INCOME TAX OFFICER, MUMBAI V. SURENDRAKUMAR AGARWAL, MUMBAI

ITA 4449/MUM/2024

AI Insights

The case involves an appeal by the Income Tax Officer, Mumbai against Surendra Kumar Agarwal, concerning the assessment year 2015-16. The core issue was the deletion of a disallowance of long-term capital gains amounting to Rs.2,70,64,182, which the assessee claimed as exempt under section 10(38) of the Income Tax Act. The Assessing Officer (AO) had disallowed this exemption based on suspicions that the shares were part of a penny stock scam. However, the CIT(A) reversed this decision, referencing a prior Tribunal decision that accepted similar transactions by the assessee as genuine. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 35498 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHANGEPATIL PUSHKARAJ RAMESH; DR
• Assessee Lawyers: RAJIV KHADELWAL AR VIRTUALLY APPEARED
• Keywords: Unexplained cash credit; Earning of tax free income; Bogus
• Section: 68

Judgement Text

"| आयकर अपीलीय अिधकरण \fा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 4449Mum/2024 Assessment Years: 2015-16 Income Tax Officer, Mumbai Vs Surendra Kumar Agarwal, Mumbai 545, Panchratna Mama Parmanand Marg Opera House Mahrashtra - 400004 [PAN: AABPA7889C] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Rajiv Khadelwal A/R (virtually appeared) Revenue by : Shri Bhangepatil Pushkaraj Ramesh, Sr. D/R सुनवाई की तारीख/Date of Hearing : 30/01/2025 घोषणा की तारीख /Date of Pronouncement: 30/01/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the revenue is preferred against the order of the ld. CIT(A)-48, Mumbai [hereinafter ‘the ld. CIT(A)’] dated 01/07/2024, pertaining to AY 2015-16. 2. The sum and substance of the grievance of the revenue is that, the ld. CIT(A) erred in deleting the entire disallowance of long-term capital gains of Rs.2,70,64,182/- being claimed as exempt u/s 10(38) of the Act. 3. Briefly stated the facts of the case are that during the course of scrutiny assessment proceedings the AO noticed that the assessee has claimed exempt income u/s 10(38) of the Act to the tune of Rs.2,70,64,182/- on sale of shares of Surabhi Chemicals and Investment (SCIL). On the basis of the information received from the Directorate of I.T.A. No. 4449Mum/2024 2 Investigation, Kolkata, the AO formed a belief that shares of SCIL are nothing but Penny stock and is a part of a large scam of tax evasion to defraud the revenue by claiming the bogus long-term capital gain on sale of shares of penny stock. Having formed such belief, the AO declined the exemption u/s 10(38) of the Act and added the entire long-term capital gain of Rs.2,70,64,182/- as unexplained credit u/s. 68 of the Act and further added Rs.8,11,925/- as alleged commission to obtain be accommodation entry. 4. The assessee challenged the assessment order before the ld. CIT(A) and it was strongly contended that shares of face value of Rs.10/- each of SCIL where are acquired in FY 2012-13 relevant to AY 2013-14, directly from the company under SEBI approved private placement at premium of Rs.5/- per share. The payment was made by account payee cheque. 10 lakh shares where allotted on 01/01/2013 by the company in Demat form and the same were credited in the Demat account with Samurai Securities Pvt. Ltd.. Subsequently 10 lakh shares were split into 1 lakh shares on release of lock-in period. 4.1. During the year under consideration, out of 10 lakh fully paid equity shares, the assessee sold 3,24,500 shares as 6,75,500 shares were already sold during AY 2014-15. On this fact, the ld. CIT(A) found that the Tribunal vide order dated 29/04/2024 in the case of the assessee for AY 2014-15, has accepted the sale of shares sold in FY 2013-14 relevant to AY 2014-15, wherein the Tribunal has held that long-term capital gain earned on sale of shares cannot be assessed as unexplained cash credit u/s 68 of the Act. The relevant findings are extracted in para 5.6. at page I.T.A. No. 4449Mum/2024 3 22 of the order of the ld. CIT(A). Since the assessee has sold part of the shares in earlier assessment year in which the sale consideration has been accepted as long-term capital gain by the Tribunal, following the order of the Tribunal, the ld. CIT(A) deleted the impugned addition made by the AO. 5. We have given a thoughtful consideration to the orders of the authorities below. It is proved that the sale of 6,75,500 shares sold in AY 2014-15 have been accepted as yielding long-term capital gain, therefore, the balance of 3,24,500 shares sold during the year under consideration cannot take a different colour as the same has been held to be genuine sale eligible for exemption u/s 10(38) of the Act. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A). This ground is accordingly dismissed. And since we have allowed the exemption, the addition on account of alleged commission also stands deleted. 6. In the result, appeal of the revenue is dismissed. Order pronounced in the Court on 30th January, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE-PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 30/01/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs I.T.A. No. 4449Mum/2024 4 आदेश की \u0015ितिलिप अ\u001aेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001c / The Appellant 2. \u0015\u001dथ\u001c / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "