Jignesh H Shah Vs DCIT (ITAT Mumbai)
Documentary Evidence Cannot Be Disregarded Merely by Branding Shares as Penny Stock: Mumbai ITAT Deletes ₹68.41-Lakh Addition
The assessee earned long-term capital gains of ₹68,41,479 from the sale of shares of Sunrise Asia Ltd. and claimed exemption under Section 10(38). The Assessing Officer treated the transaction as bogus penny-stock accommodation and made an addition under Section 68, besides adding estimated commission of ₹2,73,660 under Section 69C.
The Mumbai ITAT noted that the assessee had produced complete supporting evidence, including purchase and sale contract notes, demat statements and bank statements establishing payments for purchase and receipt of sale consideration. The AO did not identify any specific defect in these documents and relied merely on a third-party investigation report without bringing independent evidence connecting the assessee with any price manipulation or accommodation-entry arrangement.
The Tribunal further observed that identical additions concerning the same scrip had been deleted in several decisions. It particularly relied upon the Gujarat High Court ruling in PCIT v. Divyaben Prafulchandra Parmar, against which the Revenue’s SLP had been dismissed by the Supreme Court.
Following the principles of judicial consistency and binding precedent, the Tribunal directed deletion of the ₹68.41-lakh addition under Section 68 and the consequential ₹2.74-lakh commission addition under Section 69C. The assessee’s appeal was allowed.
