PCIT Vs Vishwanath Singhal (Delhi High Court)
The Revenue challenged an order of the Income Tax Appellate Tribunal (ITAT) that had dismissed its appeal concerning transactions undertaken by the assessee through brokers Karnam Securities Limited and Lifeline Securities Limited. According to the Assessing Officer, these brokers had arranged forged and bogus share transactions for the assessee, amounting to an organized tax evasion scheme involving shares of Eicher Motors Ltd.
The Revenue contended that the Tribunal wrongly dismissed the appeal by merely observing that the shares involved were not penny stocks and belonged to a listed company. It was argued that the Tribunal failed to consider the merits of the case and ignored clause (h) of paragraph 3.1 of CBDT Circular No. 5/2024 dated 15.03.2024.
The assessee argued that the Tribunal had dismissed the appeal not only because the tax effect was below the prescribed monetary limits but also on merits.
After examining the record, the Delhi High Court found that the Tribunal had not considered the merits of the case. The Court relied on the Tribunal’s own observation that the appeal had been dismissed “without going into the merits of the issue” on account of low tax effect.
The High Court observed that the Assessing Officer had alleged organized tax evasion through non-genuine share transactions. It held that such allegations fall within the exception provided under clause (h) of paragraph 3.1 of CBDT Circular No. 5/2024. The Court further held that the word “including” in the clause gives it a wide scope and that references to bogus capital gains/losses through penny stocks and accommodation entries are only illustrative examples, not limitations on the exception.
