India Max Investment Fund Private Limited Vs DCIT (ITAT Mumbai)
Capital Gains Accepted as Genuine Because Share Transactions Were Fully Supported by Documentary Evidence; Section 68 Addition Quashed Because Suspicion Cannot Replace Evidence; Penny Stock Allegation Rejected Because No Nexus With Accommodation Entry Operators Was Established; Additions Deleted Because Shares Were Purchased, Held and Sold Through Recognized Stock Exchange Mechanism; Section 69C Addition Deleted Because It Was Solely Consequential to Unsustainable Section 68 Addition.
The appeal arose from a final assessment order dated 28.12.2024 for Assessment Year 2019-20. The assessee challenged additions of Rs. 1,68,77,117 under Section 68 and Rs. 8,43,855 under Section 69C of the Income Tax Act.
The assessee had filed its return declaring total income of Rs. 2,60,650 and a current year loss of Rs. 83,93,89,455. The case was reopened based on information received from the Insight Risk Management System alleging that the assessee had traded in shares of International Conveyors Ltd., which was categorized as a penny stock and allegedly used for providing accommodation entries in the form of bogus capital gains and losses.
During reassessment proceedings, the assessee explained that it had earned long-term capital gains of Rs. 69,05,415 on sale of shares of International Conveyors Ltd. and had not claimed exemption under Section 10(38). It further stated that the shares were purchased through a recognized stock exchange in October and November 2010 and sold through the stock exchange in August 2018. The assessee, a Mauritius-based company registered as a Foreign Portfolio Investor (FPI) with SEBI, submitted that it had been investing in Indian capital markets since 2006 and furnished Demat statements, contract notes, custodian reports, and banking records supporting the transactions.
