ITO Vs Legal Heir of Arvindkumar Sevantilal Shah (ITAT Ahmedabad)
Revenue filed an appeal against the order of the CIT(A) challenging deletion of an addition of ₹1,42,200 made on account of alleged penny stock transactions in the scrip of M/s VMS Industries Ltd.
AO had treated the profit from the sale of shares as bogus, presuming the transaction to be part of a penny stock accommodation entry scheme. AO alleged that Assessee had made investments and booked long-term capital gains from manipulative trading in the said scrip.
Tribunal’s Observations/Decision
Tribunal noted that the Revenue had failed to produce any concrete evidence to show that Assessee had either purchased or sold any such shares of VMS Industries Ltd., or that any amount was credited to his bank account in connection with such transactions.
There was no documentary trail-no contract notes, no demat statements, no broker confirmations, or any other material linking the assessee to the alleged penny stock. Bench observed that in the absence of any “cogent or corroborative evidence”, the addition could not stand merely on suspicion or generalized reports of penny stock manipulations.
ITAT upheld the order of the CIT(A) deleting the addition, observing that no addition can be sustained purely on presumption or allegation without actual evidence showing that the assessee participated in the alleged share transactions or received sale proceeds.
