Commissioner Of Income Tax vs Raj Kumar Golecha

K.R. Shriram, Cj

This appeal filed under Section 260A of the Income-Tax Act, 1961 (for short, ‘the Act’) impugns an order dated 10.03.2025 passed by Income-Tax Appellate Tribunal (ITAT) by which order ITAT was pleased to hold that assessment order dated 28.12.2017 was not correct.

Assessee i.e. respondent had filed return of income for A.Y. 2014-15 on 31.07.2024 declaring total income at Rs.7,50,190/-. There was a search made under Section 132 of the Act at the business/residential premises of assessee as also his family members and business concerns. The search that was carried out on 17.12.2015 revealed several incriminating documents alongwith cash, jewellery and other valuables, which were seized. Jurisdiction was assumed by Principal Commissioner of Income-tax (PCIT), Jodhpur and notice under Section 153A of the Act was issued on 04.07.2016 for filing return for A.Y. 2014-15. In response, assessee filed return on 05.10.2017 declaring total income at Rs. 7,40,190/-. Subsequently, notice under Section 142(1) of the Act alongwith detailed questionnaire was served on assessee and later on, a notice under Section 143(2) of the Act was also issued. It is stated that assessee did not comply with the various notices and, thereafter, penalty proceedings were also initiated. Assessee however, was represented in the personal hearing and an assessment order dated 28.12.2017 came to be passed.

The contentious issue in this appeal before us pertains to long term capital gain under Section 10(38) of the Act.

Assesseee had claimed exempt income of Rs.48,49,782/- in his ITR as long term capital gain from transaction on which Security Transaction Tax (STT) was paid. The Income-tax Officer called upon assessee to furnish details of purchase of shares in a company by the name Sunrise Asian Limited (company). The capital gain of Rs.48,49,782/- was from sale of 11400 shares of the said company. These shares were purchased by assessee on 24.08.2011 for Rs.2,00,000/- and sold during the period from

06.09.2013 to 06.02.2014 for Rs.50,51,269/- resulting in long term capital gain of Rs.48,49,782/-. In effect, shares were purchased at Rs.17.54 per share and sold at Rs.443.09 per share.

According to assessing officer, finances of the company are not good enough to have such a high rise in share price and that also within such a short span and he has assumed based on his own research that the share price of company has been manipulated by the syndicate of entry providers to reach such high without any financial basis. According to assessing officer, the company was also suspended thrice by Bombay Stock Exchange (BSE) and therefore transaction cannot be called as genuine, though it has been conducted through stock exchange.

The fact that shares were purchased and sold through BSE is admitted. There is nothing in assessment order to indicate that it was assessee who manipulated stock price. There is also no finding that assessee purchased shares knowing well that it is going to be rigged or manipulated. The fact that shares have been held to have been manipulated itself is a speculation and an assumption of assessing officer. The assessing officer, therefore, proceeds to conclude that amount of Rs.48,49,782/- credited in the capital account of assessee was by indulging in bogus and dubious share transaction used to convert his undisclosed income in the garb of long terms capital gain. Assessing officer then proceeds to treat this as income of assessee holding its characteristics to be unexplained cash credit as envisaged under provisions of Section 68 of the Act. Thereafter, assessing officer came to the conclusion that the assessee has furnished inaccurate particulars of income by showing his undisclosed income in the garb of long term capital gain and accordingly imposed penalty under Section 271(1)(c) of the Act holding that assessee had furnished inaccurate particulars of income.

The assessee unhappy with assessment order filed an appeal before Commissioner of Income-Tax (Appeals) [CIT(A)]. The appeal was dismissed, against which assessee went in appeal before ITAT. The ITAT allowed the appeal vide order pronounced on 10.03.2025, which is impugned before us.

Four substantial questions of law have been proposed and the same read as under:-

“i. “Whether on the facts & in the circumstances of the case, the ld. ITAT has erred in law in deleting the addition of Rs.48,49,782/- made by the AO treating it as an undisclosed Long Term Capital Gain that the onus was on the assessee to prove the transaction leading to claim of long-term capital gain was a genuine transaction and that the assessee failed to justify manifold increase in the prices of the shares despite weak financials of the companies?.”

ii. “Whether on the facts & in the circumstances of the case, the ld. ITAT has erred in law in deleting the addition of Rs.48,49,782/- made by the AO treating it as an undisclosed Long Term Capital Gain without appreciating that an initial investment in the company of unknown credential and subsequent jump in the share prices of such a company, cannot be an accident or windfall but could be possible, because of manipulation in the share prices in a pre-planned manner, as brought on record by the Assessing Officer?”

iii. “Whether on the facts & in the circumstances of the case, the ld. ITAT has erred in law in deleting the addition of Rs.48,49,782/- made by the AO treating it as an undisclosed Long Term Capital Gain without appreciating that the company namely; Sunrise Asian whose stock is in question, was suspended thrice by Bombay Stock Exchange (BSE) for various reasons including non-fixation of book closure record, non-submission of quarterly report and on account of SOP?”

iv. “Whether on the facts & in the circumstances of the case, the Hon’ble ITAT has erred in law in deleting the addition of Rs.48,49,782/- made by the AO treating it as an undisclosed Long Term Capital Gain without appreciating that the present case was examined on the touch stone of case law by the Hon’ble Supreme Court in the case of Durga Prasad Mor and Sumati Dayal where the test of human probabilities has been applied. It was clear that these transactions of the assessee can by no stretch of imagination be considered as investment transactions?””

If one reads, the proposed questions of law, they are all effectively one and the same i.e. the ITAT erred in deleting addition of Rs.48,49,782/- made by assessing officer treating it as undisclosed long term capital gain.

In our view, the ITAT was correct in deleting addition made. It has to be kept in mind that assessment order has been passed under Section 153(A) read with Section 143(3) of the Act. As held by Apex Court in Principal Commissioner of Income Tax, Central-3 Vs. Abhisar Buildwell P. Ltd. [2023] 454 ITR 212 (SC), in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration any other material in respect of completed assessment/unabated assessment. It means that in respect of completed/unabated assessment, no addition can be made by AO in absence of any incriminating material found during the course of search under Section 132 or requisitioned under Section 132A of the Act. The AO has made addition treating the long term capital gain as undisclosed income merely on the basis of information that he has received from the Investigation Wing, Kolkata. Addition made is neither based on any incriminating material found during the course of search nor based on any other evidence, but it is merely because of hypothetical presumption of the AO. As noted earlier by us, AO has not brought on record any cogent material/evidence in support of addition made by him.

In the circumstances, in our view, the ITAT on factual finding was correct in concluding that addition made by AO of Rs.48,49782/- has to be deleted.

Therefore, no substantial question of law arises in this appeal.

Appeal dismissed.