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2025 Supreme(Guj) 1910
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, PRANAV TRIVEDI, JJ.
The Principal Commissioner of Income Tax – Appellant
Versus
Sanjaykumar Damjibhai Gangani – Respondent
Tax Appeal Nos. 924, 929 of 2024
Decided On : 01-09-2025
For the Appellant : Karan G. Sanghani
The ITAT's deletion of LTCG claims based on mere presumption was erroneous without substantial evidence.
Headnote:(A) Income Tax Act, 1961 - Section 260A - Tax Appeal concerning capital gains - Questioning the ITAT's decision in allowing the assessee's appeal by deleting bogus long-term capital gains addition claimed under section 10(38) on the grounds of insufficient evidence and legal reliance on jurisdictional Supreme Court rulings - Court observed that the presumption of non-genuineness without evidence cannot support such an addition (Paras 1, 4, 16-17).
(B) Burden of Proof - The Tribunal correctly identified that without substantial evidence or corroborating proof, assessments based on mere presumption are unsustainable, thus upholding the genuineness of transactions and investments made by the assessee concerning the sale of shares over a substantial period, dismissing the revenue’s objections in light of past jurisdictional precedent.
(C)
Findings of Court:
The Tribunal distinguished between non-genuine transactions versus transactions substantiated by the assessee under regulations and upheld the findings consistent with previous judgments.
(D)
Issues: The primary questions addressed were the propriety of ITAT's decision concerning bogus LTCG claims, the assessment basis of the AO, and the validity of presented evidence. (E)
Ratio Decidendi: The court reaffirmed that absent the requisite evidence, mere suspicion cannot substitute for proof in tax assessments. (F)
Result: The appeal was found to have no merit and was thus dismissed.
| Table of Content |
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| 1. nature of proposed questions in tax appeal (Para 2) |
| 2. legal standards for evidence in tax matters (Para 4) |
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned Senior Standing Counsel Mr. Karan G. Sanghani for the appellant.
2. These tax appeals preferred under section 260A of the Income Tax Act, 1961 (For short “the Act”) arise out of common order dated 28.03.2024 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat (For short “the Tribunal”) in ITA No. 15 & 16/SRT/2024 for Assessment Year 2015-2016. For the sake of convenience, substantial questions of law are taken from Tax Appeal No.929/2024 as under:
"i) Whether on the facts and in the circumstance of the case and in law, the Hon'ble ITAT was justified in deleting the addition of bogus long term capital gain claimed as exempted u/s 10(38) of the Act of Rs.46,96,881/- made by the Assessing Officer arising out of sale of shares of Sunrise Asian Ltd., a penny stock and without appreciating the findings of the Assessing Officer that the price movement of the company were not supported by financial fundamentals of the company?
ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in allowing the appeal of the Assessee by holding that the investment in shares was genuine, simply placing reliance upon the decision of Hon'ble High Court in the case of CIT vs. Himani M Vakil, [2014] 41 taxmann.com 425 (Guj.) and overlooking the circumstantial evidences and preponderance of the probability in the case?
iii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in ignoring the fact that, one of the entry operators involved in this case Shri Anil Khemka has admitted that the scrip of Sunrise Asian Ltd has been used for providing accommodation entry?
iv) Whether on the facts and circumstances of the case and in law the order of the Hon'ble ITAT suffers from perversity as it ignores the facts brought on record establishing manipulation of share prices of Sunrise Asian Ltd. as the upward movement of share price was not at all justified by the economic fundamental of company during the period 2011 to 2014?
v) Whether on the facts and circumstances of the case and in law the Hon'ble ITAT erred in deleting the disallowance of commission of Rs. 2,34,844/- purportedly incurred by the Assessee towards payment to brokers who allegedly entered into the share transactions at the behest of the Assessee overlooking the fact that the entire transaction was stage managed with the object to facilitate the Assessee to plough back its unaccounted income in the form of fictitious Long Term Capital Gains of Rs.46,96,881/- and claim bogus exemption?
vi) Whether on the facts and circumstances of the case and in law the Hon'ble ITAT erred in holding that addition made on account of unexplained commission in the order u/s 154 of the Act is made without show cause notice, however, before making such addition and passing rectification order the AO had issued show cause notice on 10.03.2021 to the assessee and no compliance of the same was made on the part of the assessee?
vii) Whether on the facts and circumstances of the case and in law the order of the Hon'ble ITAT is not perverse in holding that addition made on account of unexplained commission in the order u/s 154 of the Act is made without show cause notice, whereas it is clear form the record that before making such addition through rectification order the AO had issued show cause to the assessee vide notice dated 10.03.2021?”
3. At the outset learned Senior Standing Counsel Mr. Karan Sanghani fairly submitted that questions proposed are based on identical facts as in Tax Appeal No. 812 of 2023 in case of Principal Commissioner of Income Tax v. Divyaben Prafulchandra Parmar wherein vide order dated 02.01.2024, Tax Appeal is dismissed on similar proposed questions by the Revenue. It was further fairly submitted by learned Senior Standing Couns
