ITO Vs Bharti Jain (ITAT Delhi)
Penny Stock Allegation Fails – Investor’s LTCG Claim from Stock Exchange Trades Found Genuine, Revenue’s Appeal Dismissed – Suspicion No Substitute for Proof:
Delhi Tribunal dismissed Revenue’s appeal against deletion of additions made on account of alleged bogus Long-Term Capital Gains (LTCG) from penny stock transactions.
Assessee had filed her return declaring income of Rs. 4,15,910/- & claimed exempt LTCG of Rs. 37.97 lakh arising from sale of shares of Sunstar Realty Development Ltd. purchased in 2012. AO reopened assessment u/s 147 based on investigation wing inputs about penny stock transactions & made additions of Rs. 39.69 lakh u/s 68 as unexplained cash credit & Rs. 39,690/- u/s 69C as commission. The basis of addition was the statement u/s 131 of the company’s promoter, Dipen Patel, who admitted to price rigging in the scrip.
On appeal, CIT(A) deleted the additions noting that:
- The shares were purchased in 2012 & sold in 2014 through registered broker Anand Rathi, supported by contract notes, demat statements & bank entries.
- Assessee’s name did not appear in SEBI’s adjudication order & SEBI had not blacklisted the scrip.
- Suspicion, however strong, cannot replace legal proof; and statements of third parties without cross-examination cannot be relied upon.
- The company’s financials reflected rising income & assets, justifying the share price movement.
- Reliance was placed on PCIT Vs. Indravadan Jain HUF (Bombay HC) & ITO Vs. Shaleen Khemani (ITAT Kolkata) wherein genuine stock exchange transactions were held not to be treated as bogus in absence of concrete evidence.
Tribunal upheld CIT(A)’s findings, emphasizing that no direct evidence linked the Assessee with any price rigging. Since the transactions were carried out on stock exchange through banking channels & all evidences were produced, addition u/s 68 & 69C was unsustainable. Accordingly, Revenue’s appeal was dismissed & CIT(A)’s order was affirmed.
