INCOME TAX OFFICER-42(2)(3), KAUTILYA BHAVAN, BKC, V. KAUSHIK BALUBHAI MADHWANI, GIRGAON, MUMBAI

ITA 2861/MUM/2023

AI Insights

The case involves an appeal by the Revenue against the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi, which had deleted additions made by the Income Tax Officer regarding unexplained investments and undisclosed income from the sale of shares in Sunrise Asian Ltd. The Revenue contested the CIT(A)'s decision, arguing that the additions were justified based on the evidence of accommodation entries and the nature of the transactions involving penny stocks. The ITAT found that the CIT(A)'s order did not adequately address the issues raised by the Revenue and thus remitted the matter back for a comprehensive re-evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712143 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Assessment Year: 2014-2015
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Unexplained cash credit; Unexplained investment; Tax effect; Accommodation entries; Bogus
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2861/MUM/2023 Assessment Year: 2014-15 Income Tax Officer-42(2)(3), Mumbai Vs. Kaushik BalubhaiMadhwani 364, Cigaratewala Bldg., S.V.P. Rd., Girgaon, Mumbai- 400004, (PAN : AETPM0755P) (Appellant) (Respondent) Present for: Assessee : Shri Sharwan Kumar Jha, Adv. (Virtually appeared) Revenue : Shri RiteshMisra, CIT DR Date of Hearing : 10.06.2025 Date of Pronouncement : 24.07.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by Revenue is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2023-24/1053795300(1), dated 19.06.2023 passed against the assessment order by lncome Tax Officer, Ward - 35(1)(5), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 29.12.2016 for Assessment Year 2014- 15. 2. Grounds taken by the Revenue are reproduced as under: Printed from counselvise.com 2 ITA No. 2861/MUM/2023 Kaushik BalubhaiMadhwani AY 2014-2015 \"1. Whether on the facts and the circumstances of the case and in law, LdCIT(A) is right in deleting the addition of Rs. 30.31. 974 made by the A.0 on account of unexplained investment made in penny stock company M/s. Sunrise Asian Lid and commission paid? Date: 14.08.2023 . 2. Whether on the facts and the circumstances of the case, LdCIT(A) is right in deleting the addition of Rs. 29,43,664/- without appreciating the fact that the sale consideration of Rs. 29,43,664/- derived from the sale of shares of company M/s. Sunrise Asian Ltd. are bogus? 3. Whether on the facts and the circumstances of the case. LdCIT(A) is right in deleting the addition of Rs. 29,43, 664/- without appreciating the fact that the addition was made on account of undisclosed income on the basis of the statement recorded u/s. 132(4) of the accommodation entry provider, which is evidence as per section 132(4) of the Income Tax Act? 4. Whether on the facts and the circumstances of the case, Ld.CIT(A) is right in holding the assessee an entry provider without appreciating the fact that the assessee himself admitted that he was an Investor and had invested in the company M/s. Sunrise Asian Ltd. through Some other broker and the assessee did not even raise this ground during the assessment proceedings? 5. On the facts and in the circumstances of the case, the Hon'ble ITAT is requested to entertain this appeal, though, the tax effect is below the monetary limit prescribed in the CBDT Circular no. 17/2019 dated 08.08.2019 r.w. Circular No. 3/2018 dtd. l1.07.2018 as amended on 20.08.2018 as the case falls under the purview of CBDT Circular No. 23 of 2019 dated 06-09-2019 and O.M. dated 16/09/2019 \". 2. Brief facts of the case are that assessee filed his return of income on 13.02.2015, reporting total income at Rs.3,58,370/- which was revised on 25.03.2016, reporting total income at Rs.3,63,990/-. In the year under consideration, assessee had earned long term capital gain on sale of shares of Sunrise Asian Ltd., amounting to Rs.29,43,664/- claimed as exempt u/s.10(38). Details of the working for the said long term capital gain is tabulated below: Scrip Name: Sunrise Asian Ltd [former known as SantoshimaTradelinks Ltd.] Buy Sell Date of purchase/sale Quantity Rate Amount Quantity Rate average Amount Gain 12.09.13 416157 503.15 205325786 Sunrise Asian Ltd. 6000 503.45 2943664 Printed from counselvise.com 3 ITA No. 2861/MUM/2023 Kaushik BalubhaiMadhwani AY 2014-2015 22.07.13 10000 53.45 534546 Luminaitech ltd. Total 426157 205860332 6000 490.94 2943664 2943664 2.1. In the course of assessment, enquires were made and explanations were called in respect of the said long term capital gain which were duly replied by the assessee along with furnishing relevant documentary evidences. However, ld. Assessing Officer took an adverse view and considered the sale proceeds on sale of shares amounting to Rs.29,43,664/- as unexplained cash credit and made the addition u/s.68. Further addition was made of Rs. 88,310/- towards commission on the said alleged transaction of long term capital gain. Assessee went in appeal before the ld. CIT(A) contesting the additions so made. 2.2 From the perusal of the order of the ld. CIT(A), it is noted that he has divulged himself from the issues raised by the assessee and has directed the ld. Assessing Officer to compute the commission at the rate of 1% on the total debit entries as determined from the bank accounts of the assessee. The finding arrived at by himis in total divergence to the grounds raised by the assessee in his appeal. It is an order which in no way deals with the issue contested by the assessee in respect of addition of sale proceeds on sales of shares of Sunrise Asian for which addition was made u/s.68 by the ld. Assessing Officer. The addition of commission made by the ld. Assessing Officer is in respect of arrangement of accommodation entries made by the assessee towards long term capital gain. The order of ld. CIT(A) in no way deals with the said issue and is one liable to be set aside not dealing with the merits. Printed from counselvise.com 4 ITA No. 2861/MUM/2023 Kaushik BalubhaiMadhwani AY 2014-2015 It is required that the first appellate authority viz. CIT(A) will appreciate the evidence, consider the arguments and apply the law on the given set of facts and circumstances and arrive at findings. 3. In view of the above, we remit the matter back to the file of ld. CIT(A) with a direction to pass a speaking order specific to the grounds raised. 4. Needless to say, that assessee be given reasonable opportunity of being heard and make his submissions, as being fit. We also direct the assessee to be diligent in attending the hearing proceedings and not to seek adjournments unless warranted by compelling reasons so as to expedite the disposal. Accordingly, grounds taken by the Revenue are allowed for statistical purposes. 5. In the result, appeal of the Revenue is allowed for statistical purposes. Order is pronounced in the open court on 24th July, 2025 (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 24th July, 2025 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, Printed from counselvise.com 5 ITA No. 2861/MUM/2023 Kaushik BalubhaiMadhwani AY 2014-2015 (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "