Bhavna Lalit Jain Vs ITO (ITAT Mumbai)
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) in Mumbai reversed the additions made by the Assessing Officer (AO) concerning long-term capital gains claimed by Mrs. Bhavna Lalit Jain for the assessment year 2014-15. The case stemmed from a reassessment order issued by the AO, which disallowed a capital gain of ₹22,404,695 derived from the sale of shares in Surabhi Chemicals and Investments Ltd, later renamed Super Space Infrastructure Ltd.
The background of the case involves Mrs. Jain, who filed her income tax return showing total earnings of ₹2,056,540. However, the AO flagged her reported capital gains, asserting they were derived from transactions involving penny stocks. This led to the reopening of her assessment under Section 147 of the Income Tax Act, based on intelligence reports suggesting manipulation and bogus entries related to such stocks.
The AO’s reassessment concluded that Mrs. Jain’s reported long-term capital gains were not genuine, classifying them under Section 68 of the Income Tax Act, which deals with unexplained credits. Following this, the AO added the entire sale consideration to her taxable income, effectively dismissing her claim for exemption under Section 10(38), which typically allows for exemptions on long-term capital gains from the sale of listed securities.
