[Cites 14, Cited by 0]
Madras High Court
Principal Commissioner Of Income Tax vs Shri M.Kiran Kumar on 30 April, 2026
T.C.A.No.248 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 28.04.2026
DELIVERED ON : 30.04.2026
CORAM :
THE HONOURABLE MR. SUSHRUT ARVIND DHARMADHIKARI,
CHIEF JUSTICE
AND
THE HONOURABLE MR.JUSTICE G.ARUL MURUGAN
TCA No.248 of 2021
and CMP No.6957 of 2021
Principal Commissioner of Income Tax
Central I, No.108, Nungambakkam
High Road, Chennai - 600 034.
Appellant(s)
Vs
M.Kiran Kumar
123, Usman Road, T.Nagar,
Chennai - 600 017,
PAN: ACHPM 2247 E.
Respondent(s)
PRAYER: Appeal filed under Section 260A of the Income Tax Act, 1961
against the order of the Income Tax Appellate Tribunal Madras “C”
Bench dated 01.03.2021 in ITA.No.3374/Chny/2019.
For Appellant(s): Mr. D.Prabhu Mukunth Arunkumar
Senior Standing Counsel
______________
Page 1 of 30
https://www.mhc.tn.gov.in/judis
T.C.A.No.248 of 2021
For Respondent(s):Mr. N.Murali Kumaran
Senior Counsel
for M/s.Mc Gan Law Firm
JUDGMENT
THE CHIEF JUSTICE
This appeal by the Revenue challenges the legality and validity
of the order dated 1.3.2021 passed by the Income Tax Appellate
Tribunal [ITAT], ‘C’ Bench at Chennai, and the same was admitted
by order dated 27.04.2021, on the following substantial questions
of law:
“1. Whether the Appellate Tribunal was correct in
holding that the admission made by the assessee
during the search proceedings is only on an ad-hoc
basis, whereas the addition was made on the basis of
the statement recorded u/s. 132(4) of the IT Act,
and the assessee was unable to reconcile the
discrepancies with proper evidences during original
proceeding or before appellate authorities?
2. Whether the Appellate Tribunal was correct in
deleting the addition of Rs.20 crores without any
evidences or records when the assessee has never
______________
https://www.mhc.tn.gov.in/judis
retracted his statement made u/s.132(4) at any
point of time before any authorities?
3. Whether on the facts and circumstances of the
case and in law, the Appellate Tribunal was right in
deleting the addition made u/s.2(22)(e) of the Act as
a mere trade advances, without appreciating the fact
that the two concerns M/s.Marium Creations and
M/s. Infinite Jewellers are only paper concerns, doing
circular transactions utilized by the assessee with the
motive of diverting the funds of M/s. Lalithaa
Jewellery Mart Pvt. Ltd to M/s. AK Exports which in
turn are ploughed back in the share application
money/share premium of the same company i.e.,
M/s. Lalithaa Jewellery Mart Pvt. Ltd. which is a clear
case fall within the ambit of section 2(22)(e) of the
IT Act ?
4. Whether the ITAT was right in deleting the
disallowance of exempt long term capital gains claim
made by the assessee u/s.10(38), when the entire
scripts sold belongs to a loss making (penny stock)
company having no reserves surpluses/assets and no
possibility of earning any dividend income and whose
shares were sold by the assessee for 2613% higher
than the investment, within a span of 13 months to
21 months, which cannot happen in a normal
______________
https://www.mhc.tn.gov.in/judis
business transactions, which the ITAT had termed as
a genuine transaction?”
2. The undisputed facts of the case leading to filing of the
present appeal, which are required to be adverted to, for the
disposal of the present appeal are as follows:
(i) The respondent/assessee is an individual and
Proprietor of M/s.A.K. Exports and A.K. Jewellers,
which is engaged in the business of trading in gold
jewellery and bullion. He is also the Managing
Director of Lalithaa Jewellery Mart Pvt. Limited.
(ii) A search was conducted on 02.09.2014 under
Section 132 of the Income Tax Act in the business
premises of Lalithaa Jewellery Mart Pvt. Ltd and
Group of Companies, including the residential
premises of the respondent/assessee and,
consequent thereto, notice under Section 153A of the
Act was issued to the respondent/assessee. In
response, the respondent/assessee filed his return of
income on 14.11.2015, declaring a total income of
______________
https://www.mhc.tn.gov.in/judis
Rs.1,42,42,750/-, which was the same total income
returned in the original return.
(iii) The case was taken up for scrutiny and the
Assessing Officer added a sum of Rs.20,00,00,000/-
as undisclosed income for the assessment year
2015-16, out of the Rs.30 crores offered by the
respondent/assessee during the course of search.
The remaining Rs.10 Crores was added in the
previous assessment year, i.e., 2014-15.
(iv) The Assessing officer also made an addition of a
sum of Rs.76,19,00,000/- as deemed dividend
u/s.2(22)(e) of the Act, in the hands of the
respondent/assessee, being the cumulative credit
balance in the book of M/s.A.K. Exports and due to
M/s.Infinity Jewellers and M/s. Mariyam Creations,
while holding that the respondent/assessee had
indirectly borrowed funds from Lalithaa Jewellery
Mart Pvt. Ltd through the books of M/s.Infinity
Jewellers and M/s.Mariyam Creations, which are
paper concerns. The Assessing Officer had also made
______________
https://www.mhc.tn.gov.in/judis
additions towards Long term capital gains derived
from sale of shares by disallowing the exemption
claimed under Section 10(38) of the Act to the tune
of Rs.16.24 crores for the reason that the gains
computed from sale of shares were unrealistic and
the script was rigged in the market to derive undue
benefit to the Respondent/assessee. Similarly, the
Assessing Officer has made additions towards excess
jewellery at Rs.10,17,000/- found during the course
of search stating that no explanation was offered by
the assessee.
(v) Being aggrieved by the Assessment Order, the
respondent/assessee preferred an appeal before the
Commissioner of Income-Tax (Appeals), Chennai
[CIT(A)], inter alia, contending that the Assessing
Officer cannot make additions of undisclosed income,
solely on the basis of the statement of the assessee
made during the search without any corroborative
evidence and, at any rate, the so-called
discrepancies for which the additions were made are
______________
https://www.mhc.tn.gov.in/judis
neither connected to the assessee nor the assessee
was in any way connected to it, in his individual
capacity; that the addition made towards deemed
dividend in respect of amounts due to M/s.Infinity
Jewellers and M/s.Mariyam Creations, is without any
basis as the transactions are genuine business
transactions for purchase and sale of gold for which
necessary evidences have been filed before the
Assessing Officer to prove that the said transactions
do not come under the purview of provisions of
section 2(22)(e) of the Act; that the Assessing
Officer erred in disallowing the exemption claimed
towards long term capital gain derived from sale of
shares on the ground that though the Assessing
Officer claimed that the assessee is a beneficiary of
the bogus long term capital gain derived from sale of
penny stocks, the Assessing Officer has failed to link
the transactions of the assessee with any alleged
scam related to bogus long term capital gain.
______________
https://www.mhc.tn.gov.in/judis
(vi) The CIT(A) dismissed the appeal preferred by
the respondent/assessee vide order dated
14.11.2019, which resulted in the
respondent/sassessee filing of an Appeal in ITA. No.
3374/Chny/2019 before the Income Tax Appellate
Tribunal, ‘C’ Bench, Chennai.
(vii) The Income Tax Appellate Tribunal vide order
dated 01.03.2021 partly allowed the appeal of the
assessee deleting the additions made by the
Assessing Officer except the sum of Rs.10,17,000/-
towards unexplained iewellery. Aggrieved by the
same, the Revenue has filed this Appeal.
SUBSTANTIAL QUESTIONS OF LAW Nos.(1) AND (2)
3. Out of the four questions of law, the first two questions of
law relate to the issue of addition of Rs.20 Crores.
4.1. The learned Senior Standing Counsel for the appellant
placing reliance on a decision of the Supreme Court in B.Kishore
______________
https://www.mhc.tn.gov.in/judis
Kumar vs. DCIT1, contended that when there is a clear and
categorical admission of undisclosed income by the assessee
himself, there is no necessity to scrutinize the documents and that
the assessee had agreed to offer a total sum of Rs.30,00,00,000/-
during the search, including a sum of Rs.10,00,00,000/- pertaining
to assessment year 2014-15 as additional income. Hence, it is
submitted that in view of the fact that the assessee was unable to
explain certain discrepancies in the documents and materials seized
during the course of search which relate to the company M/s.Lalitha
Jewellery Mart Pvt. Ltd and the personal proprietary business of the
assessee and also in view of the admission made by the assessee
himself under Section 132(4) of the Act and the evidences seized
during the course of search, the additional undisclosed income of
Rs.20,00,00,000/- has rightly been adjudged by the Assessing
Officer for the Assessment Year 2015-16.
4.2. The learned Senior Standing Counsel for the appellant
further contended that it is clear from the statement recorded
during the course of search under Section 132(4) of the Act, that
1 [2015] 62 taxmann.com 215 (SC)
______________
https://www.mhc.tn.gov.in/judis
the assessee, in his individual capacity, had admitted voluntarily a
sum of Rs.20 crores as undisclosed income for the assessment year
2015-16, which was not retracted by him either during the course
of assessment proceedings or first appellate proceedings. During
the second appellate proceedings, no new material/evidence was
brought on record to disturb the findings of the Assessing Officer,
which was confirmed by the CIT(A). In this case the assessee has
admitted undisclosed income in his individual capacity, which was
supported by the statement recorded during the course of search
under Section 132(4) of the Act and such statements were recorded
in light of various discrepancies noted in respect of loose sheets
found during the course of search, excess wastage claim on melting
of old gold, etc. Therefore, the Tribunal was wrong in deleting the
said addition in the absence of any new material or evidence or
retraction by the assessee.
5.1. Per contra, learned Senior Counsel appearing for the
respondent/assessee by placing reliance on the findings of the
Tribunal contended that it is evident both from the records as well
as the findings of the Tribunal that the assessee has explained
______________
https://www.mhc.tn.gov.in/judis
every discrepancy found during the course of search and the
statement recorded itself states that only in order to buy peace, the
respondent/assessee had offered the said Rs.20 Crores as an
undisclosed income. As is found by the Tribunal, the so called
discrepancies relate to one, M/s.V.B. Jewellers and manufacturers
which was for the assessment years 2014-2015 and whatsoever
statement or declaration that was made by the assessee relates
only to Lalithaa Jewellery Mart, where he is a Managing Director
and not as an assessee in his individual capacity. Learned Senior
Counsel citing the Circulars of the CBDT dated 18.12.2014 and
10.03.2023, contended that the Department cannot make additions
of undisclosed income based on so called confessions in the absence
of any corroborative evidence.
5.2. Learned Senior Counsel for respondent placing reliance
on a Division Bench judgment of the Gujarat High Court in the case
of PCIT Vs.Nageshwar Enterprises2, has argued that the Department
cannot make an addition on the basis of confession made by
assessee. In the absence of any material to corroborate the
2 (2020) 421 ITR 388
______________
https://www.mhc.tn.gov.in/judis
statement made by the assessee in the form of confession, no
addition can be made. Further, learned Senior Counsel also relied on
Division Bench judgment of the Rajasthan High Court in the case of
PCIT v. Esspal International (P.) Ltd 3 to contend that the admission
of the assessee in the absence of any corroborative evidence cannot
be made a basis for any addition.
6. We have bestowed our consideration to the respective
submissions made by the learned counsel for the parties and
perused the records of the case.
7. If we sift through the order passed by the Assessing Officer,
it is evident that whatsoever statement has been made by the
assessee has not been made in his individual capacity and,
therefore, no addition can be made on the basis of such admission
of undisclosed income, more so as there is no corroborative
evidence to support the statement of the assesee offering
undisclosed income during the time of search. Such a practice has
3 (2025) 473 ITR 329
______________
https://www.mhc.tn.gov.in/judis
been adversely taken note of by CBDT in its two circulars dated
18.12.2014 and 10.03.2023.
8. At this juncture, it is apposite to reproduce the findings of
ITAT, with which we express our concurrence:
“7.6. … Thus, the statement recorded and the
declaration given by the assessee can only relate to
the transactions of LJM and not the assessee in his
individual capacity. It is relevant to note that the
assessee is deposing not only in his individual
capacity but also the MD of LJM. The discrepancies
pointed out in Question No.20 of sworn statement
was already been quantified and offered to tax by
the assessee in his return of income for assessment
year 2014-15. Apart from sworn statement, there is
no other corroborative evidence to prove said sum of
Rs.20 crores as undisclosed income of the assessee.
Therefore, in our considered view, the AO has
misplaced his reliance on the statement recorded
during the course of search to conclude that
admission of undisclosed income is based on
incriminating material founds during the course of
search.
______________
https://www.mhc.tn.gov.in/judis
7.7. … In the absence of any corroborative evidence,
merely on the basis of admission in statement
recorded u/s.132(4) of the Act, no liability can be
fastened on the assessee. The AO has not brought
on-record-any material and reasons for rejection of
assessee contention by which the assessee has
retracted from his admission. None of the authorities
gave any reason as to why the AO did not proceed
further to enquire into the unaccounted income as
admitted by the assessee in the statement
U/s.132(4) of the Act. ... ”
9. In the case at hand, as there is no corroborative evidence
to support the alleged confession of the assessee and in view of the
fact that pursuant to the notice issued under Section 153A of the
Act, the assessee has not returned it as income, and taking into
consideration the decision cited by learned Senior Counsel for
respondent in Nageshwar Enterprises (supra) and Esspal
International (P.) Ltd (supra), we answer the first two questions of
law against the appellant and in favour of the assessee.
______________
https://www.mhc.tn.gov.in/judis
SUBSTANTIAL QUESTION OF LAW No.(3)
10. Qua the third question of law wherein a deemed
dividend under Section 2(22)(e) of the Act was added as
income by the Assessing Officer, learned Senior Standing
Counsel for the appellant contended that Assessing Officer has
found that M/s.Infinity Jewellers and M/s.Mariyam Creations
belong to one Syed Aafaq Khurram and its transactions with
A.K.Exports, which is the proprietorship concern of the assessee
is highly suspicious and it is clear that the assessee has
borrowed funds indirectly from M/s.Lalithaa Jewellery Mart,
wherein he holds 90% of the shares, through the books of
M/s.Infinity Jewellers and M/s. Mariyam Creations. Therefore, it
is argued that they are deemed dividends in the hands of the
assessee under Section 2(22)(e) of the Act. He placed reliance
on the judgment of this Court in Bhagavathy Velan vs Deputy
Commissioner of Income Tax (DCIT) 4, to contend that, the ITAT
was wrong in deleting the said addition.
4 (2019) 264 Taxman 146 (Mad.)
______________
https://www.mhc.tn.gov.in/judis
11. Per Contra, learned Senior Counsel appearing for the
assessee contended that, as rightly held by the ITAT, the
transactions in question are pure business transactions and in the
course of running account between parties it is natural that there
will be outstanding in the books of accounts on the end of the
financial/assessment year and in this case also whatever was
outstanding in the books of accounts of M/s.A.K. Exports, due and
liable to be paid towards the Jewellery supplied by M/s.Infinity
Jewellers and M/s.Mariyam Creations, got squared in the next
financial/assesment year on payment of the sale value of the
supplied Jewellery. Similar is also the transactions between M/s.AK
Exports and M/s.Lalithaa Jewellery Mart Pvt. Ltd, and, therefore,
these business transactions do not fall under the scope of Section
2(22)(e) of Act as clarified by the CBDT Circular No.19/2017, dated
12.06.2017.
12. Learned Senior Counsel for the assessee relying on the
decisions in Commissioner Of Income Tax vs Shri Madurai Chettiyar
______________
https://www.mhc.tn.gov.in/judis
Karthikeyan5 and CIT, Kottayam Vs. Malaya Manorama6, contended
that there was no perversity in the order of the ITAT.
13. Upon hearing learned counsel for the parties on Question
No.3, this court gave anxious consideration to the finding recorded
by the ITAT in this regard, which is being reproduced below:
“8.7. … M/s. AK Exports is an independent
proprietorship concern of the assessee and engaged
in purchase and sale of gold and bullion from various
parties and sells to LJM as a captive jewellery unit,
for which it had received payments for sale of gold
and gold ornaments. Similarly, M/s.Infinity Jewellers
and M/s.Mariyam Creations are two third parties
from whom M/s.AK Exports purchases gold and gold
ornaments for which it has pending payments
against purchase of goods. Based on the above
transactions, the Assessing Officer has propounded
the theory of circuitous transactions among the
concerns for diverting profit of LJM in the guise of
payment for purchase and sales and ultimately the
same has been rerouted to the company as share
application money. The AO, to arrive at such
5 (2014) 223 Taxman 350 (Mad.)
6 405 ITR 5959 (Kerala)
______________
https://www.mhc.tn.gov.in/judis
conclusion has given his own reasons including the
capacity of two partnership firms and their business
model including the places from where they operate
their business.
8.8. We have given our thoughtful considerations to
the reasons given by the AO to reach to a conclusion
that cumulative credit balance in the books of M/s.AK
Exports due to M/s.Infinity Jewellers and
M/s.Mariyam Creations, as diversion of funds from
LJM and found that the AO has propounded a theory
of circuitous transactions purely on conjectures and
surmises, moreover without their being proper
appreciation of facts. We further noted that both
concerns are carrying out their business
independently and are regularly filing VAT returns
not only that they have also income tax assessee's
and filed return of income for the respective
assessment years. In fact, these facts are not
disputed by the AO. But, objection of the AO is that
these concerns operate in a small place with no
wherewithal to conduct business of such huge
volume and also that there are no personnel
employed by them for achieving these huge
turnover. We ourselves do not subscribe to the
reasons given by the AO, for the simple reason that
______________
https://www.mhc.tn.gov.in/judis
what is dealt by these two concerns is gold and gold
jewellery, whose value is high compared to the mass
and weight of any other merchandise that the AO
conceives of. It is not uncommon that huge volumes
could be achieved when transaction in a few
kilograms of primary gold or the gold ornaments. As
clarified by the ld. AR for the assessee, in places like
Mumbai, where there is a place constraint with small
place, huge turnover in thousands of crores are
achieved. Therefore, for this reason, the conclusion
arrived at by the AO that these are not commercial
transactions but circuitous transactions carried
through group firms for diverting funds of the
company to the Director is incorrect and unfounded
under law.
...
8.10. … The assessee has placed account copies of
the concerns M/s.Infinity Jewellers and M/s.Mariyam
Creations in the books of LJM. From the above, it
could be seen that it is a continuing account, where
huge purchase and sales inter se these concerns.
Thus, it is very clear that it has a commercial
transaction and account is running accounts. Further,
the account copy of M/s. Mariyam Creations in the
books of LJM for the period 01.04.2014 to
31.03.2015 is placed on record as per which the
______________
https://www.mhc.tn.gov.in/judis
closing balance is only a sum of Rs.26.11 crores,
whereas the AO has considered deemed dividend
from this concern at Rs.46.18 crores. Thus, from the
above, it is very clear that the AO's action is founded
on suspicions and surmises and without reference to
actual facts and figures. We further noted that the
account copy of LJM in the books of M/s. AK Exports
is placed on record at pages 89 to 173 of paper-
book. It could be seen that the total credits / debits
in this account for the period of Rs.810 crores. There
are huge purchases as well as sales effected to LJM.
The transaction between the assessee and LJM are
also pure commercial transactions. Thus, even
assuming for the sake of arguments that the
amounts had been paid directly by LJM to M/s. ÁK
Exports, still it would only be a commercial
transaction outside the scope of deemed dividend as
explained by the CBDT in Circular No.19 of 2017
dated 12.06.2017.
8.11. … Therefore, in our considered view, the AO
has made addition only based on the formulated
theory that the assessee avails the benefit in the
nature of loans and advances in the capacity of
shareholder. In order to consider any payment under
the provisions of section 2(22)(e) of the Act, the first
______________
https://www.mhc.tn.gov.in/judis
and foremost limb is that there should be some
benefit arising out of the said transactions to the
shareholder. In the present case, there is no
personal benefit at all to the assessee. The AO
himself accepts the fact that the funds were utilized
during the course of business and therefore, this
transaction at any point did not get out of the
business circle at all. The provisions of section 2(22)
(e) of the Act, is deeming provision-and-should-be-
construed strictly.”
14. This court upon perusing the finding rendered by ITAT has
no hesitation in holding that the ITAT was right in stating that the
transactions do not fall under Section 2(22)(e) of the Act and,
therefore, we do not find any reason or ground to interfere with the
findings of the Tribunal and answer the third question of law in
favour of the assesse and against the revenue.
SUBSTANTIAL QUESTION OF LAW No.(4)
15. This question of law relates to the disallowance of the long
term capital gain claimed under Section 10(38) of the Act and
adding the same as income.
______________
https://www.mhc.tn.gov.in/judis
16. Learned Senior Standing Counsel for the appellant
contended that the difference between the purchase and sale of
shares of the assessee of Indo-American Advanced Pharmaceutical
Limited [subsequently changed to Mahavir Advanced Remedied
Limited] is almost 2613%, which is unrealistic. It is argued that the
Assessing Officer had brought out clear facts to the effect that the
key financials of M/s.Mahavir Advanced Remedies Ltd, do not have
any financial fundamentals. Further, the company does not have
awesome-profit, EBIDTA margin, EPS, bonus dividend etc. The
assessee has earned 303% of profit on investments, although the
book value of the shares of the company is negligible. Referring to
various documents, he submitted that the financials of the company
if compared with share price, it is really incomprehensible as to how
such an unrealistic and astronomical price increase could be there in
the share price during such short span of time. In support of his
submissions various judicial precedents including that of the
judgment of this Court in Tax Appeal No.198 of 2019 and the
______________
https://www.mhc.tn.gov.in/judis
decision of the Supreme Court in the case of Suman Poddar vs. ITO7
were relied.
17. Per contra, learned Senior Counsel appearing for the
respondent/assessee contended that the addition made by the
Assessing Officer by disallowing the claim of exemption is only on
the basis of preponderance of probability, purely on guess work,
conjectures and surmises and the so-called findings of the
Assessing Officer are not supported by any evidence collected from
any authority and by any rate they having been not placed before
assessee for his remarks and comments, the ITAT was fully justified
in deleting the said addition.
18. Learned Senior Counsel for respondent placed reliance on
the decision in Lalithaa Mart Pvt Ltd. v. Deputy Commissioner of
Income Tax8, which was also upheld by the Supreme Court; and
also the judgement of this Court arising out of the same search
dated 02.09.2014 in the case of the company, M/s.Lalithaa
Jewellery Mart in TCA Nos.14 to 16 of 2020 and TCA No.296/2023,
7 (2020) 268 Taxman 321
8 Judgment dated 11.08.2017 in TCA Nos.435 and 436 of 2013
______________
https://www.mhc.tn.gov.in/judis
and contended that the assessee has discharged his burden of proof
and, therefore, once the assessee discharged the burden of proof
under Section 68 of the Act, merely on the basis of suspicion, in
absence of any specific evidence being brought on record, the ITAT
was completely justified in deleting the said additions. He also
further contended that on a pure finding of fact, no question of law
arises.
19. Upon hearing learned counsel for the parties on Question
No.4, this court gave anxious consideration to the finding recorded
by the ITAT in this regard, wherein the ITAT has deleted the said
addition made by the Assessing Officer, which is being reproduced
below:
“9.5. … We further noted that the AO as well as the
CIT(A) have gone on the wrong premises by assuming
that the assessee is one of the beneficiary of organized
rocket of bogus transactions of long term capital gain
without any reference to information collected during the
course of investigation carried out by the Directorate of
Investigation, Kolkata and to the assessee. Although, the
AO has extensively discussed the issue in light of modus
______________
https://www.mhc.tn.gov.in/judis
operandi of the persons involved in the rocket of bogus
long term capital gain but nowhere, he has referred to any
piece of evidence collected during the course of
investigation to the assessee and the company share in
which assessee has dealt.
...
