Jay Hansraj Chheda Vs ITO (ITAT Mumbai)
These cross appeals were filed by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, for Assessment Year 2015-16. The dispute concerned addition under Section 68 of the Income Tax Act, 1961, in respect of long-term capital gain (LTCG) from sale of shares of M/s. Pine Animation Ltd., alleged to be a penny stock, and addition under Section 69C towards estimated commission expenses.
The assessee, an individual, filed his return declaring income of Rs.3,92,540/-. During scrutiny, the Assessing Officer (AO) noted that the assessee had earned LTCG of Rs.3,93,92,775/- on sale of shares, claimed exempt under Section 10(38). The AO determined total income at Rs.4,10,07,180/- by making addition of Rs.3,98,18,275/- under Section 68, treating the sale proceeds as unexplained cash credit, and Rs.7,96,365/- under Section 69C as commission allegedly paid at 2%.
The assessee had purchased 1,50,000 equity shares of M/s. Pine Animation Ltd. on 15.03.2013 for Rs.15,00,000/- through preferential allotment at Rs.10 per share. The shares were later split in a 1:10 ratio, resulting in 15,00,000 shares of face value Rs.1 each. Between 07.04.2014 and 10.07.2014, the assessee sold shares for Rs.3,98,18,275/- and claimed LTCG exemption. The assessee contended that transactions were conducted through stock exchange, supported by contract notes, demat statements, and banking records. It was argued that the primary onus was discharged and no opportunity of cross-examination was provided despite reliance on statements of alleged entry operators. Reliance was also placed on a SEBI order dated 19.09.2017, stating that no adverse findings were recorded against 114 entities, including the assessee, in relation to manipulation of the scrip.
