ITO Vs. Sahil Vinod Agarwal (HUF), AYs- 2017-18, 2018-19 & 2019-20

Parties Involved

Facts Summary

The assessee had filed return of income for the A.Y.2017-18 on 26.06.2017 declaring income of Rs. 5,04,930/-. The case of the assessee was reopened on the basis of information received by the AO that the assessee had traded in penny stocks scrip of M/s Kushal Tradelink Pvt. Ltd. and was a beneficiary of accommodation entry transaction. In the assessment completed u/s 147 r.w.s. 144B of the Act on 30.03.2022 the AO had made an addition of Rs. 60,76,244/- in respect of sale consideration of shares of M/s Kushal Tradelink Pvt. Ltd., u/s. 68 of the Act holding the Long-Term Capital Gain (hereinafter “LTCG”) disclosed by the assessee u/s. 10(38) of the Act, as bogus. The AO had relied upon the information supplied by Investigation Wing regarding the modus operandi of bogus LTCG and also considering the fact that the assessee had sold 12,000 shares just after completion of one year from purchase. Thereafter, the Ld. PCIT had set aside the assessment order for the reason that no penalty proceeding u/s 271AAC of the Act was initiated by the AO while completing the assessment. The AO had passed a fresh assessment order u/s 147 r.w.s. 263 r.w.s. 144B of the Act on 24/03/2025 wherein the addition made in the original assessment order was repeated.…

Legal Issues

• 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 60,76,244/- u/s 68 of the Income-tax Act, 1961, treating the claimed Long Term Capital Gain (LTCG) from sale of shares in Kushal Tradelink Ltd. as genuine and eligible for exemption u/s 10(38), without appreciating that the transactions were part of an organized tax evasion scheme involving price rigging in penny stocks, as established by the Investigation Wing, Ahmedabad.
• 2. The Ld. CIT(A) has failed to consider that the assessee's purchase and sale of 12,000 shares in Kushal Tradelink Ltd. exactly after a one-year holding period, coupled with the assessee's meager declared income and lack of knowledge about the company's financial credibility, defies human probabilities and indicates pre-arranged bogus entries to claim exempt LTCG.

Judgment Outcome

Decided in favour of Revenue.

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