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Facts
The assessee sold shares and claimed long-term capital gains, which was disallowed by the AO and CIT(A) treating it as bogus and undisclosed income. The assessee provided documents to prove the genuineness of the transaction and established the shares were held for approximately 5 years.
Held
The Tribunal held that the assessee had established the genuineness of the transaction by producing relevant documents and that no allegations of manipulation or investigation were made against the assessee. The Tribunal relied on High Court judgments in similar cases.
Key Issues
Whether the long-term capital gain claimed by the assessee is genuine or bogus, and whether the authorities below were justified in disallowing the same.
Sections Cited
250, 10(38), 68, 143(3), 147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
(Assessment Year: 2018-19) Hemlata Paresh Surana I.T.O. Ward 19(1)(1), 4-A, 30-B, Taj Building, A. K. Mumbai Marg, Gowalia Tank, Mumbai Vs. – 400 036. PAN/GIR No. ABEPS6199P (Appellant) : (Respondent) Assessee by : Shri R. M. Jain Respondent by : Shri Sandeep Jumale, SR. DR Date of Hearing : 19.11.2025 Date of Pronouncement : 28.11.2025 O R D E R Per Narender Kumar Choudhry, J M: This appeal has been preferred by the assessee against the order dated 24.07.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) 48, Mumbai (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2018-19.
In the instant case, the Assessee has sold 20,500 shares of AMMLTD/Apu Marketing/Eject Marketing on a total consideration of Rs. 14,92,810/- on dated 01.02.2018 through online platform/Bombay Exchange and therefore has earned long term capital gain of Rs. 12,87,180/- and claimed the same as exempt u/s. 10(38) of the Act.
3. The claim of the assessee though was considered by the AO, however, not being satisfied with the same, disallowed the same by treating the Long Term Capital Gain (‘LTCG’) as bogus and added the amount of Rs. 12,87,180/- in the total income of the Assessee, while relying on various judgements and by treating the share of such company as penny stock.
4. The Ld. Commissioner on appeal, affirmed the findings of the AO and the disallowance of deduction claimed to the tune of Rs. 1,28,71,810/- which was treated as undisclosed income of the assessee.
Having heard the parties and considering the peculiar facts and circumstances of the case and material available on record, it is observed that the Assessee before both the authorities below has filed the relevant documents, such as profit and loss account, balance sheet, sale/contract notes for sale of share, copy of demat statement/account, bank statement, etc., in order to prove the genuineness of the transaction. Admittedly, the authorities below have not doubted the documents submitted by the Assessee, which goes to show that the assessee has been able to establish its case prima facie u/s. 68 of the Act and discharged the onus cast u/s. 68 of the Act. Admittedly, no allegations have ever been levelled against the Assessee and even otherwise, no investigation has been carried out by the SEBI or any Investigating Agency against the Assessee herein and it is also admitted fact the assessee had purchased the shares involved on dated 17.09.2013 and sold the same through online platform of Bombay Stock Exchange on 01.02.2018 which goes to show that the assessee retained the said shares for and about 5 years. Thus, on the aforesaid analyzation and respectfully following the judgments of the Hon'ble Jurisdictional High Court in the case of Principal Commissioner of Income-tax vs. Indravadan Jain, HUF [2023] 156 taxmann.com 605 (Bombay)/[2024] 463 ITR 711 (Bombay)[12-07-2023], wherein it has been held as under:- “1. This appeal is impugning an order dated 27th May 2016 passed by the Income Tax Appellate Tribunal (ITAT) rejecting two appeals that Revenue had filed against the order of Commissioner of Income Tax (Appeals) (CIT[A]) for Assessment Year 2005-06 in the matter of order passed under section 143(3) read with section 147 of the Income Tax Act, 1961 (the Act) against Respondent. Respondent though served is not present before us. Affidavit of service is also filed.
2. It was the case of Revenue before the ITAT that the CIT[A] was wrong in deleting the addition made by the Assessing Officer (A.O.) in respect of long term capital gain treated by A.O. as unexplained cash credit under section 68 of the Act.
Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gain and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs.3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs.155.04/- per share. It was A.O.'s case that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. In view thereof, respondent's case was reopened under section 148 of the Act.
The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.
5. We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises.
6. Appeal dismissed.”
The addition made by the AO and affirmed by the Ld. Commissioner is liable to be deleted. Thus, the addition under consideration stands deleted.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 28.11.2025