PCIT Vs Aditya Agrawal (Madhya Pradesh High Court)
Summary: The Madhya Pradesh High Court dismissed the Revenue’s appeal against the order dated 30.09.2025 passed by the Income Tax Appellate Tribunal, Jabalpur, which had dismissed the Department’s appeal and affirmed the National Faceless Appeal Centre, Delhi order dated 30.10.2024 for assessment year 2016-17. The respondent/assessee had originally declared total income of Rs.5,98,850/- on 26.07.2016. Following reopening under Section 148 of the Income Tax Act, 1961, the Assessing Officer made an addition of Rs.2,20,137/- relating to investment in shares of M/s. Safal Herbs Ltd., treating the transaction as a penny-stock transaction and initiating penalty proceedings under Section 271(1)(c). The NFAC directed deletion of the addition under Section 68, holding that the assessee had made out a case regarding genuineness of the transaction. Before the High Court, the Revenue proposed nine substantial questions of law, alleging manipulation of share prices, a colourable device, fictitious Long Term Capital Gain, violation of SEBI requirements and failure to properly apply the principle in Sumati Dayal vs. CIT (214 ITR 801). The Court recorded that there was a concurrent finding in favour of the assessee and that the Assessing Officer’s findings were based solely on the Investigation Wing record, resulting in a lack of independent inquiry. The Court further recorded that the assessee had discharged his liability under Section 68 by submitting evidence of investment through banking transaction/DEMAT and that the Department had not filed documents relating to the conclusion concerning Sanjay Shah and Jignesh Shah of Ahmedabad, with whom the assessee’s name had been connected by the Investigation Wing, Ahmedabad. The Court found no ground to interfere with the ITAT order and consequently dismissed the appeal.
