Sanjana Anil Agarwa Vs ITO (ITAT Mumbai)
KDJ Penny Stock Charge Fails — Mumbai ITAT Deletes ₹4.53 Cr Addition u/s 68 & 3% Commission
The Mumbai ITAT (G Bench) allowed the appeal of the Assessee for AY 2014-15 and deleted the addition of ₹4.53 crore made u/s 68 of the Income-tax Act by treating long-term capital gains on sale of shares of KDJ Holidays Scapes & Resorts Ltd. as bogus, along with consequential addition of 3% commission u/s 69C.
The Tribunal held that the Assessee had discharged the primary onus by producing complete documentary evidence, including preferential allotment letter, contract notes, demat statements, bank statements, and proof of sale through a recognised stock exchange with payment of STT. The shares were held for more than twelve months and sold in multiple tranches through a SEBI-registered broker.
It was noted that the AO made additions solely on the basis of investigation wing reports and general allegations of penny-stock manipulation, without carrying out any independent enquiry or bringing any material to link the Assessee with price rigging, entry operators, or cash circulation. Neither the Assessee nor her broker was shown to be involved in any manipulation, and no adverse material was confronted for cross-examination.
The Tribunal emphasised that suspicion, however strong, cannot replace proof, and third-party statements recorded behind the back of the Assessee cannot justify additions when primary evidence remains uncontroverted. Reliance was placed on jurisdictional and other High Court decisions, including Indravadan Jain (HUF), Himani M. Vakil and Parasben Kasturchand Kocher.
Following earlier co-ordinate bench decisions in cases involving the same KDJ scrip, the ITAT held that the Revenue failed to rebut the Assessee’s evidence. Consequently, both the addition u/s 68 and the ad-hoc commission addition u/s 69C were deleted, and the appeal was allowed in full
FULL TEXT OF THE ORDER OF ITAT MUMBAI
