PCIT Vs Gopalbhai T Patel (HUF) (Gujarat High Court)
The Gujarat High Court dismissed the tax appeal filed by the Revenue under section 260A of the Income-tax Act, 1961, holding that no substantial question of law arose from the order of the Income Tax Appellate Tribunal. The dispute related to an addition of ₹7,15,679 made by the Assessing Officer on account of alleged unexplained income from sale of shares of Global Capital Markets Limited, treated by the Revenue as a penny stock transaction generating bogus long-term capital gains.
The assessee had filed the return of income for Assessment Year 2011–12 declaring taxable income of ₹4,85,210. The assessment was reopened based on information alleging transactions in the said penny stock. After issuing notices under sections 133(6) and 148, and completing reassessment proceedings, the Assessing Officer disallowed the entire sale consideration of ₹7,15,679 as unexplained income. The disallowance was primarily based on general information suggesting manipulation in penny stock transactions, without specifying the source of such information or confronting the assessee with any incriminating material.
In response, the assessee furnished detailed documentary evidence, including bank statements, demat account records, broker contract notes, and ledger accounts. It was explained that the shares were purchased in March 2003, held for more than seven years, and sold in September 2010 through the Bombay Stock Exchange with payment of Securities Transaction Tax. The assessee also pointed out factual inconsistencies, including double consideration of sale entries by the Assessing Officer.
