KHUSHBOO AMIT BHAYANI,MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 27(2), MUMBAI, NAVI MUMBAI

ITA 100/MUM/2025

AI Insights

The case involves an appeal by Khushboo Amit Bhayani against the order of the Commissioner of Income Tax (Appeals), which confirmed additions made under section 68 of the Income Tax Act, 1961, treating certain credits as unexplained income. The appellant contested the addition of Rs 25,74,331 as unexplained income and the disallowance of long-term capital gains (LTCG). The Tribunal found that the CIT(A) had dismissed the appeal ex parte without proper consideration of the merits or granting an adjournment as requested by the appellant. The Tribunal referenced several precedents emphasizing the need for a fair hearing and proper adjudication on the merits, leading to the decision to set aside the CIT(A)'s order and remand the case for a fresh hearing.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33397 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2013-2014
• Other Referred Cases: CIT v/s Mukesh Ratilal Marolia, Farrah Marker v/s ITO, ITO-24(3)(1) V/s Mr. Indravadan Jain (HUF)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN UNAVEKAR
• Assessee Lawyers: A.C. JHAVERI
• Keywords: Set aside; Unexplained cash credit; Capital receipt; Capital Gains; Opportunity of cross examination; Bogus
• Section: 250; 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “K(SMC)” BENCH, MUMBAI BEFORE SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.100/MUM/2025 (Assessment Year : 2013–14) KHUSHBOO AMIT BHAYANI, A/405, Siddhivinayak Plaza CHS Ltd., Simpoli Link, Road Chikuwadi, Borivali (West), Mumbai, Maharashtra – 400092. PAN: AVLPB 8903F ……………. Appellant v/s ACIT, CIRCLE-27(2), Room No. 419, 4th Floor, Tower No. 6, Vashi Railway Station Complex, Navi Mumbai - 400703 Maharashtra ……………. Respondent Assessee by : Shri A.C. Jhaveri Revenue by : Shri Kiran Unavekar, Sr. DR Date of Hearing – 13/02/2025 Date of Order – 14/02/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 09/11/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2013-14. 2. In this appeal, the assessee has raised the following grounds: - GOA No.1 Addition u/s 68 as Unexplained Income for Rs 25,74,331/-: ITA No.100-Mum-2025 (A.Y. 2013-14) 2 1.1 The Ld. CIT(A) not justified in confirming the addition made by the Ld. ITO u/s 68 which was total explained income. Section 68 is reproduced as under: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: 1.2 The Ld. CIT(A) not justified in treating the said credit as unidentified credit as the same credit has been treated as capital receipts on sale of securities and the same is exempt under Long Term Capital Gains as the shares have been sold after 1 year from the date of purchase. 1.3 The Ld. CIT(A) not considered the fact the despite asking the Ld. ITO did not give any opportunity of cross examination of Mr Jignesh Shah on whose statement the addition have been made in this order. Hence confirming the said addition is unjustified and unwarrented. 1.4 The Ld. CIT(A) not given a proper opportunity in hearing before dismissing the said appeal. The last notice was received on 22/10/2024 fixing the hearing on 06/11/2024 whereby the appellant had requested for an adjournment of 15 days. The said adjournment request was not considered by the Ld. CIT(A) and the said appeal was dismissed on 09.11.2024. GOA No. 2: Reasons for disallowance of L.T.C.G. 1.1. The Ld. CIT(A) not considered the facts that holding of shares in demat accounts are for more than 12 (Twelve) months of the Assessee. 1.2 The Ld. CIT(A) not justified in accepting the addition solely on the basis of general information received from Kolkata Investigation Directorate. There is no mention of assesse's transaction in the information. There is no information /evidence / statement of directors of the companies whose stocks were purchased and long term capital gain earned. 1.3 The Ld. CIT(A) not considered the fact that the Ld. ITO neither taken statement on oath of the assesse nor done any independent enquiry nor issued any show cause for the addition. 1.4 The Id. CIT(A) not considered the fact that the Ld. ITO has not proved the cash trail in specific to prove the L.T.C.G of the assessee is bogus. 1.5 The Ld. CIT(A) not considered the fact that the Ld. ITO disallowed the L.T.C.G of the assesses on the basis of general information and on the basis of ITA No.100-Mum-2025 (A.Y. 2013-14) 3 his own imagination estimation, presumption assumptions, suspicion, conjecture which is unjustified and unwarranted. 1.6 The Ld. CIT(A) not considered the fact that prices of any particular share is not in control of the assesse / genuine investor. 