Case Law Details
ITO Vs Sanjay Mahabir Maheshka (ITAT Mumbai)
In a significant development, the Income Tax Appellate Tribunal (ITAT) in Mumbai has ruled in the case of ITO Vs Sanjay Mahabir Maheshka concerning ‘Unexplained Income’ under section 68 of the Income Tax Act. This case has created ripples in the taxation landscape, particularly concerning the sale and purchase of shares through a Demat account.
Background: The Revenue was aggrieved by the CIT(A)’s deletion of additions made under section 68, which relates to unexplained income from sale proceeds of shares. The Assessing Officer had labeled the income from sale of shares as “bogus” based on reports suggesting price manipulation in ‘penny stocks’, including the ones held by the assessee.
The Assessee’s Defense: Sanjay Mahabir Maheshka argued that he had bought and sold shares through a registered stock broker and that all transactions were conducted via a Demat account and banking channels. The assessee thereby contended that there was no reason to suspect the declared capital gains.
Role of Investigation Wing and Assessing Officer: The Assessing Officer relied on the Investigation Directorate’s report, which indicated price manipulation in ‘penny stocks’, including the one the assessee dealt in. Despite the assessee providing complete transaction details, the Assessing Officer classified the income as “unexplained” under section 68.
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