NIRMALA KUMAR GARASIYA,MUMBAI V. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI

ITA 1897/MUM/2025

AI Insights

The case involves an appeal by Nirmala Kumar Garasiya against the Income Tax Officer (ITO), ward 42(1)(3), concerning the assessment year 2017-18. The appellant contested the reopening of her assessment and the subsequent addition of Rs. 1.37 crore under section 69A of the Income Tax Act, which was based on the entire sale consideration of shares deemed as penny stocks. The appellant argued that the reopening was invalid as the AO did not obtain necessary permission and that the notices were sent to an incorrect email address. The CIT(A) upheld the AO's decision without adequately addressing the appellant's detailed submissions. The ITAT found that the principles of natural justice were not followed, leading to the decision to remand the case for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669175 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: KARAN VAKHARIA
• Keywords: Reopening of assessment; Principle of natural justice; Penny stocks
• Section: 144

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “B” Bench, Mumbai. Before Smt. Benna Pillai (JM) & Shri Omkareshwar Chidara (AM) ITA No. 1897/MUM/2025 (Assessment Year : 2017-18) Nirmala Kumar Garasiya Sanju Mistry Chawl Devlapada, Tata Power Road, Boriwali East Mumbai-400 066. Vs. ITO, ward 42(1)(3) Kautilya Bhavan Bandara Kurla Complex, Bandra E Mumbai-400 051. PAN : AIDPG002F Appellant Respondent Assessee by : Shri Karan Vakharia Revenue by : Shri Leyaqat Ali Aafaqui Date of Hearing : 30/04/2025 Date of pronouncement : 26/06/2025 O R D E R Per Omkareshwar Chidara (AM) :- In this above cited appeal, the appellant raised two main grounds – the reopening of assessment is invalid and on merits also, the Ld. AO is incorrect as he added entire sale consideration of shares instead of profit of sale of shares for capital gain purposes even admitting that it is a penny stock which is actually not so. The case of appellant is that the profit made in this transaction is already offered in Return of Income and hence the reopening of case as well as additions are incorrect in the eyes of law. 2. From the assessment order, it is observed that the appellant did not appear before the Ld. AO despite several e-notices were sent to a particular e-mail. Since there is no response from appellant, an elaborate order was passed making an addition of Rs. 1.37 crore under section 69A of the I.T. Act. The appellant’s contention is that the e-mail to which these notices were sent was wrongly tagged to somebody by Income Tax Portal. Hence, the Ld. AO made addition under section 144 of the Act. The contention of Ld. AR of the appellant is that the Ld. AO made a huge addition of Rs. 1.37 crore Nirmala Kumar Garasiya 2 relating to all sales of all shares without any basis. The Ld. CIT(A) also without going into the merits of case and without properly perusing the written submissions, confirmed the addition. 3. During the hearing proceedings before the ITAT, Ld. DR relied on the orders of lower authorities. The Ld. AR of the appellant made the following submissions :- a) The reopening of assessment is invalid as the Ld. AO did not obtain permission from concerned authority before reopening the assessment. b) The hearing notices were not sent to the correct e-mail of appellant by the Ld. AO. c) Based on some report of DDIT(Inv) that ACI Infocom Ltd. as a penny stock, the Ld. AO presumed that all stocks held by appellant are penny stocks, including Adani Group of Companies, and the entire sale consideration of all stocks was added erroneously under section 69A of the Act. 4. Heard both sides. From the assessment order/Ld. CIT(A), it is not known where from the Ld. AO took approval for reopening the assessment and hence it cannot be adjudicated by the Bench. Coming to merits of the case, the Ld. AO made huge addition of Rs. 1.37 crore under section 69A of the Act as there was no response to the show-cause notice issued by Ld. AO. As rebuttal, the Ld. AR of the appellant says the notices were not received in appellant’s mail and hence could not respond. Ld. CIT(A) did not consider the detailed written submissions made and confirmed the addition made by Ld. AO. After perusing the detailed submissions made by Ld. AR of appellant, the Bench decides that principles of natural justice i.e., right to hearing was not given to appellant by Ld. AO. It is very unfortunate that a senior officer like appellate commissioner is not taking into consideration all the submissions while passing an appeal order. From the order of Ld. CIT(A), it is observed that various submissions made by Ld. AR of the appellant that entire sale consideration of all shares, apart from presumed penny stock, Nirmala Kumar Garasiya 3 could not be added by Ld. AO, was not taken into consideration while confirming the addition. 5. Since the assessment was completed under section 144 of the Act and appellant was not given proper opportunity to lead his case before Ld. AO and also because Ld. CIT(A) has not properly looked into various submissions of appellant, the Bench decides to send the matter back to the file of Ld. AO to decide the matter afresh. The Ld. AO is directed to apply his mind and take into consideration all the submissions of appellant and pass a speaking order as per law. 6. The appeal of appellant is allowed for statistical purposes. Order pronounced in the open Court on 26/06/2025. Sd/- Sd/- (BEENA PILLAI) (OMKARESHWAR CHIDARA) JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai PS "