Case Law Details
DCIT Vs Vipul Suresh Kumar Modi (ITAT Mumbai)
ITAT held that no addition can be made for Transactions in Penny Stocks in respect of unabated assessments which have become final in absence of any incriminating material found during search.
The brief facts of the case relevant to the issue before us are that the Assessee, an individual resident, filed original return of income under Section 139 of the Act for the Assessment Year 2012-13 on 30.10.2012 declaring total income of INR 8,56,716/-, which was processed under section 143(1) of the Act. Subsequently, the search action was carried out in the case of Indo Count Industries Limited & group concerns on 01.02.2018. Notice under Section 153A of the Act, dated 19.02.2019 was issued to the Assessee and in response to the same, the Assessee filed return of income on 12.03.2019 declaring total income of INR 8,56,720/-. During the assessment proceedings, the Assessing Officer (AO) had noticed that the Assessee had sold 2,00,000/- shares of M/s. Global Capital Markets Ltd. (GCML), purchased at the cost of INR 13,28,294/-, for the sale consideration of INR 47,63,825/-. According to the AO this was a penny-stock transaction undertaken by the Assessee in a pre-arranged manner in connivance with the operators to evade taxes. Accordingly, the AO concluded that sale consideration of INR 47,63,825/- was not in the nature of capital gain and represented unexplained income invested made by the Assessee. Thus, the AO made an addition of INR 47,63,825/- to the returned income and also made a further addition of INR 2,38,891/-, being 5% commission paid for obtaining accommodation entry, as unexplained expenditure under section 69C of the Act.
The CIT(A) has returned factual finding that the additions made by the AO are not based on any incriminating material found during the course of search and the same remains uncontroverted. The Ld. Departmental Representative could not dispute the proposition that additions in the present case cases have not been made on the basis of any incriminating material found during search. The CIT(A) has granted relief by following the decision of the jurisdictional High Court in the case of Continental Warehousing Corporation (supra) wherein it has been held that no addition can be made in respect of unabated assessments which have become final in absence of any incriminating material found during search.
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