LALIT KUMAR JAIN,ALWAR V. ITO WARD,1(2), ALWAR

ITA 1126/JPR/2025

AI Insights

The case involves Shri Lalit Kumar Jain, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (CIT(A)/NFAC), which confirmed the AO's addition of Rs. 18,56,810 as unexplained money under section 69 of the Income Tax Act, 1961. The addition was based on allegations of bogus short-term capital gains from share transactions of Steel Exchange Limited, linked to a scheme of stock rigging and bogus entries. The CIT(A) dismissed the appeal ex-parte, noting the assessee's failure to provide credible evidence or comply with notices. The ITAT, while restoring the matter to the AO, highlighted the need for a fair opportunity for the assessee to present his case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777585 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 12-08-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: ROHAN SOGANI
• Keywords: Opportunity of being heard; Reassessment proceedings; Unexplained investment; Income from undisclosed sources; Principle of natural justice; Accommodation entries; Bogus
• Section: 147; 148; 69

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 1126/JPR/2025 fu/kZkj.k o\"kZ@Assessment Year : 2018-19 Shri Lalit Kumar Jain 3.8, Aravali Vihar, Alwar- 301001 (Raj) cuke Vs. The ITO Ward 1(2) Alwar LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABKPJ 1239 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Rohan Sogani, CA jktLo dh vksjls@Revenue by: Shri Gautam Singh Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 17/09/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 30 /09/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi[ for short CIT(A)] dated 06.06.2025 for the assessment year 2018-19 raising therein following grounds of appeal. ‘’1. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC (National Faceless Appeal Centre) has erred in not granting adequate opportunity to the assessee. The action of Id. CIT(A) /NFAC is illegal, unjustified, arbitrary and against the facts of case. Relief may please be granted by quashing the entire reassessment order as the same is passed against the principles of natural justice. Printed from counselvise.com 2 ITA NO.1126/JPR/2025 SHRI LALIT KUMAR JAIN VS ITO, WARD 1(2), ALWAR 2. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in confirming the action of Id. AO in reopening the case of the assesse u/s 147. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of case Relief may please be granted by quashing the assessment proceedings being illegal. 3. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in confirming the action of Id. AO in issuing notice u/s 148 without obtaining proper sanction u/s 151 The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the reassessment proceedings being without jurisdiction. 4 In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in confirming the action of ld. AO in making addition u/s 69 of Rs. 18,56,810/- being alleged unexplained money. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the fact of the case. Relief may please be granted by quashing the said addition of Rs 18,56,810/- 5. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in confirming the action of Id. AO in taking shelter of irrelevant considerations for coming to his prejudiced conclusion of treating the transaction of short term capital gain on sale of shares of steel exchange Ltd. as bogus. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the entire assessment order being based on irrelevant considerations as well as based on surmises and conjectures. 6. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in confirming the action of Id. AO in not providing relevant material used against the assesse for making additions of Rs. 18,56,810/- The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the principles of natural justice. Relief may please be granted by quashing the action of Id. CIT(A) and deleting the additions of Rs. 18,56,810/-.’’ 2.1 At the outset of the hearing of the appeal, it is noticed that the ld.CIT(A) passed an ex-parte order by dismissing the appeal of the assessee on the ground that the assessee failed to produce any credible Printed from counselvise.com 3 ITA NO.1126/JPR/2025 SHRI LALIT KUMAR JAIN VS ITO, WARD 1(2), ALWAR evidence to substantiate the genuineness of these transactions and also failed to comply with multiple notices during appellate proceedings and thus the ld. CIT(A) confirmed the addition of Rs.18,56,810/- u/s 69 of the Act made by the AO. The narrations so made by the ld.CIT(A) in his appeal order at para 6.2.1 to 7 are reproduced as under:- ‘’6.21 From the foregoing discussion, it is evident that the appellant has failed to provide any written submissions in support of the grounds of appeal. Consequently, keeping the appeal pending any further would serve no useful purpose. The absence of the appellant during the hearing could arise from various reasons, such as a lack of intent to prosecute the appeal, an inability to effectively participate in the appellate proceedings, or possibly an attempt to exploit procedural technicalities. However, the precise reasons for the appellant's non-attendance and non-submission remain known only to the appellant. In these circumstances, the Appellate Authority is vested with inherent powers to adjudicate the appeal based on the available records. While these powers include the discretion to proceed ex-parte, they also impose an obligation to ensure that the principles of natural justice are upheld, and the appellant is not unfairly deprived of an opportunity to present their case. 6.22 Considering the above discussion and facts, and by respectfully following the view taken in the cases cited supra, it can be safely concluded that the appellant is not interested in pursuing the appeal. Therefore, keeping the appeal pending any further would serve no useful purpose. 