DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-22(1), MUMBAI vs. MR BHUPESH HARISHCHANDRA RATHOD, MUMBAI

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ITA 2301/MUM/2023Status: DisposedITAT Mumbai23 October 2023AY 2011-20123 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO incorrectly added both profits and losses from penny stock trading. Only the net profit or loss derived from such transactions should be considered for addition to the total income.

What were the facts?

The Assessing Officer (AO) reopened the assessee's case based on information about trading in penny stocks. The AO made an addition to the total income, including both profits and losses from such trades, under Section 68 of the Income Tax Act.

What were the issues?

Whether additions made under Section 68 for both profits and losses from penny stock trading are justified. The correctness of the CIT(A)'s direction to consider only net profit/loss.

Which sections of the Income-tax Act were involved?

Section 68,Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Hearing: 18.10.2023Pronounced: 23.10.2023

आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the revenue is directed against the order passed by the ld. CIT(A)-48, Mumbai dated 25.04.2023 for A.Y. 2011- 12. The revenue has raised the following grounds before us: “Whether on the facts and circumstances of the case and in law, the ld. CIT(A) erred in allowing the appeal of the assessee without going into the merits on additions as it was evident that assessee had taken accommodation entry in the form of penalty stock.”

1.

2. Fact in brief is that assesse filed return of income on 14.7.2011 and declared total income of Rs.880,080/-. Subsequently, the assessing officer received information from the DDIT, Thane, that assessee has P a g e | 2 DCIT, CC-2(1) Vs. Mr. Bhupesh Harishchandra Rathod traded in the penny stock scripts of M/s KCL Infra Project Ltd.(KCLIPL) of RS.568, 331/- to the tune of Rs.255,695/-. On the basis of information the case was reopened u/s 147 of the Act. The assessing office passed order u/s 143(3) r.w.s 147 of the Act on 22.12.2018 by making addition of Rs.184,895/- (comprising total loss of Rs.114,555/- and total profit of Rs.70,340/-) to the total income of the assesse u/s 68 of the Act.

3.

The assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assesse by directing the assessing officer to verify all the detail in respect of trading in penny stock script traded by the assessee for the financial year 2010-11 and calculate net profit/loss derived by the assesse from the same. The AO was directed to restrict the addition to the extent of net profit/loss derived by the assessee only.

4.

Heard the ld. D.R and perused the material on record. During the course of assessment the assessing officer observed that assessee has booked both loss/profit by trading in penny stock script as under:

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