Bhamiraben Prashantkumar Patel Vs ITO (ITAT Ahmedabad)
Bogus LTCG Allegation Fails Where Documents Prove Genuine Share Transactions; Entire Sale Proceeds Cannot Be Added Without Proof of Price Rigging; Reopening Based Only on SEBI Reports Held Invalid in Share Sale Case; Penny Stock Tag Alone Insufficient to Deny LTCG Exemption
The appeal before Income Tax Appellate Tribunal, Ahmedabad concerned the addition of ₹88.58 lakh made under section 69A by treating sale proceeds from shares of Kushal Ltd. as unexplained income, after rejecting the assessee’s claim of exempt long-term capital gains (LTCG) for AY 2017–18. The Assessing Officer reopened the assessment based on Investigation Wing and SEBI reports identifying the scrip as a penny stock and alleging price manipulation. Despite the assessee furnishing contract notes, demat statements, broker ledgers, bank statements, and explaining the source of investment, the AO added the entire sale consideration, which was upheld by the CIT(A).
The Tribunal found that reopening was based solely on generalized information about the scrip without any assessee-specific material, independent verification, or evidence linking the assessee to price rigging or accommodation entries. It also noted that the assessee had incurred substantial losses in subsequent years in the same scrip, supporting bona fide investment. On merits, the Tribunal held that addition of the entire sale consideration was unsustainable. Consequently, the reassessment was held invalid and the addition was deleted, allowing the appeal in full.
