JAYANT IMPEX PVT LTD,GIRGAON MUMBAI vs. INCOME TAX OFFICER WARD 5 2 1 MUMBAI, MUMBAI

In the instant case, the Assessee, being a private limited company, during the year under consideration was engaged in the business of share trading as well as import and export of iron and steel.

It is observed that the Assessee had applied for allotment of 50,000 equity shares of Midland Polymers Ltd. (in short, "MPL") having a face value of Rs.10/- per share for a total consideration of Rs.20,25,000/- which was paid through banking channels maintained with HDFC Bank Ltd. on 21.11.2012, 21.11.2012, 18.12.2012 and 22.12.2012.

Subsequently, the said shares were allotted and credited to the Demat Account of the Assessee. Thereafter, MPL split its equity shares by reducing the face value from Rs.10/- per share to Re.1/- per share, pursuant to which the Assessee's holding increased from 50,000 shares to 5,00,000 shares. Subsequently, MPL also issued bonus shares in the ratio of 1:1, as a result of which the Assessee received a further 5,00,000 bonus shares.

During the year under consideration, the Assessee sold 68,359 shares of MPL for a total consideration of Rs.41,68,416/-, thereby earning Long-Term Capital Gain of Rs.40,08,956/-, which was claimed as exempt under section 10(38) of the Act.

During the assessment proceedings, in response to the statutory notices issued by the AO, the Assessee furnished, inter alia, the following documentary evidences, in support of the transactions:

However, the AO proceeded to make the impugned addition mainly on the basis of ITS data and the Investigation Information Report, without controverting or disproving any of the documentary evidences furnished by the Assessee.

Whereas the Assessee held the aforesaid shares for more than one year before effecting their sale during the year under consideration and, accordingly, claimed exemption under section 10(38) of the Act in respect of the resultant Long-Term Capital Gain. It is further an undisputed fact that no investigation has been carried out by SEBI or any other competent authority establishing the Assessee's involvement in any price rigging or manipulation of the scrip. It is also a matter of record that the shares were allotted on 24.01.2013 and were sold only during the year under consideration, resulting in Long-Term Capital Gain of Rs.40,08,956/-, which was claimed as exempt under section 10(38) of the Act.

We further observe that the Coordinate Bench of the Tribunal, in Tejas Ramesh Shah (HUF) vs. ITO [(2025) 177 taxmann.com 657 (Mumbai - Trib.)] and ACIT, Circle-2(1)(1) Vs. Avin Rajendra Kumar Agrawal (ITA No.84/Mum/2024), as well as in other connected matters, while dealing with the very same scrip, has deleted identical additions made under similar facts and circumstances.

As observed hereinabove, the purchase as well as sale transactions were carried out through recognized banking channels and no specific role has either been attributed to or established against the Assessee in respect of any alleged manipulation or rigging of the share price. The Assessee has duly discharged the onus cast upon it under section 68 of the Act. The Coordinate Benches of the Tribunal, has dealt with identical scrip as involved in this case and ultimately, deleted identical additions made under similar facts and circumstances. Thus, the addition made by the AO and sustained by the Ld. Commissioner cannot be sustained in law. Accordingly, the impugned addition is directed to be deleted.

In the result, Assessee’s appeal is allowed.