Priynka Singhal vs ITO Ward 8(1)

PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of the Ld. Addl/JCIT(A)-1, Ludhiana [hereinafter referred to as (“Ld. CIT(A)”) vide order dated 08-12-2025 arising out of the order of the Assessing Officer passed u/s. 143(3) of the Act vide order dated 30.12.2016 for A.Y. 2014-15.

The assessee has raised the following grounds in appeal:-

The brief facts of the case are that the assessee filed her Income Tax Return for the Assessment Year 2014-15, on February 19, 2015, declaring a total income at Rs. 4,26,370/-. Further, the case was selected for scrutiny under CASS. Accordingly, the assessment proceedings were completed by passing assessment order under section 143(3) of the Act on December 30, 2016 by assessing the total income at Rs. 56,27,463/- and made addition of Rs. 49,53,422/- as unexplained cash credit u/s 68 of the Act and addition of Rs. 2,47,671/- as unexplained expenditure u/s 69C of the Act. Aggrieved with this order, the assessee preferred appeal before the Ld. CIT(A), who vide his impugned order dated 08.12.2025 dismissed the appeal of the assessee. Aggrieved, assessee is in appeal before us.

We have heard the rival contentions and gone through the facts and circumstances of the case. In this case the Assessee had purchased 3,00,000 equity shares of Panchshul Mercantile Private Limited @ Re 1/- each and made the payment through RTGS dated 17-09-2012 from her saving bank account No. 912010028025684 with Axis Bank, Delhi. The shares were received by her in her D Mat account No. 15970661-IN300484 with Axis Bank on 21-11-2012. There was an Amalgamation Scheme of Panchshul Mercanitle ltd. and Careful Projects Advisory Limited with Kailash Auto Finance Limited, which was approved by Hon'ble Allahabad High Court on 09-05-2013. Accordingly new shares of Kailash Auto Finance Limited were received in D Mat account on 22-07-2013 in lieu of shares of Panchshul Marketing Private Limited. Out of these, 128,500 shares were sold by the assessee during the FY 2013-14 through the share broker Adroit Financial Services Pvt. Ltd. and received the amount in his bank account with Axis Bank. Copies of all these documents were submitted to the AO during the course of assessment proceedings. It is noted that during the course of assessment proceedings, the assessee had also furnished contract notes, D mat Statement, Bank Statement etc. in support of her share transaction but the Id. AO relied upon the report from SEBI and Investigation Wing Kolkatta and made an addition of Rs. 49,53,422/- u/s 68 of the Income Tax Act holding as under:-

In between, the assessment of the assessee was re-opened by the jurisdictional Assessing Officer i.e. ITO Ward 8(1) and re-assessment order u/s 147 was passed by the Faceless Assessment Center with following observations :-

The ITO Ward 70(2), issued a notice dated 26/28-04-2016 u/s 142(1) of the Act and had raised a question "Details of companies/Firms/Concerns in which you are employee/director (please specify) during the year under consideration along with their complete address and phone No." In response to this, the assessee appeared before the AO on 08-06-2016 and submitted a reply stating that "During the F.Y. 2013-14, assessee was director in Emgreen Impex Pvt Ltd.”. Despite having full knowledge of the facts that the assessee is Director of the company and jurisdiction of her case lies with ITO Ward 8(1) and not with ITO Ward 70(2), the ITO Ward 70(2) continued with the assessment proceedings and finally passed an assessment order dated 30-12-2016, which is thus beyond the jurisdiction. The issue of raising of objection u/s 124 will also not arise as the AO was not having the jurisdiction u/s 120 or 124 of the Act and there was no order passed u/s 127 to transfer the case. The AO has passed the assessment order based on notice dated 18-09-2015 issued by the ITO Ward 28(2), Delhi and not by himself. The assessee relied upon the decision of the Hon’ble Supreme Court in the case of Dy. Commissioner of Income Tax, New Delhi Vs. Mastech Technologies Pvt Ltd. (Civil Appeal No. 8077 of 2022). Before us, it was further submitted that the additions was based on SEBI report, which was revoked by SEBI order dated 21.9.2017 and found no infirmity or involvement, thus the very basis of addition is not sustainable. Further, it is noticed that the Assessee provided the AO, the following information/documents :

However, the Assessing Officer did not point out any discrepancy in the evidences produced by the assessee. He has neither brought out any evidence in contradiction of the assessee. The assessee has adduced the documentary evidences in support of the transaction in question. The identity of the purchasers of the shares was established as it was borne on the record of the Income Tax Department. There was no evidence or material to even suggest or pointing out that the cheques directly or indirectly emanated from the assessee so as to say that it was assessee’s own money which was brought back in the guise of sale proceeds of the shares. The AO has discarded all these explanations and documentary evidences under his own views that a prudent person would not had made such an investment. Under these facts and circumstances, the amount cannot be taken as an income u/s 68 of the Act. It is further noted that Assessing Officer has treated the income claimed under the LTCG head by the assessee as his income u/s 68 of the IT Act on the reason that investment made by the assessee in the shares of Kailash Auto Finance Ltd. is not genuine. He though took no adverse inference against the amount of investment made by the assessee and realized during the year. He has not considered the transaction amount to be income but only the component of profit element therein was considered to be income u/s 68 of the Act. Provisions of Section 68 can be invoked only when books are maintained by the assessee and for the amount found credited in the books of accounts. As no books are being maintained by the Assessee, the provisions are not applicable to the case either for the full amount of transaction or a part amount of transaction. Hence treating the income u/s 68 is not valid and the same is thus deleted. Since, the addition u/s. 68 of the Act has been deleted, the addition made u/s 69C is not justified at this stage, being made on account of payment of commission @5% as unexplained expenditure u/s 69C of the Income Tax Act, therefore, the same is also deleted.

In the result, the appeal of the assessee is allowed in very terms.