Bharat Balvantrai Goradia Vs ITO (ITAT Mumbai)
“Penny Stock” Label Cannot Replace the Bank & Demat Trail—ITAT Admits Fresh Evidence under Rule 29
The controversy
The assessee, Mr. Bharat Balvantrai Goradia, filed his return for AY 2011-12 declaring total income of ₹16,72,231.
The assessment was reopened by issuing notice u/s 148 on 29 March 2018 based upon information received from the DCIT, Central Circle, Mumbai. The information alleged that Comfort Intech Ltd. was a penny-stock company involved in providing accommodation entries through artificial share transactions.
The assessee was identified as one of its alleged beneficiaries. Based on the average purchase price, sale price & number of shares traded during FY 2010-11, the information suggested a bogus loss of ₹19,67,655.
The AO completed reassessment u/s 143(3) r.w.s. 147 and disallowed the short-term capital loss claimed by the assessee.
Share loss rejected on surrounding suspicion
The CIT(A) upheld both the reopening and the disallowance.
According to the appellate order, the assessee had purchased 2,65,500 shares of Comfort Intech Ltd. for ₹31,21,383 and sold them for ₹15,65,065.
The CIT(A) observed that the shares were purchased at a high price despite the company having no proven financial results. The price movement was not satisfactorily supported by prevailing market factors. The assessee was therefore held to have failed to establish the genuineness of the transaction.
