PCIT Vs Mamta Rajivkumar Agarwal (Gujarat High Court)
Gujarat High Court considered a tax appeal filed by the Revenue challenging the order of the Income Tax Appellate Tribunal dated 11.11.2022 for Assessment Year 2013-14. The Revenue questioned the Tribunal’s decision deleting an addition of ₹39,37,423 representing Long-Term Capital Gains (LTCG) claimed as exempt under Section 10(38) of the Income-tax Act.
During assessment proceedings, the Assessing Officer noticed that the assessee had purchased 40,000 shares of Shree Nath Commercial and Finance Ltd. on 08.03.2011 for ₹8,94,323 and subsequently sold 80,000 shares for ₹48,31,746, resulting in LTCG of ₹39,37,423. A show cause notice was issued alleging that the transaction involved a penny stock scheme intended to claim a bogus exemption under Section 10(38). The Assessing Officer treated the purchase as bogus and added the LTCG amount to the assessee’s income.
The CIT(A), however, found that the assessee had produced documentary evidence including purchase and sale bills, broker accounts, bank statements, demat records, and proof of payment through banking channels. The shares were purchased through a recognized broker, credited to the demat account, held for more than one year, sold through a recognized stock exchange, and securities transaction tax (STT) had been paid. The sale proceeds were received through banking channels. The CIT(A) held that these independent and credible documents established the genuineness of the transactions and directed deletion of the addition.
