Case Law Details
DCIT Vs Nishit Capinvest Pvt Ltd (ITAT Delhi)
Introduction: In a significant ruling on January 4, 2024, the Income Tax Appellate Tribunal (ITAT) Delhi in the case of DCIT Vs Nishit Capinvest Pvt Ltd, addressed the contentious issue of the legitimacy of the source of income derived from transactions in penny stocks. The Revenue challenged the Commissioner of Income Tax (Appeals)-26, New Delhi’s decision, which favored the assessee, Nishit Capinvest Pvt Ltd, a company engaged in investment business, for the assessment year 2016-17.
Detailed Analysis
The crux of the Revenue’s appeal was the addition of Rs.42,85,60,000/- to the assessee’s income under Section 68 of the Income Tax Act, 1961, on the grounds of unexplained share capital and premium. The Assessing Officer (AO) had scrutinized the assessee’s transactions, particularly focusing on the source of the funds received as share premium from certain individuals associated with the company, suspecting them to be involved in transactions with penny stock companies.
The AO’s suspicion was primarily based on the premise that the funds from the sale of shares of Shilpi Cables Technologies Ltd (SCTL), characterized as penny stocks, were used to subscribe to the share capital and premium of Nishit Capinvest Pvt Ltd. The AO inferred that the transactions were orchestrated to circulate money within the Gupta family (associated with the assessee) and concluded the funds as unexplained under Section 68 of the Act.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