6.33 The appellant has challenged the addition of Rs.18,56,810/- made by the Assessing Officer under section 69 of the Income Tax Act, 1961, on account of unexplained investment through alleged bogus shares transactions in STEEL EXCHANGE LIMITED. The AO issued a show cause notice dated 09.03.2023, seeking explanation for the said addition. Despite the appellant's reply dated 14.03.2023, the AO found that essential documents such as broker's ledger, bank statements, contract notes, and relevant responses were not furnished. Investigations by SEBI and the Investigation, Wing, Kolkata, established that the transactions Printed from counselvise.com 4 ITA NO.1126/JPR/2025 SHRI LALIT KUMAR JAIN VS ITO, WARD 1(2), ALWAR were sham in nature , executed to convert unaccounted cash into purported legitimate gains through accommodation entries involving hawala operators and entry providers. The appellant failed to produce any credible evidence to substantiate the genuineness of these transactions and also failed to comply with multiple notices during appellate proceedings. Considering the material on record and the appellant's failure to discharge the onus under section 69, the addition of Rs. 18,56,810/- made by the AO is upheld, and no infirmity is found in the assessment order. Accordingly, the appeal stands dismissed. 7. In the result, the appeal is dismissed.’’ 2.2 During the course of hearing, the ld. AR of assessee mainly submitted that this case may be restored to the file of the AO for proper examination of the facts and to allow the assessee a fair opportunity to present his case as the assessee was ex-parte before the AO and ld. CIT(A) 2.3 On the other hand, the ld.DR supported the order of the ld. CIT(A). 2.4 Brief facts of the case are that the assessee Shri Lalit Kumar Jain is an individual who did not file his Income Tax Return for the assessment year 2018-19. The AO as per information available with the Department noted that the assessee was a beneficiary of accommodation entries in the form of Bogus Short Term Capital Gain in the guise of share transaction of Scrip STEEL EXCHANGE LIMITED by the syndicate of Shri Naresh Jain and associates. Since the assessee had not furnished his return of income Printed from counselvise.com 5 ITA NO.1126/JPR/2025 SHRI LALIT KUMAR JAIN VS ITO, WARD 1(2), ALWAR for the year 2018-19, the amount involved of Rs.18,56,810/- was not taxed in his hand. The Department after obtaining prior approval opened this case of assessee u/s 147 of the Act and a notice u/s 148 of the Act was issued on 31-03-2022. In response to a notice u/s 148, the assessee filed his return on 06-06-2022 declaring total income of Rs.2,73,410/-. It is noted by the AO that during the assessment proceedings, the assessee denied any link to Naresh Jain’s Syndicate but admitted trading in the said scrip and declared a capital gain of Rs.40,842/- . However, no evidence was provided to refute the Department’s claim that the share transaction was part of a broader scheme of stock rigging and bogus entries operated by Shri Naresh Jain who through a SEBI investigation, was found guilty of facilitating bogus LTCG via penny stock. The AO observed that despite opportunity, the assessee failed to provide corroborative documents like broker ledger, bank statements or detailed contract notes and the AO noted that the shares were traded in abnormally high volumes and prices unjustified by company fundamentals. Thus the AO concluded that the assessee routed unaccounted income through a pre-arranged trading network and thus he made addition of Rs.18,56,810/- u/s 69 of the Act by treating this amount as unexplained money. The relevant observation of the AO at page 50 of the assessment order is reproduced as under:- Printed from counselvise.com 6 ITA NO.1126/JPR/2025 SHRI LALIT KUMAR JAIN VS ITO, WARD 1(2), ALWAR ‘’From the facts and circumstances, it is very much clear and evident that the assessee had brought his own money out of his undisclosed source of income in guise of shares of Scrip STEEL EXCHANGE LIMITED. Accordingly, on the basis of the facts and material available in record, the above mentioned transactions of amount involved or Rs.18,56,810/- as beneficiary of accommodation entries in the form of Bogus short term Gain in guise of share transaction of Scrip STEEL EXCHANGE LIMITED remains unverifiable. Hence, Rs.18,56,810/- is treated as assessee’s unexplained money u/s 69 of the Income Tax Act for the F.Y. 2017-18 relevant to assessment year 2018-19 and penalty proceedings under section 271AAC is being initiated.’’ In first appeal, the ld.CIT(A) has confirmed the action of the AO as the assessee failed to furnish any reply/ documentary evidence in respect of its appeal filed before him despite providing ample opportunities to the assessee. Since it is an admitted fact that the assessee is ex-parte before the AO and also before the ld. CIT(A). Therefore, he could not put forth his defence. It was the bounded duty of the assessee to appear before the statutory authorities as and when called for. It is noticed that various opportunities were provided to the assessee for settling the issue but the assessee remained lethargic and unserious in pursuing his case. However, we are of the view that lis between the parties has to be decided on merits so that nobody’s rights could be scuttled down without providing opportunity of being heard to the assessee. Hence, the matter is restored to the file of the AO to decide it afresh by providing one more opportunity of hearing, however, the assessee will not seek any adjournment on frivolous Printed from counselvise.com 7 ITA NO.1126/JPR/2025 SHRI LALIT KUMAR JAIN VS ITO, WARD 1(2), ALWAR ground and remain cooperative during the course of proceedings. Thus the appeal of the assessee is allowed for statistical purposes. 2.5 Before parting, we may make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by AO independently in accordance with law. 3.0 In the result, the appeal of the assessee is allowed for statistical purposes Order pronounced in the open court on 30 /09/2025. Sd/- Sd/- ¼jkBksM deys'kt;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;dlnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 30/09/2025 *Mishra vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Lalit Kumar Jain, Alwar 2. izR;FkhZ@ The Respondent- The ITO, Ward 1(2), Alwar 3. vk;djvk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZQkbZy@ Guard File (ITA No. 1126/JPR/2025) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar Printed from counselvise.com "