ITO WARD 5(3)(1), AHMEDABAD V. HARSHA ASHESHBHAI PATEL, AHMEDABAD

ITA 1074/AHD/2025

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted the additions made by the Assessing Officer on account of alleged bogus LTCG, STCG, and commission payments for accommodation entries related to transactions in the shares of Kushal Tradelink Limited. The Assessing Officer had reopened the assessment for A.Y. 2017-18 based on information from the Investigation Wing suggesting that the assessee had engaged in transactions to introduce unaccounted income as exempt LTCG and STCG. The CIT(A) found the additions unjustified, leading to the Revenue's appeal. The Tribunal's decision addressed the validity of the reopening notice and the substantive issues of the additions made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717607 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 14-05-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT
• Assessee Lawyers: ANIL KSHATRIYA; ALAY ANIL KSHATRIYA; ARS
• Keywords: Income from undisclosed sources; Capital Gains; Accommodation entries; Earning of tax free income; Bogus
• Section: 147; 148

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.1074/Ahd/2025 Assessment Year: 2017-18 Income Tax Officer, Ward – 5(3)(1), Room No.419, Aayakar Bhavan, Vejalpur, Ahmedabad – 380 015. Vs. Harsha Asheshbhai Patel, 14, Rambhaug, Mumdapura, Bopal, Ahmedabad – 380 058. [PAN – AHPPP 5828 H] (Appellant) (Respondent) Assessee by Shri Anil Kshatriya & Shri Alay Anil Kshatriya, ARs Revenue by Shri Abhijit, Sr. DR Date of Hearing 28.07.2025 Date of Pronouncement 12.08.2025 O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: This appeal is filed by the Revenue against the order of National Faceless Appeal Centre (NFAC) [hereinafter referred as ‘CIT(A)’] dated 13.03.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding under Section 147 r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The brief facts of the case are that the assessee had filed return of income for the A.Y. 2017-18 on 20.07.2017 declaring income of Rs.1,49,72,320/-. Subsequently, the Assessing Officer had received an information from the Investigation Wing that the assessee had entered into transactions of Rs.1,80,03,595/- in a penny stock company namely Printed from counselvise.com ITA No.1074/Ahd/2025 Assessment Year: 2017-18 ITO vs. Harsha Asheshbhai Patel Page 2 of 7 Kushal Tradelink Limited which was utilised to facilitate introduction of unaccounted income in the form of exempt Long Term Capital Gain (LTCG) and Short-Term Capital Loss. On the basis of this information, the case of the assessee was reopened and notice under Section 148 of the Act was issued on 21.04.2021. The assessment was completed under Section 147 r.w.s. 144B of the Act on 23.03.2022 at a total income of Rs.2,03,26,622/-. The Assessing Officer had made additions of bogus LTCG of Rs.44,01,695/-, bogus STCG of Rs.1,46,50,449/- and also made addition for commission payment of Rs.9,52,607/- for obtaining accommodation entry. 3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal with the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the additions as made by the Assessing Officer were deleted. 4. Now the Revenue is in appeal before us. The following grounds have been taken by the Revenue in this appeal: - “1. Whether the ld. CITA) has erred in quashing of notice u/s.148 dated 30.03 2021 and consequent re-assessment order passed by the AO as void ab initio invalid and not sustainable, without appreciating the facts of the case? 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition made of Rs.44,01,695/- on account bogus LTCG made u/s.69A of the Act, without appreciating the facts of the case? 3 Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition of Short-Term Capital Gains of Rs.1,46,50,449/- without appreciating the facts of the case? Printed from counselvise.com ITA No.1074/Ahd/2025 Assessment Year: 2017-18 ITO vs. Harsha Asheshbhai Patel Page 3 of 7 4. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition of Rs.9,52,607/- made u/s.69C being commission paid for accommodation entry without appreciating the facts of the case. 5 Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in ignoring the fact that the assessee has transacted with M/s. Kushal Group an entity which is an accommodation entry provider? 6 The appellant craves leave to amend or alter any ground or add a new ground which may be necessary 5. The first ground taken by the Revenue pertains to reopening of the case u/s 148 of the Act. Shri Abhijit, Ld. Sr. DR submitted that the Ld. CIT(A) had held that the notice issued under Section 148 of the Act was invalid and void ab initio. This was for the reason that the Assessing Officer had made the addition citing the name of the entity M/s. Kushal Limited whereas the assessee’s transactions pertained to M/s. Kushal Tradelink Limited. Further, that the Assessing Officer had reopened the assessment proceedings on the basis of information received from Investigation Wing, without any verification at his end and, therefore, there was no application of mind by the Assessing Officer. The Ld. CIT(A) had also held that the approving authority had mechanically approved the proposal of the Assessing Officer to reopen the case and didn’t apply his mind on the proposal of the AO. The Ld. Sr. DR has taken us through the reasons as recorded by the Assessing Officer and contended that the finding as given by the Ld. CIT(A) was not correct. He has also brought on record the fact that the name of Kushal Tradelink Limited was changed to Kushal Limited w.e.f. 17th October, 2017 and, therefore, there was no error in the reasons as recorded by the Assessing Officer. Printed from counselvise.com ITA No.1074/Ahd/2025 Assessment Year: 2017-18 ITO vs. Harsha Asheshbhai Patel Page 4 of 7 6. Per contra, Shri Anil Kshatriya, the Ld. AR of the assessee strongly supported the order of the Ld. CIT(A). 7. We have considered the rival submissions. It is found that the Ld. CIT(A) has given the decision on the issue of reopening on the presumption that M/s. Kushal Limited and M/s. Kushal Tradelink Limited, were two separate entities. From the evidence brought on record by the Revenue, it is evident that the two entities are the same and the name of Kushal Tradelink Limited was changed to Kushal Limited w.e.f. 17.10.2017. Therefore, the reason as recorded by the Assessing Officer cannot be held as incorrect for this reason as the two names are synonymous. Further, the Ld. CIT(A) was also not correct in observing that there was no application of mind by the approving authority. From the comments as given by the JCIT Range-2(1), Ahmedabad, it is found that he had gone through the proposal of the Assessing Officer and only, thereafter, recorded his finding that it was a fit case for issue of notice under Section 148 of the Act. The approving authority is not required to record his own reasons as to how there was escapement of income. This responsibly is cast on the Assessing Officer and not on the approving authority. In view of these facts, the finding of the Ld. CIT(A) that the notice under Section 148 of the Act was invalid and void ab initio, can’t be held as correct. The Assessing Officer had recorded his reasons on the basis of information as available with him and we do not find any infirmity with the approval as accorded by the Range Head. Accordingly, the ground no.1 taken by the Revenue is allowed. 8. Ground nos.-2 &3 pertain to addition of Rs.44,01,695/- on account of bogus LTCG and addition of Rs.1,46,50,449/- in respect of STCG. As the facts pertaining to these two grounds are common, both the grounds Printed from counselvise.com ITA No.1074/Ahd/2025 Assessment Year: 2017-18 ITO vs. Harsha Asheshbhai Patel Page 5 of 7 are taken up together for adjudication. The Ld. Sr. DR submitted that the LTCG and STCG was derived by the assessee from trading in the scrip of M/s. Kushal Tradelink Limited, a penny stock company. From the details as available with the Assessing Officer, it was evident that the LTCG and STCG was derived by taking accommodation entries. He explained that the transactions in the Kushal Group scrips were utilised for allowing accommodation entries to the beneficiaries and the assessee was one such beneficiary. He, therefore, strongly supported the order of the Assessing Officer and contended that the Ld. CIT(A) was not correct in deleting the additions. 9. Per contra, Shri Anil Kshatriya, the Ld. AR of the assessee submitted that the assessee was a regular investor in shares and had purchased and sold shares of different companies viz. Hindustan Petroleum Corporation, Indian Oil Corporation, Biocon Limited, Melstar Information Technologies Ltd., Kushal Tradelink Limited, SBI, Motilal Oswal Fin. Services Ltd. etc. He explained that the shares of Kushal Tradelink Limited were transacted through the broker Wealth First Portfolio Managers Limited and the purchase and sale transactions were effected through de-mat account of the assessee. Further, the entire transactions of shares were duly disclosed in the Income Tax return filed by the assessee. He submitted that no evidence was brought on record by the Assessing Officer that the assessee had taken any accommodation entry in the trading of these shares. According to the Ld. AR, all the transactions in the shares of Kushal Tradelink Limited were part of normal business/investment activities of the assessee and, therefore, the Ld. CIT(A) had rightly deleted the addition. Printed from counselvise.com ITA No.1074/Ahd/2025 Assessment Year: 2017-18 ITO vs. Harsha Asheshbhai Patel Page 6 of 7 10. We have carefully considered the rival submissions and the material brought on record in the paper-book. It is found that the assessee had disclosed STCG of Rs.1,47,00,414/- in the return of income for the A.Y. 2017-18 which included STCG of Rs.1,46,50,449/- derived on trading of shares of Kushal Tradelink Limited. Further, LTCG of Rs.42,00,597/- was also disclosed in the return under the Schedule EI (i.e. Exempt Income). This LTCG was in respect of trading of shares of Kushal Tradelink Limited which was adjusted with LTCG loss in other transactions. It is thus found that the transaction as undertaken by the assessee in the shares of Kushal Tradelink Limited were duly disclosed in the return of income filed by the assessee. A copy of the de-mat account of the assessee has also been brought on record and it is found therefrom that the purchase and sale in the shares of Kushal Tradelink Limited were effected through de- mat account only. Thus the assessee had discharged its onus to establish that the transactions in shares in were not only genuine but that the transactions were also disclosed in the IT return and due tax was also paid on the gain derived thereon, as applicable. In the assessment order, the Assessing Officer has not brought any evidence on record to substantiate the allegation that the LTCG and STCG derived by the assessee were accommodation entries. When the assessee had already disclosed STCG of Rs.1,46,50,449/- in respect of transactions in the shares of Kushal Tradelink Limited in the return of income and paid tax thereon, this amount could not have been considered as accommodation entry. Regarding LTCG derived by the assessee also, no adverse material has been brought on record to treat this as an accommodation entry. In view of these facts, the Ld. CIT(A) had rightly deleted the additions made by the Assessing Officer in respect of LTCG and STCG derived in the transactions of Kushal Tradelink Limited. The order of the Ld. CIT(A) on Printed from counselvise.com ITA No.1074/Ahd/2025 Assessment Year: 2017-18 ITO vs. Harsha Asheshbhai Patel Page 7 of 7 this issue is, therefore, upheld and the grounds taken by the Revenue are dismissed. 11. Ground no.4 pertains to addition of Rs.9,52,607/- in respect of commission paid for obtaining accommodating entry. Considering the fact that the Revenue has been unable to bring on record any evidence in support of the accommodation entry allegedly taken by the assessee, the addition made in respect of commission income was deleted by the Ld. CIT(A). The decision of the Ld. CIT(A) on this issue is also upheld and the ground taken by the Revenue is dismissed. 12. The other grounds taken by the Revenue are general in nature and, hence, dismissed. 13. In the result, the appeal of the Revenue is partly allowed. Order pronounced in the open Court on this 12th August, 2025. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 12th August, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPYE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "