Mere high appreciation in share value not enough to treat gain from Penny stocks as bogus

Pr CIT Vs. Prem Pal Gandhi (Punjab & Haryana High Court)

The issue in short is this: The assessee purchased shares of a company during the assessment year 2006-2007 at ` 11/- and sold the same in the assessment year 2008-2009 at Rs. 400/- per share. In the above case, namely, ITA-18-2017 also the assessee had purchased and sold the shares in the same assessment years. The Assessing Officer in both the cases added the appreciation to the assessees’ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees’ income from undisclosed sources. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. In such circumstances Mere high appreciation in share value not enough to treat gain from Penny stocks as bogus

FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:-

This is an appeal against the order of the Income Tax Appellate Tribunal dated 20.07.2016 upholding the order of the CIT (Appeals) dated 14.02.2014. The matter pertains to the assessment year 2008-2009.

2. The following questions of law have been raised:-

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