ACIT Vs Paru Securities Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai upholds penny-stock loss as genuine – Revenue’s addition deleted
Assessee, a private limited company engaged in regular trading of shares & securities through BSE/NSE, filed return for AY 2012-13 declaring nil income after set-off of brought-forward business loss. During scrutiny, AO received Investigation Wing information alleging that Assessee had incurred a loss of ₹3,91,126 from sale of shares of M/s PFL Infotech Ltd., a penny stock used for accommodation entries. AO treated the loss as bogus, disallowed it, & reopened assessment.
During reassessment, Assessee submitted complete documentation including contract notes, demat statements, bank statements, & capital gain computation, showing that the transactions were routed through registered brokers on stock exchange & were part of normal trading activity. It also highlighted that no exemption u/s 10(38) was claimed as the income/loss was offered under business head. AO, however, rejected the claim merely based on a third-party statement of one Naresh Jain, who, in a different search, had admitted to price manipulation in PFL Infotech. No evidence linked Assessee to Naresh Jain or any accommodation entry. AO disallowed the loss.
CIT(A) carefully analysed the evidences & found the loss to be genuine. He noted that Assessee had also purchased additional shares of PFL Infotech during the same year, indicating normal trading behaviour. Moreover, the SEBI report cited by Revenue showed the manipulation period as 01.07.2013 to 13.04.2016, whereas the assessee’s transactions took place much before this period. Since no adverse finding or involvement of Assessee was established, the CIT(A) deleted the disallowance.
