NEETA GANPATBHAI DABHI,AHMEDABAD V. THE PCIT, AHMEDABAD-1, AHMEDABAD

ITA 1158/AHD/2024

AI Insights

The case involves an appeal by Neeta Ganpatbhai Dabhi against the order of the Principal Commissioner of Income Tax (PCIT), Ahmedabad-1, which was passed under section 263 of the Income Tax Act, 1961. The PCIT's order was based on the grounds that the original assessment order was erroneous and prejudicial to the interest of the revenue as it did not include an addition of Rs. 21,26,201 concerning accommodation entries linked to the sale of shares of penny stock companies. The Tribunal examined whether the issues for which the case was reopened were adequately addressed by the Assessing Officer (AO) during the reassessment proceedings. The Tribunal concluded that the AO had indeed examined these issues thoroughly and found no basis for the additions, leading to the cancellation of the PCIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25316 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A. P. SINGH
• Assessee Lawyers: ASTHA MANIAR
• Keywords: Set aside; Accommodation entries; Revision of order; Bogus
• Section: 263

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 1158/Ahd/2024 (Ǔनधा[रण वष[ / Assessment Year : 2017-18) Neeta Ganpatbhai Dabhi 1431/9, Ganesh No Delo, Dariyapur Gate, Shahibaugh, Ahmedabad - 380004 बनाम/ Vs. The Pr. CIT Ahmedabad-1 Aaykar Bhawan, Anandnagar – Prahladnagar Road, Ahmedabad - 380015 èथायी लेखा सं./जीआइआर सं./PAN/GIR No. : BTLPD3342P (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Ms. Astha Maniar, A.R. Ĥ×यथȸ कȧ ओर से/Respondent by : Shri A. P. Singh, CIT. DR Date of Hearing 19/12/2024 Date of Pronouncement 03/01/2025 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the assessee against the order under section 263 of the Income Tax Act, 1961 (in short ‘the Act’) dated 30.03.2024 passed by the Principal Commissioner of Income Tax, Ahmedabad-1, (in short ‘the PCIT’), for the A.Y.2017-18. 2. The brief facts of the case are that the assessee had filed return of income for A.Y. 2017-18 on 31.03.2018 declaring total income of Rs.3,97,680/-. The case was reopened on the basis of information about accommodation entries obtained by the ITA No. 1158/Ahd/2024 [Neeta Ganpatbhai Dabhi Vs. PCIT] A.Y. 2017-18 - 2 – assessee from an entry operator Shri Jignesh Shah and group. Thereafter, the assessment was completed u/s.147 r.w.s. 144B of the Act on 30.03.2022 at total income of Rs.3,97,680/- as per return of income. The case record was called for and examined by the Ld. PCIT who noted that the AO did not make addition of Rs.21,26,201/- on account of accommodation entries, for which the case was reopened u/s.147 of the Act. He, therefore, held that the order of the AO was erroneous and prejudicial to the interest of the revenue and, therefore, passed the impugned order u/s.263 of the Act. 3. Aggrieved with the order of the Ld. PCIT, the assessee is in appeal before us. The following grounds have been taken by the assessee in this appeal: “1. The Ld. PCIT has grossly erred in law and on facts in assuming jurisdiction u/s 263 of the Act on the erroneous ground that the assessment order dated 30.03.2022 is erroneous in so far as it is prejudicial to the interest of the revenue. 2. The Ld PCIT erred in law and on facts in passing the impugned order in the particular premise that the subject matter was specifically inquired at length by the AO and judicious decision was taken by him. 3. The Ld PCIT erred in law and on facts in recording his finding that the assessment order was passed without making proper examination or verification and Ignoring detailed submission of the Appellant showing that the AO indeed made all relevant inquiries in the matter and therefore, his decision could not be interfered while acting u/s 263 of the Act. 4. The twin conditions i.e. the assessment order being erroneous as well as prejudicial to the interest of revenue not being satisfied, the Ld PCIT erred in passing the impugned order and the same deserves to be set aside. 5. