Amit Kumar Bajaj Vs DCIT (ITAT Mumbai)
Penny Stock LTCG Held Genuine: Additions u/s 68 & 69C Deleted for Lack of Assessee-Specific Evidence
The reassessment was reopened on the basis of an Investigation Wing report alleging that the assessee had taken accommodation entries in the guise of exempt long-term capital gains from sale of shares of Nouveau Global Ventures Ltd. The Assessing Officer treated the entire sale proceeds of ₹52.51 lakh as unexplained cash credit under section 68 and further added 3% commission under section 69C, mainly relying on abnormal price rise of the scrip, general penny-stock investigation findings, non-response of alleged exit providers to notices, and the test of human probabilities.
The Tribunal noted that key foundational facts were undisputed: the shares were purchased and sold through recognised stock exchange, held in demat form for more than one year, STT was paid, and sale proceeds were received through banking channels. These were supported by contract notes, demat statements and bank records.
It held that mere abnormal rise in share price or general investigation reports cannot by themselves make a genuine exchange-traded transaction bogus unless a live link is shown between the assessee and alleged entry operators. Statements of third parties were neither confronted to the assessee nor offered for cross-examination. Non-reply by buyer companies to section 133(6) notices could not be used against the assessee in screen-based exchange trading where the seller does not choose the counter-party.
The Tribunal rejected the AO’s reasoning that the assessee’s lack of regular share trading showed pre-planning, observing that occasional investment can also yield lawful capital gains. It further held that unsigned broker confirmation was immaterial when independent third-party evidence from depositories, stock exchange and banks substantiated the trades. No cash trail linking the assessee to any alleged accommodation entry was established.
Relying on the coordinate bench decision in Suresh Kumar Agarwal involving the very same scrip and the Supreme Court ruling in Kuntala Mohapatra, the Tribunal held that once purchase and sale through recognised exchange, demat holding and banking channel receipts are proved, addition cannot rest on suspicion and generalised modus operandi theories.
Accordingly, the long-term capital gain was accepted as genuine, the addition of ₹52.51 lakh under section 68 was deleted, and the consequential alleged commission addition under section 69C was also deleted. The assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
