Sterling Finvst Private Limited Vs DCIT (ITAT Kolkata)
AO Cannot Treat LTCG as Bogus While Accepting STCG from the Same Shares—Whimsical Approach Struck Down; Entire ₹53.24 Lakh Addition Deleted –
The Assessee filed appeal against the NFAC order dated 24.11.2023 sustaining the addition of ₹53,24,681 u/s 68 by treating long-term capital gain (LTCG) earned on sale of shares of Midland Polymer Ltd as bogus penny-stock gain. The Assessee had sold 1,20,000 shares held for more than a year, declared LTCG of ₹53.24 lakh and claimed exemption u/s 10(38). In the same year, the Assessee also earned short-term capital gain (STCG) of ₹65,96,424 on sale of 1,28,000 shares of the same company, which the AO accepted as genuine.
Tribunal noted the inherent contradiction in AO’s action—treating shares of Midland Polymer Ltd. as penny-stock for LTCG, while simultaneously treating sales of the same scrip as fully genuine when computing STCG. Tribunal held that such differential treatment of identical transactions in the same scrip is capricious, whimsical & devoid of logic.
The Bench observed that the AO accepted the entire factual matrix, trade pattern, holding period & contract notes for STCG, and there was no change in facts for the LTCG block. Hence, picking and choosing part of the transactions as bogus without any specific adverse material was legally unsustainable.
CIT(A) followed AO without addressing this contradiction. Tribunal found the reasoning wholly unacceptable and held that both gains arise from the same share, same broker, same year & same evidence, and therefore AO could not selectively treat one as sham.
Accordingly, the Tribunal set aside the CIT(A)’s order and directed deletion of the entire addition of ₹53,24,681.
The appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