1.7 The Ld. CIT(A) not considered the facts that purchases & sale parties are in existence on the date of transactions. The preferential issue of the said company was duly approved by SEBI. Purchase consideration was paid by account payee cheques. The sale consideration also received through account payee cheques. 1.8 The Ld. CIT(A) not considered the facts that sale of shares are on-line. Assessee doesn't have direct nexus with buyer. All sales are through BSE. The sale of shares was subject to levy of S.T.T. 1.9 The Ld. CIT(A) not considered the facts that prices of shares are neither controlled by assessee nor have any relation with actual working of the company in many case & fluctuation in prices mainly on the basis of rumors & news in media in connection with the future prospect of the company. 1.10 We relied on following judgment of higher forum: CIT v/s Mukesh Ratilal Marolia (Bombay High Court) S.10(38)/69: Fact that a small amount invested in \"penny\" stocks gave rise to huge capital gains in a short period does not mean that the transaction is \"bogus\" if the documentation and evidences cannot be faulted. Farrah Marker v/s ITO (ITAT Mumbai) S.10(38)/68: Long-Term capital gains on sale of \"penny\" stocks cannot be treated as bogus & unexplained cash credit if the documentation is in order & there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity. ITAT Mumbai, ITO-24(3)(1) V/s Mr. Indravadan Jain (HUF) GOA No. 3 Interest U/s 234A, 234B, 234C 3.1 The ld. CIT(A) not justified in confirming the levy of interest u/s 234A, 234B, 234C of Income Tax Act, 1961 on taxes. GOA No. 4: We reserve our right to all, amend, alter, rectify anything stated herein above or anything stated herein after.” 3. During the hearing, the learned Authorised Representative (“learned AR”), at the outset, submitted that the learned CIT(A) vide impugned order dismissed the appeal filed by the assessee without giving reasonable ITA No.100-Mum-2025 (A.Y. 2013-14) 4 opportunity of hearing to the assessee. The learned AR submitted that on 22/10/2024 the learned CIT(A) issued a notice directing the assessee to file written submissions on or before 06/11/2024 in support of the grounds of appeal raised by the assessee along with the documentary evidence. In response thereto, the assessee filed an application seeking an adjournment of 15 days to compile the details as required. It is submitted that however on 09/11/2024 the learned CIT(A) dismissed the appeal filed by the assessee and upheld the addition made by the Assessing Officer. 4. Having considered the submissions and perused the material available on record, it is evident that the learned CIT(A) has passed the order ex parte. Now in appeal before us, the assessee is duly represented by the learned AR and wishes to pursue the litigation against the addition made by the AO. During the hearing, the learned AR submitted that the learned CIT(A) dismissed the appeal filed by the assessee ex parte without granting an adjournment as sought by the assessee. In view of the above, we are of the considered opinion that in the interest of justice, the assessee be granted one more opportunity to represent its case on merits before the learned CIT(A). We further find that the learned CIT(A) merely on the basis of non-compliance with notices, dismissed the appeal filed by the assessee without adjudicating the grounds raised by the assessee on merits, as required under section 250(6) of the Act. We find that in CIT v/s Premkumar Arjundas Luthra (HUF), reported in [2016] 69 taxmann.com 407 (Bombay), the Hon’ble Jurisdictional High Court held that Commissioner (Appeals) cannot dismiss the appeal on account of non-prosecution of appeal by the assessee. Consequently, we deem ITA No.100-Mum-2025 (A.Y. 2013-14) 5 it fit and proper to set aside the impugned order and restore the matter to the file of the learned CIT(A) for de novo adjudication of the appeal on merits. We further direct that no order shall be passed without affording reasonable opportunity of hearing to the parties. The assessee is directed to appear before the learned CIT(A) on all the hearing dates as may be fixed without any default. As the matter is being restored to the file of the learned CIT(A) for adjudication on merits, the other grievances raised by the assessee in the present appeal do not call for adjudication at this stage. Accordingly, grounds raised by the assessee are allowed for statistical purposes. 5. In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 14/02/2025 Sd/- Sd/- -GIRISH AGRAWAL ACCOUNTANT MEMBER SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 14/02/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Assistant Registrar ITAT, Mumbai "