Smt. R. Shobha Lodha Vs ITO (ITAT Chennai)
In the case of Smt. R. Shobha Lodha vs. ITO (ITAT Chennai), the issue revolves around the assessment of Long Term Capital Gain (LTCG) arising from the purchase and sale of shares, particularly focusing on the applicability of Section 68 of the Income Tax Act, 1961. The appeal arises from the order of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 24.03.2023, concerning the assessment year 2016-17, framed by the Income Tax Officer, Non-Corporate Ward 9(1), Chennai.
The crux of the matter lies in the treatment of the LTCG claimed by the assessee under Section 10(38) of the Act, which provides for exemption of such gains. The assessing officer (AO) reopened the assessment based on information received regarding the trading of a penny stock, Rekvina Laboratories Ltd., by the assessee. It was alleged that the assessee engaged in transactions aimed at evading tax by showing LTCG as exempt income. The AO, after thorough investigation, concluded that the assessee had merely routed her own money through the sale of shares, treating the entire sale consideration as income from other sources under Section 68 of the Act.
Upon appeal to the Commissioner of Income-Tax (Appeals) [CIT(A)], the action of the AO was confirmed. The CIT(A) observed various factors indicating suspicious activity, such as the absence of broker notes, the non-disclosure of transactions in the return of income, and the lack of trading activity in shares apart from this isolated transaction. Additionally, the appellant’s investment in a penny stock without adequate knowledge or research raised further suspicions of involvement in a cartel for managing accommodation entries.
