INCOME TAX OFFICER 23 3 6 MUMBAI, MUMBAI V. SANJAY V JAIN HUF, KALBADEVI

ITA 3617/MUM/2025

AI Insights

The case involves the Income Tax Officer (ITO) challenging the decision of the CIT(A) which had deleted the addition of Rs. 65,72,502 made on account of alleged bogus long-term and short-term capital gains claimed by Sanjay V. Jain HUF. The ITO argued that the CIT(A) erred in law and facts by ignoring the evidence of accommodation entries linked to a syndicate involved in rigging stock prices for tax evasion. The CIT(A), however, found that the AO had not provided concrete evidence linking the assessee to these transactions and had not adequately addressed the submissions made by the assessee. The Tribunal supported the CIT(A)'s decision, emphasizing the need for the AO to substantiate claims with corroborative evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713288 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: misc
• Other Referred Cases: Durga Prasad More (1971) 82 ITR 540 (SC), Sumatt Dayal (1995) 80 Taxmann. 89/SC, Pr. CIT Vs Swati Bajaj (I. A. No. GA/2/2022) in ITAT No 6 of 2022, Dated. 14.06.2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI; DR
• Assessee Lawyers: NILESH ZASVERI; AR
• Keywords: Corroborative evidences; Income from undisclosed sources; Tax effect; Search and seizure; Accommodation entries; Benefit of exemption; Bogus
• Section: 148; 68

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T.A. No. 3617/Mum/2025 Assessment Year: 2013-14 Income Tax Officer, 23(3)(6), Mumbai Vs Sanjay V. Jain HUF 20, Balkrishana Bhavan 86, Cavel X Lane Dady Sheth, Aggari Lane Mumbai - 400002 [PAN: AAJHS6749F] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) C.O. No. 150/Mum/2025 Assessment Year: 2013-14 Sanjay V. Jain HUF 20, Balkrishana Bhavan 86, Cavel X Lane Dady Sheth, Aggari Lane Mumbai - 400002 [PAN: AAJHS6749F] Vs Income Tax Officer, 23(3)(6), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Nilesh Zasveri, A/R Revenue by : Shri Leyaqat Ali Aafaqui, Sr. D/R सुनवाई की तारीख/Date of Hearing : 24/07/2025 घोषणा की तारीख /Date of Pronouncement: 31/07/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the revenue and cross-objection by the assessee are preferred against the order dated 25/03/2025 by NFAC, Delhi [hereinafter ‘the ld. CIT(A)’] pertaining to AY 2013- 14. 2. The grievance of the revenue reads as under:- Printed from counselvise.com I.T.A. No. 3617/Mum/2025 C.O. No. 150/Mum/2025 2 “1. \" Whether the facts and circumstances of the case and in law, Ld. CITA) has erred in deleting the entire addition of Rs. 65,72,502/- made by the AO u/s. 68 r.ws 115BBE of the I. T. Act on account of unexplained accommodation entries in the form of bogus LTCG and STCL ?\" 2. \" Whether the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the entire addition of Rs 65,72,502/-made by the AO, by ignoring the fact that Assessment was re-opened u/a.147 of the Act, on the basis of post-search information gathered out of search and seizure action conducted by office of the DGIT(Investigation Wing) Mumbai, on Shri. Naresh Manakchand Jain and his several associates, who have admitted in recorded statement that his syndicates were involved in rigging the prices of various scrips on stock exchange for providing entries of LTCG/Losses to various beneficiaries, who intended to bring unaccounted income into their books of accounts without paying taxes and assessee was found to be one of the beneficiary, obtained accommodation entries LTCG/ Losses from Shri Naresh Manakchand Jain, who has controlled and managed such transaction to generate paper tail only?\" 3. \" Whether the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the entire addition of Rs. 65,72,502/- made by the AO, without appreciating the facts of involvement of assessee with Shri. Naresh Manakchand Jain & his associates, by entering into accommodation transactions, which was an arranged transaction which involve the series of preconceived steps and lack of commercial content and totally an artificially structured transaction entered in to with the sole intent to evade taxes?\" 4. \" Whether the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the entire addition of Rs. 65,72,502/- made by the AO, without appreciating the nature of the transactions by accepting the documentation presented by the assessee at face value, without adequately considering the underlying fraudulent intent and the orchestrated steps taken to present these transactions as genuine. The assessment of the true character and intent behind these transactions was crucial and has been overlooked?\" 5. Whether on the facts and circumstances of the case and in law the La. CIT(A) has erred in ma considering the fact that the direct and circumstantial evidences in view of the decision of Durga Prasad More (1971) 82 ITR 540 (SC) and Sumatt Dayal (1995] 80 Taxmann. 