Rasila Lalitkumar Cholera Vs ITO (ITAT Mumbai)
Penny Stock LTCG Addition Deleted – Mere Investigation Report Insufficient Without Direct Evidence Against Assessee – ITAT Mumbai
The assessee challenged additions made in reassessment proceedings relating to alleged bogus long-term capital gain from shares of SVC Resources Ltd., which the AO treated as penny stock accommodation entries. The AO taxed the entire sale proceeds of ₹6.15 lakh u/s 68 and also added ₹12,309 as unexplained expenditure u/s 69C alleging commission payment to entry operators.
Before ITAT, the assessee demonstrated that shares were purchased through recognized channels, held for more than three years, and sold through demat account with payments routed via banking channels. The Tribunal noted that although the investigation wing flagged the scrip as penny stock, no specific evidence linked the assessee to price manipulation or accommodation entry network. Relying only on abnormal price rise or general reports without direct incriminating material cannot justify addition.
ITAT held that suspicion, however strong, cannot substitute proof. Since documentary evidence such as contract notes, demat records and bank statements remained uncontroverted, additions made u/s 69A/69C were unsustainable. Accordingly, the Tribunal deleted the entire addition and allowed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
