Case Law Details
Ayushi Jain Vs ITO (ITAT Kolkata)
In a significant ruling by the Income Tax Appellate Tribunal (ITAT) in Kolkata, the case of Ayushi Jain vs. Income Tax Officer (ITO) sheds light on the scrutiny of long-term capital gains (LTCG) and the treatment of investments deemed as bogus by tax authorities. This article delves into the intricate details of the case, the arguments presented by both parties, and the final verdict, providing valuable insights for taxpayers and professionals alike.
Introduction; The appeal filed by Ayushi Jain against the order of the Commissioner of Income Tax (Appeals) – 6, Kolkata, for the Assessment Year 2015-16, brings to the fore the complexities involved in claiming LTCG on share sales. The core issue revolves around the addition of Rs. 11,78,596, which was claimed as LTCG from the sale of shares of Kappac Pharma Ltd. (KPL), being treated as bogus by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961.
Background of the Case: Ayushi Jain declared a total income of Rs. 4,70,650 for the Assessment Year 2015-16. Upon scrutiny, the AO raised questions regarding the LTCG claimed on the sale of 5000 units of KPL shares, which were deemed exempt under Section 10(38) of the Act. The AO’s skepticism was fueled by an investigation report suggesting manipulation by penny stock companies to facilitate tax exemptions on bogus LTCG.
Despite Ayushi Jain’s contestation and request for investigation reports, the AO observed a “bell-shaped pattern” in the trading results, indicative of manipulative practices, leading to the disallowance of the LTCG claim.
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