Sonal Ashish Shah Vs ITO (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune has delivered a significant ruling in the case of Sonal Ashish Shah vs. ITO, reversing the decision of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] to add the full sale consideration from the sale of shares of Blazon Marbles Limited to the assessee’s income. The case, pertaining to the assessment year 2014-15, centered on the genuineness of short-term capital gains declared by the assessee from the sale of what the revenue authorities labeled a “penny stock.”
The assessee, Sonal Ashish Shah, filed her return for the assessment year 2014-15, declaring various sources of income, including a short-term capital gain of Rs. 2,87,979 from the sale of 16,000 equity shares of Blazon Marbles Limited. This transaction was scrutinized by the AO, who, without providing specific evidence of the assessee’s involvement in a fraudulent scheme, concluded that the shares were “penny stock.” Consequently, the AO added the entire sale consideration of Rs. 5,50,059 to the assessee’s income under Section 68 of the Income Tax Act, 1961, as an unexplained cash credit.
The assessee appealed this decision to the CIT(A), providing documentation to substantiate the genuineness of the transactions. These documents included contract notes from a registered stockbroker, proof that the shares were purchased and sold on a recognized stock exchange, and Demat account statements confirming the share transfers. Despite this, the CIT(A) upheld the addition, although re-classifying it as “Income from other sources” rather than “unexplained cash credit.” The CIT(A)’s decision relied on the judgment of the Hon’ble Calcutta High Court in CIT vs. Swati Bajaj and others and a list of 84 alleged penny stock companies issued by SEBI.
