LTCG Addition Deleted as AO Failed to Prove Share Transactions Bogus Under Section 68

Dilipkumar Hazarimal Ahuja Vs CIT Appeal (ITAT Mumbai)

The assessee filed an appeal before the Income Tax Appellate Tribunal, Mumbai, against the order of the CIT(A), National Faceless Appeal Centre, dated 11.03.2024, arising from reassessment proceedings under Sections 147 read with 144B of the Income-tax Act for Assessment Year 2016–17. The reassessment was initiated based on information received from the Investigation Wing, Delhi, following a search on SMC Global Capital Market Ltd., wherein the scrip of Goenka Business and Finance Ltd. was allegedly identified as a penny stock used for generating bogus capital gains.

The assessee had originally filed his return declaring total income, which was later revised. The case was initially assessed under Section 143(3) at the returned income. Subsequently, reassessment proceedings were initiated alleging that the assessee had generated bogus long-term capital gains (LTCG) of ₹49,62,476 on sale of shares of Goenka Business and Finance Ltd., forming part of total LTCG of ₹1,26,07,223 declared and claimed exempt under Section 10(38). The Assessing Officer treated the entire sale consideration of ₹50,91,646 as unexplained cash credit under Section 68.

The assessee submitted detailed documentary evidence including contract notes, broker ledger accounts, bank statements, DMAT statements, and proof of payment of Securities Transaction Tax (STT). The shares were purchased on 16.06.2014 through cheque from Arena Infotech Limited and sold on 01.10.2015 through SEBI-registered broker Joindre Capital Services Ltd. via banking channels. Only 11,470 shares out of 21,000 purchased were sold, with the balance still held. The assessee also demonstrated that he was a regular investor, holding a diversified portfolio and reporting capital gains in subsequent years.