SAJJAN KUMAR HUF,C/O CA NC GARG vs. INCOME TAX OFFICER WARD-2, ROHTAK, HARYANA

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ITA 4427/DEL/2026Status: DisposedITAT Delhi18 September 2026AY 2011-123 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the addition of ₹2,37,235/- made by the Assessing Officer, treating the entire sale consideration as unexplained credit under Section 68, was not justified. The Tribunal noted that the AO's assessment order lacked specific findings linking the assessee or their broker to price rigging or circular trading of shares, relying only on a generic explanation of 'penny stock'. The CIT(A) had endorsed the AO's findings without examining the transaction. Therefore, the Tribunal deemed it appropriate to restore the issue to the file of the Assessing Officer for the limited purpose of determining the 'capital gain' on the sale of shares after allowing the benefit of the cost of acquisition, in accordance with law. The Tribunal did not decide the issue of whether the shares were indeed 'penny stock' or if the capital gain was artificial.

What were the facts?

The assessee, Sajjan Kumar HUF, is a trader in shares. For assessment year 2011-12, the assessee purchased 3500 shares of M/s Global Capital Pvt.Ltd. for ₹1,08,611/- and sold them for ₹2,37,235/-. Both transactions were conducted through banking channels on the stock exchange. The Assessing Officer (AO) made an addition of the entire sale consideration of ₹2,37,235/- under Section 68 of the Income Tax Act, 1961, without allowing the cost of acquisition. The assessee had offered capital gains on these shares to tax. The assessee's appeal before the CIT(A) was dismissed, leading to the present appeal before the ITAT.

What were the issues?

1. Whether the addition of the entire sale consideration of ₹2,37,235/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, is justified, without allowing the benefit of the cost of acquisition, when the assessee claims to have offered capital gains to tax and the transactions were through banking channels on the stock exchange? Assessee's contention: The assessee argued that the shares were purchased and sold through banking channels on the stock exchange, and the capital gain on the sale of shares of M/s Global Capital Pvt.Ltd. has already been offered to tax. Therefore, no further addition is warranted, and at most, the cost of acquisition should be allowed. Revenue's contention: The Revenue defended the impugned order, submitting that the assessee had sold "penny stock" and claimed an artificial benefit of Long Term Capital Gains (LTCG).

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ : NEW DELHI

Before: SHRI VIKAS AWASTHY

For Appellant: Shri Gopal Aggarwal, CA (Virtually)
For Respondent: Shri Manoj Kumar, Senior DR
Hearing: 23.06.2026Pronounced: 23.06.2026

This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeal) Addl/JCIT(A), Thane (hereinafter referred to as ‘the CIT(A)’) dated 31% December, 2025, for assessment year 2011-12. 2. Shri Gopal Aggarwal, appearing on behalf of the assessee submits that the assessee is a trader in shares. In the impugned assessment year, the assessee traded in about 20 scrips. One of them was of M/s Global Capital Pvt.Ltd. The assessee had purchased 3500 shares of M/s Global Capital Pvt.Ltd. for 1,08,611/- and the same were sold for %2,37,235/-. The shares were purchased through banking channel on stock exchange and were later sold during the impugned assessment year through stock exchange and entire sales proceeds were received through Banking channel. The Assessing Officer made addition of entire sale consideration i.e., $2,37,235/- without reducing the cost of acquisition. The learned Counsel restricted his prayer for allowing the benefit of cost of acquisition. The learned Counsel further submits that the capital gain on sale of shares of M/s Global Capital Pvt.Ltd. has already been offered to tax by the assessee. Therefore, no further addition in respect of sale of shares of M/s Global Capital Pvt.Ltd. is warranted.

3.

Per contra, Shri Manoj Kumar, learned Senior DR representing the Department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The Id. DR submits that the assessee had sold penny stock and has clamed artificial benefit of LTCG on sale of penny stock.

4.

Both sides heard. The orders of lower authorities examined. The short issue for consideration in the present appeal is the addition of %2,37,235/- made by the Assessing Officer treating the entire sale consideration of shares as unexplained credit under Section 68 of the Act. The contention of the assessee is that the assessee had furnished relevant documents to substantiate that 3500 shares of M/s Global Capital Pvt.Ltd. were purchased/sold by the assessee through banking channel on stock exchange. The assessee purportedly offered to tax capital gain on sale of shares. The Assessing Officer has alleged that shares of Global Capital Pvt. Ltd. are penny stock and thus made addition of entire receipts from sale of said shares u/s.68 of the Act. From examination of the assessment order, | find that except for explaining the concept of ‘Penny Stock’, the Assessing Officer has not been able to show the role of the assessee or the broker of assessee in price rigging of the share or involvement of the assessee or his broker in circular trading of shares. The findings of Assessing Officer in the assessment order are generic and not specific to the assessee. The CIT(A) has endorsed the findings of the AO without examining the transaction of sale of shares. Considering entire facts of the case, | deem it appropriate to restore this issue to the file of the Assessing Officer for limited purpose to determine ‘capital gain’ on sale of shares with law.

5.

In the result, appeal of the assessee is partly allowed in the terms indicated above. Order pronounced in the open Court on conclusion of hearing on 23" June, 2026. (VIKAS AWASTHY) JUDICIAL MEMBER

New Delhi Date : 18.09.2026

VK.

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