ITO Vs Harin Yogeshkumar Shah (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, dismissed an appeal filed by the Revenue, confirming the deletion of an addition of ₹1,17,538 made against the taxpayer, Harin Yogeshkumar Shah, for alleged unexplained income from penny stock trading during the Assessment Year (A.Y.) 2012-13. The Tribunal ruled that the entire basis of the addition was flawed, as the Revenue failed to prove that the taxpayer had, in fact, derived and claimed the exempt Long Term Capital Gain (LTCG) that formed the foundation for the reassessment.
Background and Addition
The taxpayer initially filed his return for A.Y. 2012-13 declaring income of ₹1,91,000. Subsequently, the Assessing Officer (AO) received information alleging that the taxpayer had engaged in suspicious transactions involving the penny stock scrip of M/s VMS Industries Limited and had improperly claimed the resulting LTCG as exempt under Section 10(38) of the Income Tax Act, 1961.
Based on this information, the case was reopened under Section 147. Due to the taxpayer’s complete non-compliance during the assessment proceedings, the AO completed the assessment ex-parte under Section 144 read with Section 147. The AO treated the entire sale proceeds, initially estimated at ₹1,17,538, as unexplained income under Section 68 of the Act, on the premise that the money represented accommodation entries received in the guise of genuine capital gains. The taxpayer’s total income was consequently assessed at ₹3,08,540.
