Chief Commissioner of Income tax Vs Nilesh Jain (HUF) (Madhya Pradesh High Court)
The Madhya Pradesh High Court adjudicated a batch of 33 appeals filed by the Revenue under Section 260A of the Income-tax Act, 1961, challenging orders of the Income Tax Appellate Tribunal (ITAT) which had deleted additions made on account of alleged bogus Long Term Capital Gains (LTCG).
The appeals arose from a common issue involving transactions in shares of a listed company, which were alleged by the Revenue to be penny stock transactions used to claim exempt LTCG under Section 10(38). The Assessing Officer had relied on findings of the Investigation Wing, Kolkata, alleging that the company’s shares were manipulated and used for providing accommodation entries. Additions were made treating the LTCG as unexplained income under Section 68. These additions were confirmed by the first appellate authority but later deleted by the ITAT.
The respondent had purchased shares through private placement in a company which was subsequently amalgamated with a listed entity pursuant to an order of the Bombay High Court. After amalgamation, the share prices increased significantly. The ITAT recorded a finding that the respondent was not involved in price manipulation and had made only a one-time investment of a small amount. It was also noted that the Securities and Exchange Board of India (SEBI), in its investigation report dated 06.09.2021, identified certain promoters and entities involved in price rigging, but the respondent was not named among them.
