RAVI KUMAR PRASAD,HOWRAH V. ITO, WARD 48(2), , KOLKATA

ITA 889/KOL/2025

AI Insights

The case involves an appeal by Ravi Kumar Prasad against the order of the Addl/JCIT(A)-2, Noida, which denied him the exemption under section 10(38) of the Income Tax Act for long-term capital gains on shares sold. The shares were originally purchased from M/s Panchshul Marketing Ltd., which was later amalgamated with M/s Kailash Auto Finance Ltd. The assessee claimed that the gains from the sale of these shares were exempt as per section 10(38), but the AO included the entire sale consideration in taxable income, which was upheld by the JCIT(A). The Tribunal, referencing a similar case, ruled in favor of the assessee, emphasizing the lack of adverse material against the genuineness of the transactions.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 829296 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Kolkata
• Assessment Year: misc
• Appeal Filed On: 24-04-2025
• Other Referred Cases: Manish Kumar Baid Vs. ACIT, GTC Industries Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT ADHIKARY
• Assessee Lawyers: S.K. THAKUR
• Keywords: Capital Gains; Accommodation entries; Bogus
• Section: 68

Judgement Text

" आयकर अपीलीय अधिकरण, “एस.एम.सी” न्यायपीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH KOLKATA श्री जाजज माथन, न्याययक सदस्य क े समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER आयकर अपील सं/ITA No.889/KOL/2025 (नििाारण वर्ा / Assessment Year :2015-2016) Ravi Kumar Prasad, 13/2, Third Bye Lane Pilkhana Howrah, West Bengal-711101 Vs ITO, Ward-48(2), Kolkata PAN No. :AUAPP 0039 Q (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) नििााररती की ओर से /Assessee by : Shri S.K.Thakur, AR राजस्व की ओर से /Revenue by : Shri Abhijit Adhikary, Sr. DR सुनवाई की तारीख / Date of Hearing : 12/01/2026 घोषणा की तारीख/Date of Pronouncement : 12/01/2026 आदेश / O R D E R This is an appeal filed by the assessee against the order dated 31.03.2025 passed by the ld.Addl/JCIT(A)-2, Noida, for the assessment year 2015-2016. 2. It was submitted by the Ld.AR that the assessee had purchased 2,00,000 shares of M/s Panchshul Marketing Ltd. offline on 11/06/2012 for consideration of Rs.2,00,000/- Re.1/- per share. It was the submission that the said M/s Panchshul Marketing Ltd. was subsequently amalgamated with M/s Kailash Auto Finance Ltd. by the order of the Honble Allahabad High Court vide dated 09/05/2013 and the assessee was allotted 2,00,000 shares in the said Kailash Auto Finance Ltd. in lieu of the shares held by the assessee in Panchshul Marketing Ltd. It was submission that the shares were sold in between August 2014 and February 2015 for consideration of Rs.24,54,434/-. It was the submission that the assesee had claimed exemption 10(38) of the Act in respect of the long term capital gains on the Printed from counselvise.com ITA No.889/KOL/2025 2 sale of the said shares which was denied by the AO and the said denial was upheld by the Ld.JCIT. It was submission that the AO while denying the deduction u/s.10(38) of the Act had also included the purchase price and consequently the entire amount of sale consideration was brought to tax. It was submission that the exemption u/s. 10(38) of the Act in respect of long term capital gains arising on the sale of shares of Kailash Auto Financial Ltd. was now squarely covered by the decision of the coordinate bench of this tribunal in the case of Manish Kumar Baid Vs. ACIT, passed in ITA No.1236/KOL/2017 dated in 18/08/2017 wherein the coordinate bench of this tribunal in para 6 as held as follows :- 6. We have heard both the rival submissions and perused the materials available on record. We find lot of force in the arguments of the ld AR that the ld AO was not justified in rejecting the claim of the assessee on the basis of theory of surrounding circumstances, human conduct, and preponderance of probability without bringing on record any legal evidence against the assessee. We rely on the judgement of Special Bench of Mumbai Tribunal in the case of GTC Industries Ltd. (supra) for this proposition. The various facets of the arguments of the ld AR supra, with regard to impleading the assessee for drawing adverse inferences which remain unproved based on the evidences available on record, are not reiterated for the sake of brevity. The principles laid down in various case laws relied upon by the ld AR are also not reiterated for the sake of brevity. We find that the amalgamation of CPAL with KAFL has been approved by the order of Hon’ble High Court. The ld AO ought not to have questioned the validity of the amalgamation scheme approved by the Hon’ble High Court in May 2013 merely based on a statement given by a third party which has not been subject to cross –examination. Moreover, it is also pertinent to note that the assessee and / or the stock broker Ashita Stock Broking Ltd name is neither mentioned in the said statement as a person who had allegedly dealt with suspicious transactions nor they had been the beneficiaries of the transactions of shares of KAFL. Hence we hold that there is absolutely no adverse material to implicate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. We find that the ld DR could not controvert the arguments of the ld AR with contrary material evidences on record and merely relied on Printed from counselvise.com ITA No.889/KOL/2025 3 the orders of the lower authorities apart from placing the copy of SEBI’s interim order supra. We find that the SEBI’s orders relied on by the ld AO and referred to him as direct evidence against the assessee did not contain the name of the assessee and/or the name of Ashika Stock Broking Ltd. through whom the assessee sold the shares of KAFL as a beneficiary to the alleged accommodation entries provided by the related entities / promoters / brokers / entry operators. In the instant case, the shares of CPAL were purchased by the assessee way back on 20.12.2011 and pursuant to merger of CPAL with KAFL, the assessee was allotted equal number of shares in KAFL, which was sold by the assessee by exiting at the most opportune moment by making good profits in roder to have a good return on his investment. We find that the assessee and / or the broker Ashita Stock Broking Ltd was not the primary allottees of shares either in CPAL or in KAFL as could be evident from the SEBI’s order. We find that the SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee and / or Ashita Stock Broking Ltd’s name is not reflected at all. Hence the allegation that the assessee and / or Ashita Stock Broking Ltd getting involved in price rigging of KAFL shares fails. We also find that even the SEBI’s order heavily relied upon by the ld AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. Thus we hold that the said orders of SEBI is no evidence against the assessee, much less to speak of direct evidence. The enquiry by the Investigation Wing and/or the statements of several persons recorded by the Investigation Wing in connection with the alleged bogus transactions in the shares of KAFL also did not implicate the assessee and/or his broker. It is also a matter of record that the assessee furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the ld AO to be false or fabricated. The facts of the case and the evidences in support of the assessee’s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the ld AO was not justified in rejecting the assessee’s claim of exemption under section 10(38) of the Act. We also find that the various case laws of Hon’ble Jurisdictional High Court relied upon by the ld AR and findings given thereon would apply to the facts of the instant case. The ld DR was not able to furnish any contrary cases to this effect. Hence we hold that the ld AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. We accordingly hold that the reframed question no. 1 raised hereinabove is decided in the negative and in favour of the assessee. 3. It was submission that the addition as made by the AO and as confirmed by the ld, CIT(A) is liable to be deleted. Printed from counselvise.com ITA No.889/KOL/2025 4 4. In reply, the ld.Sr DR vehemently supported the order of the AO and JCIT(A). 5. I have considered the rival submissions. As it is noticed that the issue in respect of the exemption u/s.10(38) of the Act in respect of the long term of capital gains rising on the sales of the shares of Kailash Auto Finance Ltd. now squarely covered by the decision of the coordinate bench of this tribunal, referred to supra, respectfully following the decision of the coordinate bench of this tribunal, the AO is directed to delete the addition and grant the assessee the benefit of section 10(38) of the Act as claimed. 6. In result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 12/01/2026. Sd/- (जाजज माथन) (GEORGE MATHAN) न्यानयक सदस्य / JUDICIAL MEMBER कोलकाता Kolkata; ददनाांक Dated 12/01/2026 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : आदेशािुसार/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 1. अपीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्ज फाईल / Guard file. सत्यापपत प्रयत //True Copy// Printed from counselvise.com "