Chimanbhai Chhaganbhai Vs ITO (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, on June 23, 2025, largely upheld an order by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, regarding the assessment of Chimanbhai Chhaganbhai for the Assessment Year 2012-13. The Tribunal confirmed the disallowance of a Long Term Capital Gain (LTCG) exemption claimed from penny stock transactions but remitted a separate addition for unexplained cash credit back to the Assessing Officer (AO) for re-examination.
The appeal, initially delayed by 36 days, was condoned by the ITAT after the assessee submitted an affidavit stating he was unaware of the CIT(A)’s order until receiving a recovery letter from the department.
Bogus Penny Stock Transactions
The core of the dispute revolved around the assessee’s claim of LTCG exemption under Section 10(38) of the Income Tax Act, 1961, amounting to ₹55,52,890. The Assessing Officer had received intelligence from the DDIT (Investigation), Calcutta, indicating that M/s. Jai Maa Kali Enterprise, owned by Shri Mukesh Kumar Gupta, was involved in suspicious cash transactions. Further investigation revealed that large cash deposits in this enterprise’s bank account were subsequently transferred to Mr. Ashok Kumar Kayan, a share broker who reportedly admitted to providing bogus LTCG and Short Term Capital Loss (STCL) entries. The assessee, Chimanbhai Chhaganbhai, was identified as a beneficiary who allegedly received accommodation entries totaling ₹59,18,118 from Mr. Kayan.
