Ramesh Rikhavdas Shah Vs ACIT (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai ruled in favor of the assessee, Ramesh Rikhavdas Shah, setting aside the additions made by the Assessing Officer (AO) for Assessment Years (AYs) 2014-15 and 2015-16. The case involved long-term capital gains (LTCG) on the sale of shares of M/s Midland Polymers Limited, which the AO deemed to be part of a penny stock scheme. The AO treated the sale proceeds as unexplained income under Section 68 of the Income Tax Act, 1961, and also estimated commission expenses for obtaining alleged bogus gains. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, leading to an appeal before the ITAT.
The AO’s case was based on an investigation report from the Income Tax Department’s Kolkata wing, which suggested that the share prices of Midland Polymers were manipulated. However, the ITAT noted that the AO had not conducted any independent inquiry or produced concrete evidence linking the assessee’s transactions to the alleged scam. The Tribunal emphasized that the assessee had conducted all transactions through a recognized stock exchange, provided complete documentary evidence, and received payments through legitimate banking channels. There was no indication that the assessee was part of any price-rigging operation.
