Gitaben Dineshbhai Patel Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad Upholds Addition on Penny Stock Gains — Reopening Valid & LTCG Held Bogus u/s 68
Assessee filed an appeal against the order of CIT(A), NFAC, confirming addition of ₹93,92,789/- u/s 68. The addition represented Long-Term Capital Gain (LTCG) on sale of shares of Kushal Tradelink Ltd., claimed exempt u/s 10(38). AO, based on information from the Investigation Wing & SEBI findings, held that the company was a penny stock used for providing accommodation entries & treated the LTCG as unexplained income.
Before CIT(A), Assessee contended that the reopening u/s 147 was mechanical, based on borrowed satisfaction, & that all share transactions were genuine, supported by contract notes, demat & bank statements. It was argued that no adverse material specific to Assessee was brought on record & that similar additions in related cases (like Pranav Mahendrabhai Patel v. NFAC) had been deleted. CIT(A), however, upheld both the reopening & the addition, relying on the SEBI order on price manipulation in Kushal Tradelink Ltd. & on Gujarat High Court’s decision in Backbone Projects Ltd. v. ITO (131 taxmann.com 80), holding that credible information from the Investigation Wing was sufficient basis for reopening.
On further appeal, Tribunal held that the reopening was valid as AO had tangible information from investigation, verified the material independently, & recorded satisfaction that income had escaped assessment. The reassessment, therefore, could not be termed mechanical or based on borrowed satisfaction.
