ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi The Income Tax Officer, Sub: Reply against your show cause notice for A.Y. 2012-13. Your notice dated 09/12/2019 having number ITBA/AST/F/147(SCN)/2019- 20/1021998587(1) 1.0 This is with reference to the above captioned subject, I have received your above notice dated 09.12.2019 having number ITBA/AST/147(SCN)/2019 20/1021998587(1) for the year under consideration. In this connection, I have to submit my written submission on or before 13.12.2019. The humble submission 2.0 As per the Show Cause notice mentioned that I have purchased the shares of M/s. Dhavanil Chemicals Ltd of 40200 amounting to Rs. 12,64,005/ goodself have treated such script as Penny Stock. In this connection, I would like to know how can your goodself treat such stock as \"Penny\" and on whic such stock treated as \"Penny\". So, I request your goodself that kindly provide me the facts/details on which basis your goodself have treated such script/stock as 3.0 Furthermore, I would like to intimate your goodself that I have not any script in the name of M/s. Dhavnil Chemicals Ltd. But, I would like to intimate your goodself that such script name was changed from M/s, Dhavanil Chemicals Ltd to \"Jagpro\". In this script of shares I have net earned profit ,959/- which was duly considered while filling the return of income. The details profit earned from such transaction are duly attached for your ready reference from the books of Sykes and Ray Equities. And, also due taxes were already paid by me. source of investment in such script was out of my regular income as well as earlier years saving. Each and every transactions made in such shares were duly covered demate account and due security transaction taxes were already paid by me. The transactions are duly made through registered broker with SEBI. So, it is requested your goodself not treat such script/share transaction as \"Penny\" and also requested your goodself that not to make any addition amounting to Rs. 12,64,005/-. Should your honour require any further details, I shall be pleased to submit the This contradiction, going to the very root of the matter, necessitates verification of the correctness and veracity of the statements so made. While the affidavit may raise a factual plea, ITA No. 601/SRT/2025 7 Shri Dhaval Indravadan Gandhi Your notice dated 09/12/2019 having number 1.0 This is with reference to the above captioned subject, I have received your having number ITBA/AST/147(SCN)/2019- 20/1021998587(1) for the year under consideration. In this connection, I have to submit my written submission on or before 13.12.2019. The humble submission I have purchased the shares of M/s. Dhavanil Chemicals Ltd of 40200 amounting to Rs. 12,64,005/-. Your goodself have treated such script as Penny Stock. In this connection, I would like to know how can your goodself treat such stock as \"Penny\" and on which basis such stock treated as \"Penny\". So, I request your goodself that kindly provide me the facts/details on which basis your goodself have treated such script/stock as 3.0 Furthermore, I would like to intimate your goodself that I have not purchase any script in the name of M/s. Dhavnil Chemicals Ltd. But, I would like to intimate your goodself that such script name was changed from M/s, Dhavanil Chemicals Ltd to \"Jagpro\". In this script of shares I have net earned profit which was duly considered while filling the return of income. The details profit earned from such transaction are duly attached for your ready reference from the books of Sykes and Ray Equities. And, also due source of investment in such script was out of my regular income as well as earlier years saving. Each and every transactions made in such shares were duly covered demate account and due security transaction taxes were already are duly made through registered broker with SEBI. So, it is requested your goodself not treat such script/share transaction as \"Penny\" and also requested your goodself that not to make any addition any further details, I shall be pleased to submit the This contradiction, going to the very root of the matter, necessitates verification of the correctness and veracity of the davit may raise a factual plea, Printed from counselvise.com the earlier letter constitutes an admission which, in law, cannot be lightly disregarded without proper inquiry. 5.3 In these circumstances, we are of the considered view that the ends of justice would be best served if the to the file of the Assessing Officer Assessing Officer shall, in particular, verify: 1. Whether the assessee had, in fact, purchased shares of M/s. Dhwanil Chemicals Ltd. (now Jagpro) demat or offline mode; 2. The veracity of the vis the admission 3. The source of funds 5.4 The Assessing Officer is at liberty to conduct such independent inquiry from the concerned depository participant or from the company itself, as the case may be. However, he shall ensure that the assessee is furnished copies of any material or investigation report relied upon, and is afforded a being heard and to explain any discrepancy or adverse finding before final determination. 5.5 The Assessing Officer shall thereafter adjudicate the issue afresh and in accordance with law, by passing a speaking order. ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi the earlier letter constitutes an admission which, in law, cannot be lightly disregarded without proper inquiry. In these circumstances, we are of the considered view that would be best served if the matter is to the file of the Assessing Officer for fresh examination Assessing Officer shall, in particular, verify: Whether the assessee had, in fact, purchased shares of M/s. Dhwanil Chemicals Ltd. (now Jagpro), either through offline mode; The veracity of the affidavit filed before this Tribunal vis admission made in the letter dated 10.12.2019; and source of funds, if any, utilised for such investment. The Assessing Officer is at liberty to conduct such as may be warranted, including verification from the concerned depository participant or from the company itself, as the case may be. However, he shall ensure that the assessee is furnished copies of any material or investigation and is afforded a reasonable opportunity of and to explain any discrepancy or adverse finding before final determination. The Assessing Officer shall thereafter adjudicate the issue and in accordance with law, by passing a ITA No. 601/SRT/2025 8 Shri Dhaval Indravadan Gandhi the earlier letter constitutes an admission which, in law, cannot In these circumstances, we are of the considered view that matter is remitted fresh examination. The Whether the assessee had, in fact, purchased shares of , either through filed before this Tribunal vis-à- made in the letter dated 10.12.2019; and if any, utilised for such investment. The Assessing Officer is at liberty to conduct such as may be warranted, including verification from the concerned depository participant or from the company itself, as the case may be. However, he shall ensure that the assessee is furnished copies of any material or investigation reasonable opportunity of and to explain any discrepancy or adverse finding The Assessing Officer shall thereafter adjudicate the issue and in accordance with law, by passing a reasoned, Printed from counselvise.com 5.6 In view of the foregoing discussion, the impugned order of the learned CIT(A) is file of the Assessing Officer for de novo adjudication in the light of the above directions. 5.7 The ground of appeal of the assessee is accordingly allowed for statistical purposes. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced by way display o board on 30/10/2025 under Rule 34(4) Sd/- (SANDEEP GOSAIN JUDICIAL MEMBER Surat; Dated: 30/10/2025 Rahul Sharma, Sr. P.S. (on Tour) Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Surat 5. Guard file. //True Copy// ITA No. 601/SRT/2025 Shri Dhaval Indravadan Gandhi In view of the foregoing discussion, the impugned order of the learned CIT(A) is set aside, and the matter is restored file of the Assessing Officer for de novo adjudication in the light of ground of appeal of the assessee is accordingly allowed for statistical purposes. In the result, the appeal of the assessee is allowed for Order pronounced by way display of result on notice /10/2025 under Rule 34(4) of ITAT Rules, 1963. - Sd/ (SANDEEP GOSAIN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Surat ITA No. 601/SRT/2025 9 Shri Dhaval Indravadan Gandhi In view of the foregoing discussion, the impugned order of restored to the file of the Assessing Officer for de novo adjudication in the light of ground of appeal of the assessee is accordingly allowed In the result, the appeal of the assessee is allowed for f result on notice of ITAT Rules, 1963. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Surat Printed from counselvise.com "