INCOME TAX OFFICER, WARD 19(1), NEW DELHI V. M/S OVAL INVESTMENT PRIVATE LIMITED, DELHI

ITA 5772/DEL/2024

AI Insights

The case revolves around the appeal by the Revenue against the order of the CIT(A) which had deleted the additions made by the AO on the grounds of undisclosed income from trading in shares and F&O segments, and a bogus credit balance. The AO had initially assessed the income from these transactions as belonging to M/s. Oval Investment Pvt. Ltd., the assessee, but the CIT(A) found that these transactions were actually conducted on behalf of M/s. RKS Distributor Pvt. Ltd., who had provided the funds and declared the income in their tax returns. The Tribunal supported the CIT(A)'s decision, emphasizing that the income was correctly reported by M/s. RKS Distributor Pvt. Ltd., and thus, should not be taxed again in the hands of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 822667 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2017-2018
• Appeal Filed On: 13-12-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHYAM MANOHAR SINGH
• Assessee Lawyers: MAYANK PATWARI; AKASH OJHA
• Keywords: Transactions in derivatives; Bogus
• Section: 143(3); 68; 14A; 10B

Judgement Text

"ITA No.5772/Del/2024 Page | 1 THE INCOME TAX APPELLATE TRIBUNAL DELHI “E” BENCH: NEW DELHI BEFORE SHRI SUDHIR KUMAR, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.5772/Del/2024 [Assessment Year : 2017-18] ITO Ward-19(1) Delhi vs M/s. Oval Investment Pvt. Ltd. B-97, 2nd Floor, Amritpuri, Garhi East of Kailash, Delhi-110065. PAN-AAACO0373R APPELLANT RESPONDENT Revenue by Shri Shyam Manohar Singh, Sr.DR Assessee by Shri Mayank Patwari, Adv. & Shri Akash Ojha, Adv. Date of Hearing 25.09.2025 Date of Pronouncement 23.12.2025 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by the Revenue against the order dated 15.10.2024 of Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-7/11026/2019-20 passed u/s 250 of the Income Tax Act,1961 [“the Act”] arising out of the assessment order dated 31.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18. 2. Brief facts of the case are that assessee is a Private limited company and filed its return of income on 31.10.2017, declaring loss of INR 1,25,243/-. The case of assessee was selected under CASS Printed from counselvise.com ITA No.5772/Del/2024 Page | 2 and assessment was completed by making additions towards the profit of INR 1,17,08,931/- on the sale of equity shares and profit from F&O segment of INR 86,70,879/- and further dividend income of INR 3,38,060/- as income of the assessee and after reducing the amount of service tax, net addition of INR 1,80,37,381/- was made by the AO. Besides this, an addition of INR 2,33,06,326/- is made regarding credit balance appearing in the name of M/s RKS Distributor Pvt. Ltd. u/s 68 of the Act and further, an addition of INR 9,05,423/- was made u/s 14A of the Act. Accordingly, total income of the assessee stood assessed at INR 4,21,23,887/-. 3. Against the said order, the assessee preferred appeal before Ld. CIT(A), who confirmed the addition made u/s 14A of the Act and deleted the other two additions made by the AO. 4. Aggrieved by the said order, Revenue is in appeal before the Tribunal by taking following grounds of appeal:- 1. Whether on the facts of the case and in law, the Ld. CIT(A), has erred in deleting the additions totaling to Rs. 1,80,37,381/-made by the A.O. on account of undisclosed income earned by the assessee during the year under consideration on sale of equity, F&O Profit and dividend income for which the assessee received Rs. 2,07,17,870/- and payment of STT totaling to Rs. 26,80,489/- on these transactions was made which is evident in Form 10DB which the assessee failed to explain during the assessment proceedings. 2. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,33,06,326/- made by the A.O. on account of bogus credit balance appearing in the books of the assessee against M/s RKS Distributors Pvt. Lid. which the assessee failed to explain during the assessment proceedings despite being provided ample opportunities to do so. Printed from counselvise.com ITA No.5772/Del/2024 Page | 3 3. The appellant craves to be allowed to add any fresh ground(s) of appeal and or deleted or amend any of the ground(s) of appeal.” 5. Ground of appeal No.1 raised by the Revenue is with respect to the deletion of addition of INR 1,80,37,381/- made by AO by holding the same as undisclosed income earned by the assessee from sale of equity shares and F&O segment and dividend income. 6. Before us, Revenue has vehemently supported the order of the AO and submits that assessee was trading in shares and had not declared any income on account of profits earned from such trading in the return of income filed for the year under appeal though the same was appearing in AIS statement of the assessee. Ld. Sr. DR submits that all the transactions are appearing in the name of the assessee in Form 10B however, the assessee claimed that it had provided management services where the funds were received from M/s RKS Distributor Pvt. Ltd. and funds received from the said company were invested in the stock market and assessee earned 10% as commission on the profit earned from such transactions. Ld. Sr. DR submits that AO has observed that no formal agreement was filed by the assessee and further after examining the details filed and submissions of the assessee, concluded that entire profits earned from trading of shares and from F&O segment is the income of the assessee company and not of M/s RKS Distributor Pvt. Ltd. and accordingly, made the addition. He submits that order of Ld. CIT(A) deserves to be uphold. Printed