Usha Chandresh Shah Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai dismissed the appeal filed by Usha Chandresh Shah against the Commissioner of Income Tax (Appeals)’s order. The core issue was whether the sale proceeds of ₹7,53,061 from shares of “M/s Prime Capital Market Ltd” should be taxed as Long Term Capital Gains (LTCG), as claimed by the assessee, or as unexplained Cash Credits under Section 68 of the Income Tax Act, as assessed by the Assessing Officer (AO).
The assessee claimed to have purchased 2700 shares in an off-market transaction in May 2004 for ₹13,959 and sold them in September 2005 for ₹7,53,061. However, inquiries by the AO revealed inconsistencies and raised doubts about the genuineness of the purchase. The Kolkata Stock Exchange had no record of the purchase transaction. The broker involved in the purchase could not provide proper documentation or books of accounts, stating payment was adjusted against prior speculation profits (also off-market). The company confirmed the share purchase by the assessee but couldn’t identify the buyer. Notably, the shares were identified as “Penny Stock” by SEBI, and the selling broker was indicted for price manipulation. The AO, relying on the principle of human probabilities and various court decisions, concluded the LTCG claim was a means to convert unaccounted money. The CIT(A) upheld this assessment. The ITAT concurred, finding the purchase transaction unverifiable, lacking proper documentation (share certificates, transfer forms), and involving a penny stock with a broker accused of manipulation, thus dismissing the assessee’s appeal.
