Sameer Shah (HUF) Vs ITO (ITAT Rajkot)
ITAT Rajkot Allows Tuni Textile LTCG: Genuine Demat-Based Share Deal Beats “Penny Stock” Allegation – Addition Deleted in Full
In this case, Assessee (Sameer Shah HUF) claimed exemption of Long-Term Capital Gain u/s 10(38) on sale of shares of Tuni Textile Ltd. for AY 2013-14. AO reopened the assessment u/s 147, treated the LTCG as bogus penny stock accommodation entry, & made an addition of ₹39,90,501 u/s 68, without disproving the documents furnished by Assessee. NFAC/CIT(A) upheld the addition relying on general allegations of penny stock modus operandi, without addressing the actual evidence. Assessee argued multiple legal violations: no opportunity of hearing, no disposal of objections as mandated in GKN Driveshaft (SC), no cross-examination of adverse material (violating Andaman Timber Industries SC), & complete reliance on suspicion & “preponderance of probability” without any concrete evidence. It was also argued that jurisdictional Gujarat High Court decisions allow LTCG when documentation is complete, & Swati Bajaj (Calcutta HC) cannot override binding Gujarat HC & ITAT precedents.
At Tribunal, Assessee relied on a binding coordinate bench decision in Shah Parag Gulabchand (ITA 272/RJT/2023 dated 31.07.2024) involving the same scrip (Tuni Textile), where LTCG was accepted as genuine after examining contract notes, demat statements, bank entries, holding period exceeding 12 months, & STT payment. Tribunal noted that in the present case also, all conditions of section 10(38) were fulfilled:
- Shares purchased via account payee cheque,
- Shares held in demat for more than 12 months,
- Shares sold through recognised stock exchange with STT,
- Bank statements, contract notes, ledger, demat statements, & investment schedule were all provided.
Tribunal observed that AO never disputed the documents nor brought any independent evidence to prove price rigging, cash trail, or involvement in bogus LTCG schemes. There was no statement or SEBI/investigation report involving Assessee, & no third-party evidence linking him to any scam. The lower authorities ignored binding Gujarat High Court decisions such as Champalal Gopiram Agarwal (2023), Mamta Rajivkumar Agarwal (2023), Ambalal Chimanlal Patel (2024) which held that genuine demat-based, cheque-paid, STT-paid share transactions cannot be treated as bogus merely on suspicion.
