MOHAMEDISTIYAK MOHAMEDIQBAL PATEL,SURAT V. INCOME TAX OFFICER, WARD 1(3)(7), SURAT

ITA 752/SRT/2024

AI Insights

The case involves Mohamedistiyak Mohamediqbal Patel, the appellant, who contested the addition of Rs.48,78,356 to his income as unexplained investment in shares of M/s Comfort Fincap Ltd., a penny stock. The addition was initially made by the Assessing Officer (AO) based on information from the Investigation Wing, Kolkata, and was upheld by the CIT(A). The appellant argued that the actual transactions involved much smaller amounts and were conducted on the same day, resulting in minimal short-term capital gains, which were duly reported. The Tribunal, after reviewing the submissions and the lack of specific evidence against the appellant's claims, decided in favor of the appellant, highlighting the need for concrete evidence in tax assessments.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473282 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-11-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 10-07-2024
• Other Referred Cases: Shabanabibi Mohammedistiyak Patel
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MINAL KAMBLE
• Assessee Lawyers: P. M. JAGASHETH
• Keywords: Set aside; Unexplained investment; Search and seizure
• Section: 250; 132; 274

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.752/SRT/2024 Assessment Year: (2014-15) (Physical Hearing) Mohamedistiyak Mohamediqbal Patel, 8/190, Subedar Street Rander, Surat - 395005 Vs. The ITO, Ward -1(3)(7), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: ALKPP6043R (Appellant) (Respondent) Appellant by Shri P. M. Jagasheth, CA Respondent by Shri Minal Kamble, Sr. DR Date of Hearing 05/11/2024 Date of Pronouncement 28/11/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 17.05.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2014-15. 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.48,78,356/ on account of alleged unexplained investment. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in the assessee has purchased some shares of \"M/s Comfort Fincap Ltd.\" amounting to Rs. 63,239.45 and sold them at Rs. 66,446.52 and made a Short-Term Capital Gain/(Loss) amounting to Rs. 3,207.07 during A.Υ. 2014-15. 2 ITA No752/SRT/2024/AY.2014-15 Mohamedistiyak Mohamediqbal Patel 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in not considered the Capital Gain as above even after submission of documents relating to capital gain. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in not considered the transaction as genuine not considered the documents submitted. The learned AO has not given any data relating to offline transaction in shares on which he has relied. 5. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in initiating penalty u/s. 274 r.w.s 271(1)(c) of the income tax act, 1961. 6. Appellant craves leave add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. Brief facts of the case are that assessee filed return of income for AY.2014-15 on 21.03.2016, declaring total income at Rs.2,20,550/-. The AO has discussed about the search and seizure action u/s 132 of the Act conducted by the Investigation Wing, Kolkata where accommodation entris of long-term capital gain (LTCG) and short-term capital gain (STCG) were unearthed. The AO discussed modus operandi in para 4 of assessment order. At para 4.2, he has stated that the assessee had purchased shares of M/s Comfort Fincap Ltd. of Rs.48,78,356/- though online/offline mode. He issued show cause as to why the above amount should not be added to the total income of the assessee. The reply of assessee is at para 4.3 wherein it was stated that there are five instances of purchase and sale of the above shares on the same day and the total purchase value of purchases was Rs.63,239.49/- and total sale value was Rs.66,446.52/-. The assessee earned STCG of Rs.3,207/- only. This explanation was not accepted by the AO. At para 4.5, he has stated that as per information 3 ITA No752/SRT/2024/AY.2014-15 Mohamedistiyak Mohamediqbal Patel from Investigation Wing, Kolkata, the assessee had purchased total value of share of Rs.48,78,356/- in the above-mentioned penny stock company. He added the above amount has unexplained investment to the total income of assessee. 4. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The CIT(A) at para 5.3, stated that appellant was provided many opportunities to explain nature and source of investments made for purchase of shares of the impugned penny stock namely, M/s Comfort Fincap Ltd. The appellant’s claim that total value of purchase was only Rs.63,239/- was not accepted by CIT(A). He stated that as per information from Investigation Wing, Kolkata, the total purchase value was Rs.48,78,356/-. He confirmed the addition made by AO. 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Learned Authorized Representative (Ld. AR) has filed a paper book and enclosed submission made to the CIT(A). He submitted that the appellant had produced all information including Demat account, contract notes etc. to substantiate appellant’s claim, which was not accepted by the AO without giving any valid reasons and without confronting assessee about information of the Investigation Wing. He submitted that all purchase and sales were same day purchase and sale and total profit of Rs.3,207/- was offered to tax. He relied on the decision in case of Shabanabibi Mohammedistiyak Patel where the CIT(A) in the order u/s 250 of the Act for AY.2014-15 has allowed relief to the said assessee. 4 ITA No752/SRT/2024/AY.2014-15 Mohamedistiyak Mohamediqbal Patel 6. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) of the revenue supported the order of lower authorities. 7. We have heard both the parties and perused the materials available on record. We have also carefully perused the appellate order in case of Shabanabibi Mohammedistiyak Patel (supra) where the appeal of the said assessee was allowed. In the present appeal, the addition was made by AO and confirmed by CIT(A) on the ground that assessee had made investment of Rs.48,78,356/- in the shares of M/s Comfort Fincap Ltd., which is a penny stock. The information in this regard was received from Investigation Wing, Kolkata. The assessee in his reply before AO has submitted that he had made total purchase of Rs.63,239/- on five occasions between 17.04.2013 to 11.05.2013 and sold the shares on the same day of purchase and received total consideration of Rs.66,446/-. The profit of Rs.3,207/- was offered for tax. We find that both sale and purchase were made on the same day. The AO as well as the CIT(A) have not given any reason as to why explanation of the assessee is not acceptable. They have relied on information from Investigation Wing, but the same has not been discussed in either of the orders. Content of the report of the Investigation Wing pertaining to the appellant has neither been discussed in the orders of lower authorities nor it was given to assessee for his rebuttal and explanation. The appellant has claimed that he has not made any investment in the above penny stock and he had undertaken only daily trading of very nominal amount and the profit earned thereon has been offered for tax. The appellant also submitted that he has also not earned any LTCG and claimed 5 ITA No752/SRT/2024/AY.2014-15 Mohamedistiyak Mohamediqbal Patel exemption u/s 10(38) of the Act. After considering the facts of the case, as discussed above, we do not find any merit in the addition made by the AO because such conclusion is not based on any specific information and evidence in respect of the assessee. On the other hand, claim of the assessee has not been rebutted by the AO by bringing any positive evidence or information. Hence, the addition is not liable to be sustained. The order of CIT(A) is, accordingly, set aside and AO is directed to delete the addition of unexplained investment of Rs.48,48,356/-. The ground is allowed. 8. Since we have deleted the addition made by the AO, the other grounds are only of academic in nature and do not require adjudication. 9. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 28/11/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 28/11/2024 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "