No direct evidence linked assessee to bogus LTCG: Nagpur ITAT deleted addition
Recently, Nagpur ITAT in the case of Dy. Commissioner of Income Tax (Central Circle–1(1), Nagpur) v. Shri Sanjay Gaurishankar Agrawal
[ITA No. 109/Nag/2019 | AY 2014–15 | Order Date: 03 April 2025 | ITAT Nagpur Bench] has deleted the addition of bogus LTCG by holding that there is no direct evidence linked to assessee.
Let us have a Short Overview of the case:
1. Background:
The assessee, Shri Sanjay Gaurishankar Agrawal, received ₹3.30 crores as unsecured loans from M/s Anubhav Vinimay Pvt. Ltd. in AY 2014–15. A search under Section 132 revealed documents indicating transactions with Kolkata-based companies. In the assessment under Section 143(3) read with 153A, the AO made two additions under Section 68:
₹3.30 crores as unexplained unsecured loans.
₹95.60 lakhs as bogus Long Term Capital Gains (LTCG) from shares of M/s Esaar (India) Ltd.
2. Revenue’s Contentions:
The lender’s creditworthiness was questionable as its share premium funds were allegedly from unverified sources.
The assessee only submitted basic documents (confirmation, bank statements) without substantive proof.
Esaar (India) Ltd. was a penny stock used for accommodation entries; price surge was unnatural.
Third-party statements recorded during the Kolkata investigation indicated manipulation by entry operators.
3. Assessee’s Arguments:
The loan was through banking channels, supported by confirmations, audited financials, and ITRs.
Part repayment of the loan and consistency with past assessments showed genuineness.
Shares were bought via account payee cheque, demat delivery was taken, and sold on BSE through a registered broker.
AO violated natural justice by relying on third-party statements without cross-examination, citing SC rulings in Andaman Timber Industries and Sunita Dhadda.
Strong suspicion is not a substitute for evidence (Umacharan Shah & Bros., Lavanya Land Pvt. Ltd.).
4. Tribunal Observations:
Assessee discharged the initial onus under Section 68 by furnishing credible documents.
Revenue should have investigated the lender instead of assuming the funds were unexplained.
AO’s selective application of Section 68 (ignoring ₹11.75 crore opening balance) was arbitrary.
No direct evidence linked assessee to bogus LTCG; denial of cross-examination vitiated the AO’s reliance on third-party statements.
The documentary trail of the LTCG transaction was intact and un-refuted by the Revenue.
5. Conclusion & Decision:
The ITAT upheld the CIT(A)’s deletion of both additions:
₹3.30 crores unsecured loan: Genuine, supported by evidence, and not rebutted by AO.
₹95.60 lakhs LTCG: Valid transaction with supporting records; denial of cross-examination was fatal to Revenue’s case.
With this, the appeal was dismissed
The copy of the order is as under:
