PCIT Vs Neelu Mahansaria (Gujarat High Court)
The Gujarat High Court dismissed the Revenue’s tax appeal filed under Section 260A of the Income Tax Act, 1961, challenging an order of the Income Tax Appellate Tribunal, Surat, for Assessment Year 2015–16. The Assessing Officer had completed scrutiny assessment by making additions of ₹25.26 lakh under Section 68 as undisclosed income from sale of shares of Mishka Finance & Trading Ltd., treated as a penny stock, and ₹1.26 lakh under Section 69C as unexplained commission expenditure. The Tribunal deleted both additions, holding the share transactions to be genuine.
Read SC Judgment in this case: 154-Day Delay: SC Dismisses Revenue Plea in Penny Stock Addition Case
Before the High Court, the Revenue raised multiple questions alleging that the Tribunal erred in accepting the transactions as genuine despite alleged abnormal price movements unsupported by financial fundamentals, and in ignoring circumstantial evidence and probabilities suggesting price manipulation and bogus long-term capital gains. It was also argued that commission payments were stage-managed to facilitate introduction of unaccounted income.
The High Court noted that identical issues for Assessment Year 2014–15 had already been decided against the Revenue, and that appeal had been dismissed earlier. Relying on the Tribunal’s findings, the Court observed that the assessee had produced complete documentary evidence, including contract notes, demat statements, bank details, and records of bonus shares. No adverse material was found by SEBI in its investigation into the company, and no allegation of price manipulation was made against the broker. Transactions were conducted through the BSE with payment of securities transaction tax. In the absence of cogent contrary evidence, the Court held that no substantial question of law arose and dismissed the appeal.
