ITAT Ahmedabad Quashes Reassessment and Rejects Section 68 Addition Where Kushal Limited Share Trading Profit Was Duly Disclosed
1. Overview of the Dispute
The Ahmedabad Bench of the Income Tax Appellate Tribunal, in ACIT Vs Shital Omprakas Agrawal (I.T.A. Nos. 2240/Ahd/2025), dismissed both Revenue appeals relating to Assessment Years 2017-18 and 2018-19 and simultaneously allowed the assessee's cross objections. The central question was whether the reopening of an assessment already completed under Section 143(3) was valid when the very income alleged to have escaped assessment had in fact been returned and taxed. The Tribunal answered in the negative and went further to hold that the substantive addition under Section 68 read with Section 115BBE was equally unsustainable on the merits.
Since the facts and legal issues for both assessment years were identical, the Tribunal disposed of all proceedings through a common order, treating the Revenue's appeal in I.T.A. No. 2240/Ahd/2025 as the lead matter.
2. Background: How the Reassessment Was Initiated
The reassessment proceedings trace their origin to information that appeared on the Income Tax Department's Insight Portal. According to that information, the assessee — a resident individual — had allegedly benefited from accommodation entries through transactions in shares of Kushal Tradelink Limited, generating a profit of ₹60,37,086.
The Assessing Officer observed that the assessee's computation of income showed nil capital gains and, on that basis, concluded that the profit from these share transactions had not been disclosed. Proceeding on this premise, he formed the view that income had escaped assessment due to a failure on the assessee's part to fully and truly disclose all material facts, and accordingly reopened the assessment under Section 147 of the Income Tax Act, 1961. A notice under Section 148 was issued on 27.04.2021, in response to which the assessee filed a return declaring total income of ₹2,04,00,940.
3. What the Assessee Demonstrated During Reassessment
During the reassessment proceedings, the assessee was called upon to establish the genuineness of transactions in the Kushal Limited scrip. She furnished the following documents in support:
- Demat account statements reflecting both purchases and sales of shares
- Contract notes for each purchase and sale transaction
- Bank statements evidencing the flow of funds for these transactions
Her case rested on the fact that all transactions were executed through a recognised stock exchange, that securities transaction tax had been paid on both legs, and that all payments and receipts moved through regular banking channels. She also pointed out that she had purchased shares in a price range of ₹103 to ₹293, far above the face value of ₹2, which undermined the suggestion that she had entered at manipulated prices.
The Assessing Officer disregarded this documentary evidence. He relied instead on information received from the Investigation Wing concerning an alleged price-rigging exercise in Kushal Limited shares, and on a SEBI adjudication order dated 22.12.2017 passed against certain persons in connection with share-price manipulation. He noted that the share price of Kushal Limited had moved from its face value of ₹2 on 03.09.2015 to ₹469 on 13.02.2017, a movement he considered inconsistent with the broader BSE Sensex trend. On this basis, he concluded that the assessee had taken an accommodation entry in the form of bogus profit and made an addition of ₹60,37,086 under Section 68 read with Section 115BBE.
4. The Order Passed Under Section 148A(d)
The Tribunal reproduced the relevant concluding portion of the order passed by the Assessing Officer under Section 148A(d) of the Act: