DCIT Vs Suresh Kumar Jain (ITAT Delhi)
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), dated 27.11.2024 for Assessment Year 2014–15.
The assessee had purchased 6000 shares of M/s. Kappac Pharma Ltd. on 27.11.2012 at ₹13 per share for a total consideration of ₹78,000 in physical form. These shares were later transferred to the demat account of the assessee. During February 2014, the assessee sold 4300 shares for a total consideration of ₹29,94,700 and claimed the resulting Long-Term Capital Gain (LTCG) as exempt.
The Assessing Officer reopened the assessment under Section 147 read with Section 144B and disallowed the exemption claimed on LTCG. The addition was made solely on the basis of information received from the Investigation Wing, Kolkata, which classified the shares of M/s. Kappac Pharma Ltd. as penny stock. The Assessing Officer treated the entire LTCG as bogus and added the amount as unexplained money under Section 69A.
In the assessment order, the Assessing Officer elaborated on the general characteristics of penny stock transactions, including price manipulation, role of brokers, and artificial rigging of share prices to reduce tax liability. However, the order did not establish any direct link between the assessee or its broker and such alleged activities. There was no finding that the transactions were premeditated or manipulated.