9.7. The AO has also made another allegation that
investigation carried out by the Directorate of
Investigation, Kolkata had brought out a list of 87
companies, which were involved in bogus long term
capital gains. The AO neither furnished the list of 87
companies in the assessment proceedings and it is not
shown in, under which serial number this company
appears in the said list. Further, the Departmental
authorities having referred to a list of 331 shell companies
which are involved in bogus long term capital gain, once
again the list has not been furnished to prove that the
name of the company in which the assessee invested also
finds a place. Unless, the AO confronted with the
information possessed by him to the assessee for his
comments, no addition can be made only on the basis of
some allegation that the assessee may be one of the
beneficiary of the organized rocket of bogus long term
capital gain. … Further, the AO as well as the CIT(A had
referred to investigation in the order of assessment in
respect of companies situated in Kolkata. … But, the
______________
https://www.mhc.tn.gov.in/judis
evidence placed before us shows that the authorities
failed to note that the company is situated in Chennai and
there is no link to any of Kolkata companies involved in
the bogus long term capital gain scam. Since, the
company 'situated in Chennai and also present for more
than 21 years, the assessee felt that the prospect of
pharmaceutical industry would be good and therefore
invested in the company. Another important point to be
considered is that the company was listed in the BSE on
26.06.2013 at Rs.7.77 per share. Unlike other companies
as mentioned by the AO in the assessment order, this
company was not previously listed as on the date of
purchase of shares. The shares were purchased through
private placement before the list and on the basis of
optimism of the assessee with respect to the growth of
pharmaceutical industry….
9.8. … yhe AO totally ignored the genuine documents
produced before him and passed the Assessment Order on
a sweeping statement without any material evidence or
fact on record. … In our considered view, on the basis
suspicion, modus operandi, preponderance of human
probabilities, the claim of assessee cannot be discarded,
unless specific evidences are brought on record to
controvert voluminous evidences filed by the assessee. …
______________
https://www.mhc.tn.gov.in/judis
9.9. The assessee has submitted some additional
documents before the Ld. CIT(A) along with an application
for admission of additional evidence under Rule 46A of the
IT Rules (pages 399 to 440 of PB No.2). They are the
details of the assessee's shareholding as on 31.03.2013
and 31.03.2014 issued by MK Global Financial Services
Limited and the ledger account of the assessee in the
books of Aryan Share and Stock Brokers Limited for the
period 01.04.2014 to 31.03.2015 and MK Global Services
Limited. The contract notes issued by the aforesaid share
brokers are there in pages 404 to 434 of PB No.2. The
CIT(A) refused to admit these documents as additional
evidence for the reason that there is no cause shown by
the Assessee as to why these documents could not be
placed before the AO. A Look at the Assessment Order
would show that the proceedings were concluded on 30th
December, 2016. The documents were called for by the
AO only at fag end of the Assessment Proceedings and
therefore could not be placed before him at that point of
time. It is however relevant to note that the AO has not
disputed the purchase or the sale of the shares.
Therefore, in effect even though the contract notes were
not placed before the AO in the course of Assessment
Proceedings the AO has accepted the purchase and sale of
the shares. Thus, these documents are only support the
______________
https://www.mhc.tn.gov.in/judis
statement already made by the Assessee in the course of
the Assessment Proceedings which statement is 7 not
disputed by the AO.
9.10. …The AO failed to bring on record any evidence
indicating bogus transactions. … All these transactions
are through proper banking channels, Dematted and
subjected to securities transaction tax. When the pre-
requisite conditions imposed by the legislature stands
complied in toto, the AO cannot proceed to treat the same
as bogus and disallow the same solely based on the fact
that the shares prices went up substantially. More
importantly, said company Mahavir Remedies haven't
been termed as SHELL Company which involved in
unlawful trading of scripts.”
20. Since the ITAT has deleted the addition on the basis of
pure finding of fact, we hereby hold that the same does not give
rise to any question of law, much less any substantial question of
law and, therefore, we answer the last and fourth question of law
against the appellant/department.
______________
https://www.mhc.tn.gov.in/judis
In view of the foregoing discussion, the appeal being devoid of
merits is hereby dismissed. No order as to costs. Consequently,
interim application stands closed.
(SUSHRUT ARVIND DHARMADHIKARI,CJ) (G.ARUL MURUGAN,J)
30.04.2026
Index : No
Neutral Citation : No
sasi
______________
https://www.mhc.tn.gov.in/judis
THE HON'BLE CHIEF JUSTICE
AND
G.ARUL MURUGAN,J.
(sasi)
30.04.2026
______________
https://www.mhc.tn.gov.in/judis
