Suresh M. Jain HUF Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, disposed of three connected appeals filed by Suresh M. Jain HUF, Heena Suresh Jain, and Rameshkumar Mohanlal Jain for Assessment Year 2014-15, as all involved identical issues relating to long-term capital gains (LTCG) claimed as exempt under Section 10(38) of the Income-tax Act, 1961.
The lead appeal concerned Suresh M. Jain HUF, which had declared exempt LTCG arising from the sale of shares of Shree Shalin Textiles Ltd. The Assessing Officer (AO), relying on reports of the Investigation Wing, treated the scrip as a penny stock allegedly used for price manipulation. The AO concluded that the LTCG represented a pre-arranged method to evade taxes and launder money. Consequently, the AO denied the exemption under Section 10(38), treated the sale proceeds of ₹29,64,910 as unexplained cash credit under Section 68, and made a further addition under Section 69C by estimating commission allegedly paid for obtaining accommodation entries.
During assessment, the assessee contended that it was a regular investor in listed shares and produced documentary evidence including physical share certificates showing transfer in its name, demat statements reflecting purchase and sale transactions, contract notes issued by a SEBI-registered broker, evidence of payment of Securities Transaction Tax (STT), bank statements evidencing receipt of sale proceeds through banking channels, and earlier income tax returns disclosing the purchase of the shares. The assessee maintained that the shares had been held for more than twelve months before their sale through the recognised stock exchange.
