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.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals)-10, Mumbai, vide order dated 07.03.2025 relevant to the Assessment Year 2012-13.
2. The Revenue has raised the following grounds of appeal:
(1) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.1,42,200/- considering the investment in Penny Stock namely M/s.VMS Industries Limited.
(2) The Appellant craves leave to add, later and/or to amend all any the ground before the final hearing of the appeal.
3. The Revenue made an addition of Rs.1,42,200/- on account of the profit and out of Penny Stock. However, the Revenue absolutely failed to bring on record any iota of evidence that the assessee has indeed purchased and sold stock and received monies in his account. In the absence of any cogent evidence to prove that the assessee has received monies or engaged in the sale of stock, no addition can be made in this case.
4. In the result, the appeal of the Revenue is dismissed.
The order is pronounced in the open Court on 07.10.2025.
