ACIT Vs Manish Agarwal & Sons (ITAT Delhi)
The case of ACIT Vs Manish Agarwal & Sons (ITAT Delhi) concerns the addition of to the assessee’s income by the Assessing Officer (AO) after treating the entire sale proceeds from the sale of shares in M/s CCL International Ltd. as bogus income of the Income Tax Act, 1961. The assessee had claimed an exemption of as Long Term Capital Gain (LTCG) on this sale for the Assessment Year 2013-14. The AO’s action was based on information from the Department’s Investigation Wing, which identified M/s CCL International Ltd. as a “penny stock” company used by accommodation entry providers to convert undisclosed income into exempt LTCG. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, finding that the AO had brought no concrete evidence on record to prove that the company dealt in penny stock or was involved in share price manipulation, concluding that the share sale was genuine. The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)’s decision, noting that in the absence of evidence demonstrating the company’s involvement in rigging up shares, the sale consideration was rightly claimed as exempt LTCG . The ITAT ultimately dismissed the Revenue’s appeal, also noting that the tax effect involved () was below the prescribed lakh monetary limit for filing an appeal before the Tribunal, as per a CBDT Circular.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the Revenue is directed against the order of the NFAC, Delhi passed relating to assessment year 2013-14. The Revenue has raised the following grounds:-
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 36,85,075/- made by the AO by treating entire receipts from the sale of shares of M/s CCL International Ltd. As unaccounted income u/s. 69 of the Act, without considering the fact that M/s CCL International Limited was one of the identified penny stock company as established by the Investigation Wing of the Department which was used for providing accommodation entry and creation of bogus capital gains exempt u/s. 10(38) of the I.T. Act, 1961.
2. Briefly stated, facts are that in this case, the assessee e-fled its ITR for A.Y. 201314 on 29.7.2013 declaring total income of Rs.7,94,940/-. During the year the assessee claimed a sum of Rs. 35,75,075/- as exempt u/s 10(38) of the I.T. Act, 1961. The name of the assessee was flagged as a person who had traded in Penny Stock scrip of M/s. CCL International Limited by the Investigation Wing of the Department. Thus, the assessment was re-opened by issuing the notice u/s 148 of the IT Act, 1961. In response to the notice assessee did not file any ITR for the year under consideration. Therefore, assessment was completed u/s 147 r.w.s 144 of the Act. The AO also ascertained that shares of M/s. CCL International Limited was managed by accommodation entry providers and used by the assessee to route their undisclosed income through transactions in these penny stock and claimed exempt Long Term Capital Gain as per the provisions of section 10(38) of the I.T. Act, 1961. M/s. CCL International Limited was one of the identified penny stock by the Investigation Wing which was used for such purpose. With the aforesaid observation, the AO concluded that assessce’s own money was being routed in through the mechanism of penny stocks/long term capital gain, the claim u/s. 10(38) of the Act in ITR for the year under consideration to the tune of Rs. 35,75,075/- on sale of shares, entire sale consideration of Rs. 36,85,075/- was treated as bogus and disallowed. In appeal, Ld. CIT(A) held that as no evidence was brought on record to show that M/s CCL International Ltd. deals in penny stock and rigging up of shares, hence, he deleted the addition in dispute by allowing the appeal of the assessee. Aggrieved, the Revenue is in appeal before the Tribunal.
3. At the time of hearing, Ld. DR submitted that the order of Ld. CIT(A) is not acceptable as he has not considered the fact that as per the enquiry conducted by investigation wing of the Department and also from NSE. It had been established that there were scrip which were managed by accommodation entry providers and were used by the assessee to route their undisclosed income through transactions in these penny stock and to claim exempt Long Term Capital Gain as per the provisions of section 10(38) of the Act and CCL International Limited was one of the identified penny stock Company by the Investigation Wing of the Income Tax Department which was used for such purpose. In such facts and circumstances, the amount as claimed exemption u/s. 10(38) of the Act by the assessee on sale of shares of M/s. CCL International Ltd. for a total consideration of Rs, 36,85,075/-, is not justifiable, hence, the same deserve to be upheld.
4. Per contra, Ld. AR has relied upon the order of the Ld. CIT(A) and submitted that he has passed a well reasoned order which does not need any interference on my part.
5. I have heard the rival contentions and gone through the facts of the case. I find that Ld. CIT(A) has discussed the issue in dispute elaborately by observing as under:-
The appellant has placed before me all the fact related to this instant case and the same was found to be in order as not evidence was brought on record to show that M/s CCL International Ltd. deals in penny stock and rigging up of shares. hence, in view of the discussion made above, I found that the sale of shares for a consideration of Rs. 36,85,075/- is genuine and rightly claimed u/s. 10(38) in his return of income filed for the year and therefore, I direct the AO delete the addition of Rs. 36,85,075/- made under unexplained cash credit u/s. 68 of the Act and give relief to the appellant.
6. In the background of the aforesaid discussions and upon careful perusing the finding of the Ld. CIT(A), as reproduced above, I note that Ld. CIT(A) has rightly deleted the addition of Rs. 36,85,075/- made by the AO, keeping in view of the fact that no evidence was brought on record to show that M/s CCL International Ltd. deals in penny stock and rigging up of shares. hence, in view of the discussion made above, I found that the sale of shares for a consideration of Rs. 36,85,075/- is genuine and rightly claimed u/s. 10(38) in his return of income filed for the year. Further, it is noted that Ld. Pr. Commissioner of Income Tax (OSD), Ghaziabad while submitting the Statement of Facts has admitted that the tax effect involved is Rs. 11,38,688/-which is below the prescribed limit of Rs. 60 lakhs for filing the appeal before the ITAT as provided in CBDT’s Circular No. 09/2024. In view of the aforesaid factual matrix and in the interest of justice, I affirm the action of the Ld. CIT(A) and accordingly reject the grounds raised by the Revenue.
7. In the result, the Revenue’s appeal stands dismissed.
Order pronounced on 19.09.2025.
