ITAT Deletes Bogus LTCG Addition on Green Crest Shares; Suspicion Cannot Replace Evidence

Jinesh Prakash Thakkar Vs ITO (ITAT Mumbai)

ITAT Deletes Bogus LTCG Addition on Green Crest Shares; Suspicion Cannot Replace Evidence

The Mumbai ITAT deleted an addition of ₹69.89 lakh made by the Assessing Officer on account of alleged bogus Long-Term Capital Gains from shares of Green Crest Financial Services Ltd. The reassessment was based on a statement of the company’s director alleging that the scrip was a penny stock. The Assessing Officer treated the exempt LTCG claimed under section 10(38) as unexplained income, primarily on the ground that the company lacked strong financial fundamentals and that the shares had been purchased in physical form.

The Tribunal found that the assessee had purchased the shares in 2012, held them for more than three years, and sold them through a recognized stock exchange after paying STT. The purchases and sales were fully supported by share certificates, contract notes, broker ledger accounts, and bank statements, with all payments and receipts routed through banking channels. The Tribunal held that once the assessee had discharged the primary onus by producing documentary evidence, it was for the Revenue to establish that the transactions were sham. Mere reliance on the “penny stock” tag, without any evidence of cash circulation or the assessee’s involvement in accommodation entries, could not justify the addition. Following earlier decisions involving the same scrip, including Sacchanand Hiralal Lalwani, the Tribunal deleted the entire addition.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. Aforesaid appeal by assessee for Assessment Year (AY) 2016-17 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 30.01.2026 in the matter of an assessment framed by Ld. AO u/s 147 r.w.s. 144B of the Act on 16.05.2023. The sole grievance of the assessee is confirmation of addition of Rs.69.89 Lacs. The Ld. AR advanced arguments and referred to various decisions of Tribunal to support the case of the assessee. The Ld. Sr. DR, on the other hand, referred to the findings of lower authorities. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.

2. The assessee field return of income on 30.07.2016. However, the case was reopened and a notice u/s 148 was issued on 19.05.2021 on the allegation that the assessee traded in shares of M/s Green Crest Financial Services Ltd. (in short ‘M/s Green Crest’) and booked bogus Long-Term Capital gains for Rs.71.20 Lacs. The allegation was based on statement of director of that entity i.e., Shri Sushil Parikh recorded us 132(4) wherein he admitted that this entity was a penny stock traded on the stock exchange. After the decision of Hon’ble Supreme Court in the case of UOI vs. Ashish Aggarwal (138 Taxmann.com64). notice u/s 148 was again issued to the assessee and the assessee was directed to explain the said transaction. The assessee defended its claim and finished copy of share certificate, purchase bills of shares, bank statements and sale contract notes. The said gains were offered as capital gain but claimed to be exempt u/s 10(38). However, alleging that the said entity had no strong financials as well as future potential growth, there was no justification for such kind of investment by the assessee. Moreover, the shares were purchased in physical mode. Finally, the exempt capital gain claim of the assessee was rejected and sale consideration of Rs.69.89 Lacs was treated as undisclosed income of the assessee. The Ld. CIT(A) confirmed the action of Ld. AO against which the assessee is in further appeal before us.

3. From the fact, it emerges that the assessee has purchased the shares of M/s Green Crest way back on 09.03.2012 and sold the same on 30.06.2015, 10.07.2015 & 29.07.2025. The assessee has held the shares for substantial period of more than 3 years. The purchase consideration was paid through banking channels and the purchases are duly supported by purchase contract notes (Page No.51 of the paper book). The sale of scrip is duly evidenced by sale contact notes and the sale consideration has been received through banking channels only. The sale has taken place on recognized stock exchange and the assessee has duly paid Securities Transaction tax (STT) on sale transactions. The sale is duly evidenced by broker ledger as placed on record. On these facts, it could be well said that the onus of the assessee, as required under law, stood discharged and it was the onus of revenue to refute the claim of the assessee. However, the same was not done. The whole basis of rejecting the claim is mere allegation that the assessee dealt in a penny stock whose financials were not strong enough. However, the statement of director of M/s Green Crest does not specifically implicate the assessee. It is trite law that no addition could be made on mere presumptions and assumptions. The Ld. AO has not brought on record any evidence of cash exchange in lieu of sale consideration. Therefore, the impugned addition could not be sustained in law as held in various decisions of Tribunal relating to same script. The copies of the same have been placed on record. In the latest decision of Nagpur Bench of Tribunal in Sacchanand Hiralal Lalwani (ITA No.388/Nag/2024; dated 15.04.2026), the bench referred to various other decisions and finally deleted the impugned additions on identical facts. This case law deals with the case of trading in M/s Green Crest only. Therefore, respectfully following the same, we would delete the impugned addition. No other ground has been urged in the appeal.

4. The appeal stands partly allowed.

Order pronounced on 18^th June, 2026