Poornima Ramesh Shenoy Vs ITO (ITAT Mumbai)
ITAT Mumbai held that addition u/s 68 unsustainable as department failed to establish that assessee was involved in price manipulation even after purchasing and selling the shares on the stock exchange through SEBI registered stock.
Facts- The assessee is an individual and for the year under consideration filed the return of income on 13/04/2015, declaring a total income of Rs. 20,480/-. The return filed by the assessee was selected for scrutiny and statutory notices u/s. 143(2) as well as Section 142(1) of the Income Tax Act were issued and served on the assessee.
During the assessment proceedings, it was observed that the assessee has shown long-term capital gains of Rs. 5,47,190/- on the sale of shares of Pearl Agriculture Ltd. and Pearl Electronics Limited and claimed the same as exempt u/s. 10(38) of the Act.
AO vide order passed u/s. 143(3) of the Act by placing reliance upon the investigation carried out by the Directorate of Investigation, the financial position of the Companies in whose shares assessee had transacted and fluctuation in the share rates in a short span of time concluded that the assessee had earned long-term capital gains from the sale of penny stocks. Accordingly, the AO disallowed the exemption of long-term capital gains claimed u/s. 10(38) of the Act and made the addition of Rs. 5,47,190/- u/s. 68 of the Act.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that it was specifically submitted that the assessee has never invested through preferential allotment and also disclosed the name and address of the broker, i.e. HDFC Securities Ltd. However, the AO without finding any fault with the evidence submitted by the assessee proceeded to treat the transaction as non-genuine and the long-term capital gains earned by the assessee as bogus. Further, we find that the SEBI vide its order dated 26/06/2020, had conducted an enquiry into the manipulation of the price of the scrip of Mystic Electronics Limited, by certain operators and the entities connected to such operators. From the perusal of the said order, which was furnished during the course of the hearing, we find that there is no allegation that the assessee has transacted with the alleged operators or their entities for earning the long-term capital gain of Rs.5,47,190. In the absence of any other allegation of the Revenue, we find no merits in the impugned order upholding the addition of Rs.5,47,190, made under section 68 of the Act and disallowing the exemption of long-term capital gains earned by the assessee. Accordingly, the grounds raised by the assessee are allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal has been filed by the assessee challenging the impugned order dated 16/12/2022, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2014-15.
2. In this appeal, the assessee has raised the following grounds:-