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” ITA No. 1158/Ahd/2024 [Neeta Ganpatbhai Dabhi Vs. PCIT] A.Y. 2017-18 - 3 – 4. Ms. Astha Maniar, Ld. AR appearing for the assessee explained that the case of the assessee was reopened u/s.147 of the Act to examine the sale of shares of penny stock companies to the extent of Rs.21,26,201/-. She explained that the issue on which the case was reopened was duly examined by the AO in the course of re-assessment proceeding and considering the explanation of the assessee no addition was made. Thus, the ground on which the case was reopened was ultimately dropped by the AO. The Ld. AR submitted that when the issue, on which the case was reopened by the AO, was duly examined in the course of assessment proceedings, the Ld. PCIT was not correct in holding that the order of the AO was erroneous and prejudicial to the interest of the revenue. 5. Per contra, Shri A. P. Singh, the Ld. CIT. DR. supported the order of the Ld. PCIT. 6. We have carefully considered the rival submissions. A copy of the reasons recorded by the AO for reopening of the case has been brought on record in the paper book filed by the assessee. It is found that the case was reopened to examine the accommodation entry of Rs.21,26,201/- obtained by the assessee in respect of sale of shares of penny stock companies. From the reason as recorded by the AO, it is found that the assessee had entered into the following transactions of penny stock: Name of Penny stock No. of shares Amount of sale shares (in Rs.) Financial Year Purple Entertainment Ltd. 80000 1600000 2016-17 Shivansh Finsev Ltd. 19315 526201 2016-17 ITA No. 1158/Ahd/2024 [Neeta Ganpatbhai Dabhi Vs. PCIT] A.Y. 2017-18 - 4 – Total 2126201 In the course of assessment proceedings, the assessee had duly explained these transactions. It was submitted that the shares of Purple Entertainment Ltd. were purchased during the year but no sale of these shares were made and that all the shares of this company were appearing in the demat account of the assessee. Under the facts and circumstances, the question of obtaining any accommodation entry in respect of sale of the shares of Purple Entertainment Ltd did not arise as no capital gain was derived on sale of this share. As regarding shares of Shivansh Finsey Ltd., it was explained that out of 19315 shares purchased by the assessee, only 13079 shares were sold on different dates on which the assessee had incurred short term capital loss of Rs.1,25,396/- and the balance shares were part of closing stock. The assessee had, therefore, explained that the question of obtaining any bogus capital gain on sale of shares of Shivansh Finsey Ltd. also did not arise as the assessee had incurred short term capital loss of Rs.1,25,396/- in these transactions. Considering the explanation of the assessee, no addition was made by the AO and the return of income was accepted. When the matter on which the case was reopened was duly examined by the AO in the course of assessment proceeding, the stand of the Ld. PCIT that the order of the AO was erroneous and prejudicial at the interest of the revenue cannot be held as correct. The Ld. PCIT has rather held that the AO did not make addition of Rs.21,26,201/- on account of accommodation entries and, therefore, the order of the AO was erroneous and prejudicial to the interest of the revenue. Merely because the AO did not make addition, the order cannot be held ITA No. 1158/Ahd/2024 [Neeta Ganpatbhai Dabhi Vs. PCIT] A.Y. 2017-18 - 5 – as erroneous and prejudicial to the interest of the revenue. The AO didn’t make the addition for the reason that no addition was called for in the facts and circumstances of the case. What is relevant is to consider whether the issue on which the case was reopened was duly and properly examined by the AO in the course of re-assessment proceeding or not. As already mentioned earlier, the AO had made enquiries and duly verified the issues on which the case was reopened in this case. In fact, the reason for which the case was reopened was found to be incorrect and, therefore, the AO did not make any addition. Under the circumstances, the order of the AO cannot be held to be erroneous and prejudicial to the interest of the revenue. Therefore, the order u/s. 263 of the Act passed by the Ld. PCIT is cancelled. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 03/01/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated /01/2025 S. K. SINHA True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned CIT 4. आयकर आयुÈत(अपील) / The CIT(A)- 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad "