DCIT Vs Varun Vimlesh Mehta (ITAT Mumbai)
Suspicion Cannot Replace Proof — ITAT Rejects Penny-Stock Theory, Deletes ₹3.94 Cr Addition
The Mumbai ITAT dismissed the Revenue’s appeal and upheld the CIT(A)’s deletion of a ₹3.94 crore addition made under Section 69A by treating the assessee’s LTCG on Banas Finance Ltd as bogus. The Tribunal noted that the assessee’s case was supported by end-to-end documentary proof: preferential allotment, ₹20 lakh payment through banking channels, dematerialisation, share split (1:10), and eventual sale of 10 lakh shares through a recognised stock exchange via SEBI-registered broker with contract notes and bank credits. It held that the Assessing Officer did not dispute these primary evidences and proceeded largely on investigation inputs, third-party statements and alleged price-pattern analysis, without meaningful verification or allowing cross-examination. The ITAT further observed that SEBI’s order dated 27.04.2018 neither named the assessee nor characterised Banas Finance Ltd as a “penny stock” or established price rigging for the assessee’s sale period. The Tribunal also relied on the co-ordinate bench decision in the case of the assessee’s brother on identical facts, and noted the ITAT’s earlier order in Banas Finance Ltd’s own case upholding genuineness of preferential share allotments. On these facts, it concluded that suspicion, price rise, or “human probability” cannot substitute legal proof, and therefore the deletion of addition was affirmed and the Revenue’s appeal dismissed.