89/SC) /1995] 2014 ITR 801 (SC)/ (1995) 125 CTR 124(BC) rendered by the Supreme Court, where it was held that Honible Court and Tribunal have to judge the evidences before it by applying the test of probabilities, the surrounding circumstances which exercise had been done by the Assessing Officer?\" 6. \" Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the entire disallowance claimed as exemption of LICG. by ignoring the fact that in such cases, where there was a suspicious or bogus trade, the onus is on the assessee to establish the genuineness of transactions and also to prove that the price of script/stocks in which he was traded to claimed LTCO/STCL was not manipulated. The reliance is placed on judgment of Hon'ble Culcutta High Printed from counselvise.com I.T.A. No. 3617/Mum/2025 C.O. No. 150/Mum/2025 3 Court's decision in the case of Pr. CIT Vs Swati Bajaj (I. A. No. GA/2/2022) in ITAT No 6 of 2022, Dated. 14.06.2022. 7. The tax effect involved in this case is Rs. 20,30,905, which is below the prescribed limit mentioned in the CBDT's Circular F.No.279/Misc. 142/2007-ITJ(Pt) amended vide No. 09/2024 dated. 17.09.2024. However, the appeal is being filed before the Hon'ble ITAT, as this case also falls under one of the exceptions specifled in paragraph 3.1(h) of the of the CBDT's Circular No.05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving\" Organized Tax Evasion\", in such cases the decision to file appeal/ SLP shall be taken on merit without regard to the tax effect and the monetary limit. 8. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary. A copy of the CITIA)'s order was received on 25.03.2025 in this office of PCIT-19, Mumbai. The last date of filling an appeal is 31.05.2025. The appeal should be filed IMMEDIATELY.” 3. Briefly stated the facts of the case are that the assessee filed its return of income on 12/09/2013 declaring income of Rs. 3,30, 780/-. On the basis of the information in possession with the Department and after recording the satisfaction and after obtaining necessary approval from the concerned authority, the AO has issued notice u/s 148 of the Act on 28/07/2022. Pursuant to which, the assessee filed his return of income. 3. As per the information, the assessee availed accommodation entries to the tune of Rs. 65,72,502/- from Shri Naresh Makechand Jain who was involved in operations of the syndicate establishing clearly the modus operandi of providing bogus long term capital gain/loss and rigging the prices of various scrips on stock exchange for providing bogus long term capital gain/loss. 4. The assessee was asked to furnish details and documentary evidence to prove the genuineness of transactions with respect to Shri Naresh Makechand Jain. The details were furnished and partial documents were also submitted. A final showcause notice was issued by the AO again asking the assessee to furnish supporting documents Printed from counselvise.com I.T.A. No. 3617/Mum/2025 C.O. No. 150/Mum/2025 4 in response to which the assessee supported his case by referring to the decision of the Hon’ble Gujarat High Court and Hon’ble Allahabad High Court, who have quashed the re-assessment proceedings. 4.1. The contentions of the assessee were dismissed by the AO who was of the opinion that the assessee has failed to prove genuineness of the transactions and made addition of Rs. 65,72,502/- u/s 68 r.w.s. 115BBE of the Act. 5. The assessee challenged the additions before the ld. CIT(A) and made various submissions with supporting evidence. After considering the facts, submissions and all the material available on record, the ld. CIT(A) called for a remand report from the AO, who submitted his report on 26/09/2024 which is extracted by the ld. CIT(A) at para 6.2.2. on page 10 of his order. On the addition on account of accommodation entries alleged to have been availed by the assessee from Shri Naresh Makechand Jain, it was strongly contended that the assessee is engaged in share trading activity on a day-to-day basis right from AY 2002-03 and the turnover from share trading activity has crossed the threshold prescribed for tax audit u/s 44AB of the Act and accordingly, the books of accounts of the assessee were audited. The return of income has been filed electronically within the due date. It was also pointed out to the ld. CIT(A) that on the basis of information received from DDIT (Inv.) Unit – 7(1) and 7(3), the Jurisdictional AO (JAO) initiated the re-assessment proceedings on 25/05/2022 against which the assessee raised specific objections claiming that no benefit of long term capital gain or short term capital losses has been claimed by the assessee in his return of income on any scrips traded by it or alleged by the JAO. Printed from counselvise.com I.T.A. No. 3617/Mum/2025 C.O. No. 150/Mum/2025 5 5.1. The ld. CIT(A) at para 6.3.2. of his order recorded the reasons for the additions made by the AO and the same is as under:- “a. the assessee, Sanjay V. Jain HUF (PAN: AAJHS6749F) availed accommodation entries to the tune of Rs.65,72,502/- from Shri Naresh Manakch and Jain who are involved in operations of providing Bogus Long term capital gain (LTCG) / Loss. b. The assesse has submitted partial documents however, it couldn't submit the documentary evidence for genuineness of transaction with Shri Naresh Manakchand Jain to the tune of Rs. 65,72,502/-. c. Sanjay V. Jain HUF (PAN:AAJHS6749F) availed accommodation entries to the tune of Rs.65,72, 502/- from Shri Naresh Manakchand Jain who are involved in operations of the syndicate, establishing clearly the modus operandi of providing Bogus Long term capital gain (LTCG) / Loss and rigging the prices of various scrips on stock exchange for providing Bogus Long term capital gain (LTCG) / Loss. d. Submission filed by the assessee was not found satisfactory.” 5.2. The ld. CIT(A) found that the AO, solely relied upon the information received from the investigation wing without conducting any independent enquiries at the assessment stage, when the assessee strongly contended that he did not know any Shri Naresh Makechand Jain. The ld. CIT(A) was of the opinion that it is the duty of the AO to meticulously convert this preliminary information into substantive evidence for which the AO must gather corroborative evidence to verify the authenticity of the information and meticulously connect the dots to build a credible and coherent case. Merely relying on the isolated pieces of information without proper validation and correlation could lead to inaccuracies and unjust conclusions. The ld. CIT(A) further observed that the AO did not being the transaction specific information on record like banking transactions between Shri Naresh Makechand Jain and the assessee. The ld. CIT(A) further observed that the AO has not discussed the submissions of the assessee and rebutted the contentions of the assessee raised during the assessment stage. On the allegation that the assessee has availed accommodation entries to the tune of Rs. Printed from counselvise.com I.T.A. No. 3617/Mum/2025 C.O. No. 150/Mum/2025 6 65,72,502/- from Shri Naresh Makechand Jain in the form of long term capital gain/loss, the ld. CIT(A) on factual verification of ITR filed by the assessee for the year under consideration found that the assessee has not availed any benefit of exemption of long term capital gain. The ld. CIT(A) finally concluded as under:- “6.3.8 Upon a comprehensive examination of the appellant's case in its entirety, it is evident that the appellant submitted numerous: documents related to the financial transactions conducted and clarified his position through detailed submissions. However, the Assessing Officer (AO) failed to identify specific transactions among the total transactions undertaken by the appellant that were linked to Sh. Naresh Manikchand Jain. Simply mentioning amounts and labeling them as accommodation entries, without establishing live connections between the parties, identifying defects in the appellant's submissions, demonstrating the transfer of tangible benefits, and substantiating these claims with corroborative evidence, is insufficient to impose liabilities on the appellant. 6.3.9 In the peculiar facts and circumstances of the case and in light of discussion made above, I am of the considered opinion that AO did not bring any corroborative evidences on record to substantiate his allegation, highlight any defects in the submission of the appellant and establish any live connection between the Sh. Naresh Manik chand Jain and the appellant. Therefore, i found merit in the contention of the appellant, thus grounds of appeal no. 1, 2 & 3 are allowed and addition on account of accommodation entries is hereby deleted.” 6. After giving a thoughtful consideration to the factual matrix discussed hereinabove and considered by the ld. CIT(A) in their true perspective, we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, effective ground/s raised by the revenue are dismissed. 7. In his cross objection, the assessee has challenged the very appeal filed by the revenue on the ground that it is no maintainable as the tax effect is below the mandatory limit of Rs.60,00,000/- prescribed for appeals before the ITAT as per the CBDT Circular No. 09/2024 dated Printed from counselvise.com I.T.A. No. 3617/Mum/2025 C.O. No. 150/Mum/2025 7 17/09/2024. We find that the appeal of the revenue is protected by the exceptions carved in the CBDT Circular and the appeal of the revenue is maintainable. 8. In the result, appeal of the revenue and cross-objection filed by the assessee are dismissed. Order pronounced in the Court on 31st July, 2025 at Mumbai. Sd/- Sd/- (ANIKESH BANERJEE) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 31/07/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0014ितिलिप अ\u0019ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014 थ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "