SANA MD.SAQIB PUTHAWALA,AHMEDABAD V. THE ITO, WARD-1(1)(1), AHMEDABAD

ITA 624/AHD/2025

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The case involves Sana Md. Saqib Puthawala, who appealed against the order of the Commissioner of Income Tax (Appeals) which upheld the A.O.'s decision treating her long-term capital gains from the sale of shares in M/s. Kushal Tradelink Ltd. as unaccounted income. The A.O. had reopened her assessment for A.Y. 2018-19 based on information from the Insight portal, alleging that she benefited from bogus accommodation entries related to these shares. The Tribunal, referencing a similar case (Ashishbhai Jashwantbhai Desai HUF vs. ITO), found that the A.O. did not establish a direct link between the assessee and the alleged price rigging or accommodation entries, leading to the decision to allow the appeal and delete the additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780512 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2018-2019
• Appeal Filed On: 26-03-2025
• Other Referred Cases: Ashishbhai Jashwantbhai Desai HUF vs. ITO, CIT vs Jagat Pravinbhai Sarabhai, Devyani D. Shah vs. ITO, Alpa Uday Shah vs. ITO, Harsha A. Patel vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Income from undisclosed sources; Capital Gains; Principle of natural justice; Accommodation entries; Borrowed satisfaction; Bogus
• Section: 147; 148; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Siddhartha Nautiyal, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member Sana Md. Saqib Puthawala 16B, Kashmira Society, Nr. Vishwakunj Cross Roads, Paldi, Ahmedabad-380007 PAN: CNUPP1538D (Appellant) Vs The ITO, Ward-1(1)(1), Ahmedabad (Respondent) Assessee Represented: Shri S.N. Divatia & Shri Samir Vora, A.Rs. Revenue Represented: Shri Sher Singh, CIT-DR & Shri Abhijit, Sr. D.R. Date of hearing : 10-09-2025 Date of pronouncement : 10-10-2025 आदेश/ORDER PER : NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:- This appeal is filed by the Assessee as against the order dated 27.02.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), in the proceedings under section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19. ITA No. 624/Ahd/2025 Assessment Year: 2018-19 Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 2 2. The brief facts of the case are that the assessee is an individual deriving income from other sources and capital gains. She had filed her return of income for A.Y. 2018-19 on 24-07-2018 declaring total income of Rs.17,14,415/- after claiming exemption of Rs.23,02,040/- u/s 10(38) of the Act on sale of shares of M/s. Kushal Tradelink Ltd. Subsequently, the A.O. had reopened the case u/s 147 of the Act on the basis of information uploaded on Insight portal that a search action was conducted in the case of M/s. Kushal Group which revealed that bogus accommodation entries were provided in the form of Long Term Capital Gain/Short Term Capital Gain and the assessee was one of the beneficiaries. Accordingly, a notice u/s 148A(b) of the Act was issued on 08-03- 2022 to which the assessee had complied and thereafter the A.O. had issued a notice u/s. 148 on 24-03-2022. In the course of assessment, the assessee had complied and explained the share transactions in respect of M/s. Kushal Tradelink Ltd. However, the A.O. was not satisfied with the explanation of the assesse and the entire LTCG of Rs.23,59,580/- was treated as unaccounted income of the assessee. Further, addition of Rs.1,41,575/- was also made on account of commission @ 6% in respect of these transactions. The assessment was completed u/s 147 r.w.s. 144B of the Act on 30-03-2023 at total income of Rs. 40,60,390/-. 3. Aggrieved with the order of the A.O., the assessee filed an appeal before the First Appellate Authority, which was decided vide the impugned order and the appeal of the assessee was dismissed. Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 3 4. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal: 1.1 The order passed by U/s.250 passed on 27.02.2025 for A.Y. 2018-19 by NFAC, [CIT(A)], Delhi (for short CIT(A)\" upholding the disallowance of exemption u/s 10(38) of Rs. 23,59,580/ on sale of shares of Kushal Ltd treating as bogus and thereby making addition to that extent as well as unexplained expenditure of Rs. 1,41,575/- u/s 69C by way of commission at 6% on its purchase value made by A.O. is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has failed to appreciate that there was gross violation of the principles of natural justice in as much as (a) both the lower authorities had not considered fully and properly the explanations furnished and the evidence produced by the appellant from time to time (b) the Ld.AO had failed to furnish the complete material/statements/details relied upon by him while issuing notice u/s 148A(b) as well as passing order u/s 148A(d) and 143(3), (c) allowing insufficient time for furnishing response with necessary documents (d) failure to provide opportunity to cross examine the concerned parties relating to the transactions in shares of Kushal Ltd. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding that the appellant had traded in the penny stock of a shell company Kushal Ltd. and booked bogus gain of Rs. 23,02,040/- and LTCG Loss of Rs. 57,540/-. The Id. CIT(A) has thereby erred in confirming addition of Rs.23,59,580/-. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) has grievously erred in confirming the addition of Rs. 23,59,580/- in respect of sale of shares of Kushal Ltd. The Id.AO has completely erred in. 2.3 The Ld. CIT(A) has grievously erred in ignoring the submissions, evidences and other documents produced by the appellant in order to prove that the transactions in purchase and sale of shares of Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 4 Kushal Ltd. were genuine. The reliance placed by the CIT(A) on the decision in case of Swati Bajaj is totally misplaced and fully distinguishable. 2.4 The observations made and conclusion reached by CIT(A) to uphold the transactions of purchase and sale of shares of Kushal Ltd. as bogus are not admitted by the appellant and the same are contrary to the evidence produced by the appellant. 3.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding that the appellant had incurred unexplained expenditure by way of commission at 6% of the purchase value of shares of Kushal Ltd. and thereby confirming the addition of Rs. 1,41,575/- u/s 69C. 4.1 That in the facts and circumstances of the case as well as in law, the notice issued u/s 148A(b) and order passed u/s 148A(d) both are illegal and unlawful, since the condition precedent are not satisfied. The Id.AO had allowed less than 7 days in giving response to notice u/s 148A(b) which is contrary to the statutorily allowable time. It is therefore prayed that the addition aggregating to Rs. 23,59,580/-confirmed by the CIT(A)should be deleted. 5. Shri S.N. Divatia, Ld. A.R. of the assessee explained that the A.O. had reopened the case relying solely upon the information uploaded on Insight portal and without application of mind. The Ld. A.R. relied upon the judgment of the Jurisdictional High Court in the case of Ashishbhai Jashwantbhai Desai HUF vs. ITO (SCA No. 1998 of 2022 dated 07-01-2025) in support of his contention that the reopening based on the information on Insight portal only was a borrowed satisfaction and that the A.O. did not derive an independent satisfaction in the matter. On merits, the Ld. AR submitted that the assessee had complied to the notices of the A.O. Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 5 and submitted all evidences to establish that the transactions undertaken by the assessee were genuine. He submitted that the assessee had also requested the A.O. to provide the details, statements, reports available with the A.O. in support of the contention that the assessee had obtained accommodation entry in respect of these transactions. However, no material or evidence was provided to the assessee and thus the addition was based on mere presumption and conjecture. On the merits of the addition, the Ld. A.R. relied upon the following decisions: (a) CIT vs Jagat Pravinbhai Sarabhai (142 Taxman.com 247) (Guj) (b) Devyani D. Shah ITA No. 576/Ahd/2020 dtd. 15.06.22 (c) Alpa Uday Shah ITA No. 318/Ahd/2018 dtd. 26.08.2022 (d) Refer to the case laws mentioned at page 110-12, 140 to 148 (e) ITO Vs. Harsha A. Patel ITA No. 1074/Ahd/2025 dtd. 12-08-25 6. Per contra, Shri Sher Singh, Ld. CIT-DR submitted that the A.O. had reopened the case on the basis of specific information received from the Investigation Wing pointing out large scale accommodation entries and artificial LTCG generated through price rigging in the scrip of M/s. Kushal Tradelink Ltd. The Ld. CIT-DR submitted that the A.O. had reproduced the information in respect of the price rigging in the shares of M/s. Kushal Tradelink Ltd. in the assessment order and that the abnormal rise in the price of the scrip was not supported by fundamentals of the company. Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 6 Therefore, the Ld. CIT-DR submitted that the findings of the A.O. and the Ld. CIT(A) should be upheld. 7. We have carefully considered the rival submissions. It is found that the assessee is a regular investor in shares and had disclosed Short Term Capital Gain of Rs. 1,18,427/- in her return of income. It is found that this STCG was derived in respect of trading of 23 different scripts. In addition, the assessee had also derived LTCG of Rs. 23,02,040/- in respect of trading in scrip of M/s. Kushal Tradelink Ltd. which was claimed exempt u/s 10(38) of the Act. The A.O. had reopened the case on the basis of the information uploaded on Insight portal in respect of search action in M/s. Kushal Group. An identical issue was involved in the case of Ashishbhai Jashwantbhai Desai HUF (supra) wherein the Hon’ble Jurisdictional High Court had held as under: “8. Considering the submissions made by learned advocates for both the sides and on perusal of the reasons recorded, it appears that the Assessing Officer has failed to give the requisite details in the reasons recorded so as to form a requisite prima-facie belief that income has escaped assessment. The reasons recorded only refer to the information received from the credible sources that the search was carried out in case of Kushal Group and during course of search, incriminating documents were found and seized and on going through the information available on Insight Portal, it was found that the petitioners are one of the beneficiaries of the accommodation entries in form of different types of income like Long Terms Gains/Loss/Short Terms Gains/Loss and also beneficiary of unsecured loans etc., without there being any basis for forming such belief. 9. Therefore, it is clear that the respondent-Assessing Officer has recorded the reasons only on the basis of the borrowed satisfaction without there being any live link between the information available on the In-sight Portal and the data available on the record of the petitioners-assesses. In such circumstances, the Assessing Officer cannot be said to have formed an Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 7 independent satisfaction regarding the reasons recorded to re-open the assessment to come to the prima. 8. It is found that in the present case also, there was no live link between the information available on the Insight portal and the data available on record in respect of the assessee. The connection of the assessee with any broker who was engaged in the price rigging in the shares of M/s. Kushal Tradelink Ltd. was not brought on record. Neither any statement or any other evidence was brought on record to establish that the assessee was involved in obtaining accommodation entry in the form of transactions in the shares of M/s. Kushal Tradelink Ltd. Merely because there had been price rigging in the shares of M/s. Kushal Tradelink Ltd., it does not automatically establish the involvement of the assessee in such price rigging mechanism. No evidence was brought on record that the assessee was a beneficiary of such price rigging. The involvement of the assessee in the manipulation of the pricing of the scrip of M/s. Kushal Group was not manifested by the A.O. The Assessing Officer also did not give any finding that the purchase and sale transactions of the assessee in the scrip of M/s. Kushal Tradelink Ltd. were not genuine. The assessee had brought on record all the evidences for purchase and sale of this scrip. It is found that the shares were purchased through the broker Innovate Securities Pvt. Ltd., registered with SEBI, and the contract note with settlement no., proof of payment for the purchase, brokerage paid etc. were brought on record. The purchase as well as the sale transactions were made through de-mat account of the assessee and there was no off-market transaction. Further, the assessee was Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 8 a regular investor in shares and the transactions in the share of M/s. Kushal Tradelink Ltd. were not one-off transactions. It is found that the purchase as well as sale of scrip was duly reflected in the de-mat account of the assessee and the payment for the transactions were also appearing in the bank account of the assessee. Under the circumstances, the A.O. was not correct in treating the share transactions of M/s. Kushal Tradelink Ltd. as bogus or unexplained. The A.O. had failed to point out any defect in the documentary evidences furnished by the assessee. Further no evidence was brought on record that any cash was involved or routed by the assessee in the guise of these transactions. In view of these facts, the entire addition made by the AO is found to be based on mere surmises and general suspicion and without any investigation specific to the assessee. Once the assessee had discharged her onus through documented evidences, it was for the Revenue to rebut the same with credible contrary material to establish that the capital gain was not genuine. In the absence of any such exercise, the addition made by the AO can’t be sustained. 9. In view of the totality of facts and circumstances as discussed above and considering the documentary evidences on record, we are of the considered opinion that addition made by the A.O. was based on suspicion only and not on any concrete material facts. Therefore, the addition of Rs. 23,59,580/- in respect of unexplained income in respect of share transactions of M/s. Kushal Tradelink Ltd is deleted. The addition of Rs. 1,41,575/- on account of commission, is also deleted. Printed from counselvise.com I.T.A No. 624/Ahd/2025 A.Y. 2018-19 Page No Sana Md. Saqib Puthawala. vs. ITO 9 10. In the result, the appeal of the Assessee is allowed. Order pronounced in the open court on 10 -10-2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 10/10/2025 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद Printed from counselvise.com "