PRINCIPAL COMMISSIONER OF INCOME TAX-1 V. SHRI ARNAV GOYAL

ITA/14/2024

AI Insights

The case revolves around an appeal by the Principal Commissioner of Income Tax against the decision of the Income Tax Appellate Tribunal, which had favored the respondent, Shri Arnav Goyal. The dispute centered on the additions made by the Assessing Officer regarding alleged bogus long-term capital gains and undisclosed expenditures related to commissions for acquiring accommodation entries. The Tribunal's decision to delete these additions was based on the evidence provided by the respondent, which included proper documentation of the transactions and the use of a Demat account for the trading activities. The Tribunal also noted the lack of cross-examination on the statements used against the respondent, rendering them inadmissible as evidence.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 736591 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 19-02-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: ANUROOP SINGHI; ADITYA KHANDELWAL
• Keywords: Accommodation entry; Bogus short term capital gain; Long-term capital gain exemption; Synchronized trading violation
• Section: 68; 69C; 260A; 10(38)

Judgement Text

"[2024:RJ-JP:8447-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 14/2024 Principal Commissioner Of Income Tax-1, Income Tax Department, New Central Revenue Building, Statue Cirlce , Jaipur. ----Appellant Versus Shri Arnav Goyal, 141, Vidyut Nagar-A, Prince Road, Ajmer Road, Jaipur. ----Respondent For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Khandelwal For Respondent(s) : HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MRS. JUSTICE SHUBHA MEHTA Order 19/02/2024 AVNEESH JHINGAN,J (ORAL):- 1. This appeal under Section 260A of Income Tax Act is filed against the order dated 03.04.2023 passed by Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short ‘Tribunal’) allowing the appeal of the respondent. 2. Following substantial questions of law have been proposed:- “(i)Whether the Tribunal was justified in deleting the addition of Rs.31,70,080/- made by the AO u/s 68 of the I.T. Act, 1961 on account of bogus short Term Capital and the Tribunal has also in ignorance of report of SEBI and SIT? [2024:RJ-JP:8447-DB] (2 of 4) [ITA-14/2024] (ii)Whether the Tribunal was justified in deleting the addition of Rs.63,402/- made by the Assessing Officer u/s 69C of the I.T. Act, on account of commission paid for acquiring accommodation entries? (iii) Whether the Tribunal was justified in holding that the claim of long term capital gain of exemption u/s 10(38) of IT Act do not suffer from infirmities and cannot be held as bogus ignoring that the impugned transaction was manipulative/deceptive device to create profit/loss? (iv) Whether the Tribunal was justified in deleting the addition made by the A.O. on account of commission paid for acquiring accommodation entry ignoring that such type of synchronized trading is violation of transparent norms of trading in securities?” 3. The brief facts of the case are that the respondent for assessment year 2015-2016 filed an income tax return declaring income of Rs.5,48,200/-. The case was taken up in scrutiny and vide order dated 21.12.2017 an addition of Rs.31,70,080/- was made on account of bogus long term capital gain on sale of shares of M/s. Kappac Pharma Limited (for short ‘company’). Further addition of Rs.63,402/- was made on account of undisclosed expenditure towards payment of commission for sale of the shares of company. The respondent was unsuccessful in appeal filed before the Commissioner Income Tax (Appeals). The Tribunal vide order dated 03.04.2023 allowed the appeal of the respondent and deleted the additions. Hence the present appeal. [2024:RJ-JP:8447-DB] (3 of 4) [ITA-14/2024] 4. Learned counsel for the appellant submits that the Tribunal erred in allowing the appeal. The department had a material in shape of the statements recorded of Sh. Jai Kishan Poddar and Sh. Anil Kumar Khemka stating that accommodating entries in guise of long terms capital gains was being provided by the company. It is further argued that the steep rise in shares prices within a short period creates a doubt on the transaction which was not supported by any document. 5. The Tribunal while allowing the appeal took into consideration that 12500 shares of the company were purchased by the respondent in financial year 2012-2013 for an amount of Rs.1,87,500/-. After more than one year, on sale of the shares, respondent had a capital gain of Rs.29,75,725/-. The payment for purchase was through account payee cheque. The purchase and sale was through a Demat Account maintained by an independent agency. The shares were sold through registered share broker by an online transaction and as per the share prices prevalent on that day. The Assessing Officer failed to contradict the evidence adduced by the respondent to support the claim of long term capital gain. 6. It was considered that the statements recorded at the back of the respondent, without affording an opportunity of cross- examination was no evidence in eyes of law. Further the statements nowhere stated that the transactions of the respondent with regard to sale and purchase of the shares of the company was an accommodating entry. It would be appropriate to [2024:RJ-JP:8447-DB] (4 of 4) [ITA-14/2024] note that second addition on account of undisclosed expenditure of commission paid was consequent upon addition made of long term capital gain. 7. The Tribunal allowed the appeal on appreciation of evidence adduced by respondent and considering that no contrary material produced by the department. No case is made out for interference. Moreso, when there is no case pleaded of perversity. No questions of law much less the substantial questions of law arises. 8. The appeal is dismissed. (SHUBHA MEHTA),J (AVNEESH JHINGAN),J Chandan/Himanshu—21 Whether reportable- Yes "