from counselvise.com ITA No.5772/Del/2024 Page | 4 7. On the other hand, Ld.AR for the assessee supported the order of ld. CIT(A) and submits that assessee has worked as management consultants in terms of agreement executed with M/s RKS Distributor Pvt. Ltd. which is placed at page 14 of the Paper Book filed by the assessee. As per the said agreement, there was an arrangement between the assessee and M/s RKS Distributor Pvt. Ltd. that M/s RKS Distributor Pvt. Ltd. will providing the funds to assessee for making investment I the stock market including F&O segment on its behalf and assessee will be eligible for 10% of the profit earned as commission for the services rendered. Ld. AR submits that as per this arrangement, funds were received from M/s. RKS Distributor Pvt. Ltd. from time to time which were invested in stock market and profits earned from such transactions were credited to the account of M/s. RKS Distributor Pvt. Ltd. maintained by the assessee, and remained payable at the end of the previous year. Ld. AR further drew our attention to the affidavit of Director of M/s RKS Distributor Pvt. Ltd., Shri Sanjay available at page 50 to 51 of the Paper Book, wherein he had admitted that the funds were provided by the company to the assessee for making investment in share market and the entire income received after deduction of commission paid to assessee, was offered for tax in the return of income filed by the company M/s RKS Distributor Pvt. Ltd. The necessary copy of the computation of the said company was also filed in the Paper Book alongwith affidavit. Ld. AR submits that the assessee has acted as an Agent for M/s RKS Distributor Pvt. Ltd. and income earned from share trading as well as F&O segment pertained to M/s RKS Distributor Pvt. Ltd. who offered the same for tax in its Printed from counselvise.com ITA No.5772/Del/2024 Page | 5 return of income filed. Ld. AR submits that Ld. CIT(A) after considering these facts has rightly deleted the additions made by AO and he prayed for the confirmation of the order of ld. CIT(A). 8. Heard the contentions of both the parties and perused the material available on record. It is seen that there was an arrangement between the assessee and M/s RKS Distributor Pvt. Ltd. according to which assessee has acted as Agent for M/s RKS Distributor Pvt. Ltd. who provided the funds to the assessee and the assessee invested such funds in stock market on behalf of M/s RKS Distributor Pvt. Ltd. and the assessee got 10% of the profit as commission. It is further seen that such commission is duly credited in the books of the assessee and declared as income in the Profit & Loss account. The profits earned from such transactions also stood credited in the ledger account of M/s. RKS Distributor Pvt. Ltd. in the books of assessee. As this income actually belonged to M/s. RKS Distributor Pvt. Ltd. who declared the same in its return of income, therefore same was not disclosed by assessee and there was mismatch with the information available in AIS statement. As observed above, M/s. RKS Distributor Pvt. Ltd. has accepted these transactions as belonged to it and further confirmed the balance appearing in the books and after including the profits in its income paid the taxes thereon. Ld. CIT(A) appreciated these facts and deleted the additions made. The relevant observation of Ld. CIT(A) as appearing in para 6.2 to 6.3.4 of the order are reproduced as under:- Printed from counselvise.com ITA No.5772/Del/2024 Page | 6 Printed from counselvise.com ITA No.5772/Del/2024 Page | 7 Printed from counselvise.com ITA No.5772/Del/2024 Page | 8 Printed from counselvise.com ITA No.5772/Del/2024 Page | 9 Printed from counselvise.com ITA No.5772/Del/2024 Page | 10 Printed from counselvise.com ITA No.5772/Del/2024 Page | 11 Printed from counselvise.com ITA No.5772/Del/2024 Page | 12 Printed from counselvise.com ITA No.5772/Del/2024 Page | 13 Printed from counselvise.com ITA No.5772/Del/2024 Page | 14 Printed from counselvise.com ITA No.5772/Del/2024 Page | 15 Printed from counselvise.com ITA No.5772/Del/2024 Page | 16 9. Before us, Revenue has failed to controvert the findings given by Ld. CIT(A) who has based his findings after examining Balance Sheet of the assessee company as well as of M/s. RKS Distributor P.Ltd. wherein this income was disclosed by M/s. RKS Distributor P.Ltd. and taxes were paid on such income. It is also seen that company, M/s. RKS Distributor Pvt. Ltd. has accepted all the transactions and filed its confirmations which is available at page 49 of the Paper Book and it is also a matter of fact that no independent inquiry was made by AO from M/s. RKS Distributor PVT. Ltd. though all these details were filed by the assessee before him. It appears that AO has proceeded with pre-conceived notion and failed to make any independent inquiry before reaching to the conclusion that the profits from such transactions pertained to the assessee company and was its income. 10. Once it is established that these profits are actually pertained to M/s. RKS Distributor Pvt. Ltd. who has paid the taxes after including the same in its total income any further addition of the said income in the hands of the assessee would tantamount to double addition of income. Accordingly, we find no error in the order of Ld.CIT(A) in deleting the addition made which is hereby, upheld. Both the grounds of appeal of the revenue are thus, dismissed. Printed from counselvise.com ITA No.5772/Del/2024 Page | 17 11. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 23.12.2025. Sd/- Sd/- (SUDHIR KUMAR) JUDICIAL MEMBER Date:- 23.12.2025 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "