Income Tax Department vs. Shri Govardhan Tayal

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ITA/37/2022HC Madhya Pradesh30 May 2024Bench: HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI2 pages
For Petitioner: Veena Mandlik
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Income Tax Department. The Court noted that this issue had come up for consideration in a bunch of appeals, with the main case being ITA No.56 of 2021. The High Court had dismissed the revenue's appeals in that batch of cases vide a common order dated 30.04.2024. Therefore, in view of the aforesaid, the present appeal was also dismissed, and the order passed in ITA No.56 of 2021 was made applicable mutatis mutandis to the facts and circumstances of the present case. The specific reasoning of the ITAT or the High Court's reasoning for dismissing the earlier batch of appeals is not detailed in this judgment, other than stating that the appeals were dismissed.

What were the facts?

The Income Tax Department (Petitioner) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 27.07.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bench Indore. The ITAT's order was in relation to ITA No.245/Ind/2019 for the Assessment Year 2014-15. The appeal challenges the ITAT's deletion of an addition made by the Assessing Officer (AO) and confirmed by the CIT(A). The dispute revolves around the claim of Long Term Capital Gain (LTCG) exempt under Section 10(38) of the Act, arising from transactions in shares of M/s Life Line Drugs & Pharma Ltd., which the revenue alleged to be a bogus penny stock company.

What were the issues?

1. Whether on facts and circumstances of the case, the ITAT was justified in law in deleting the addition made by AO, which was confirmed by CIT(A), ignoring the findings of Investigation Wing that M/s Life Line Drugs & Pharma Ltd. was clearly established as a bogus penny stock company which was used for claiming bogus Long Term Capital Gain as exempt U/s 10 (38) of the Income Tax Act, 1961? 2. Without prejudice to the above, on facts and within the legal spectrum of the case, was the ITAT justified in not appreciating the spirit and substance of the rest of human probabilities by ignoring the judgment of Sumati Dayal V/s CIT (1995) 80 Taxman 89 (SC) where astronomical increase in price of share and that too without any substantial business activity or profit earning apparatus? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The ITAT was not justified in deleting the addition made by the AO, which was confirmed by the CIT(A). The revenue argued that M/s Life Line Drugs & Pharma Ltd. was a bogus penny stock company used for claiming bogus LTCG exempt under Section 10(38). The revenue also contended that the ITAT failed to appreciate the spirit and substance of human probabilities and ignored the precedent set in Sumati Dayal V/s CIT (1995) 80 Taxman 89 (SC) concerning shares with astronomical price increases without substantial business activity.

Which sections of the Income-tax Act were involved?

Section 260A,Section 10(38)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF MADHYA PRADESH AT INDORE BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SHRI JUSTICE GAJENDRA SINGH ON THE 30th OF MAY, 2024 INCOME TAX APPEAL No. 37 of 2022 BETWEEN:- INCOME TAX DEPARTMENT PRINCIPAL COMMISSIONER OF INCOME TAX AAYKAR BHAWAN, NEAR WHITE CHURCH (MADHYA PRADESH) .....PETITIONER ( MS. VEENA MANDLIK-ADVOCATE) AND SHRI GOVARDHAN TAYAL PRATAPGANJ, SENDHWA (MADHYA PRADESH) .....RESPONDENTS (BY SHRI YATISH KUMAR LAAD-ADVOCATE) This appeal coming on for orders this day, Justice Sushrut Arvind Dharmadhikari passed the following: ORDER This appeal is filed by the appellant under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') being aggrieved by the order dated 27.07.2021 passed by the Income Tax Appellate Tribunal (ITAT), Bench Indore in ITA No.245/Ind/2019 for the Assessment Year 2014 - 15 proposing following substantial question of laws in this appeal:- 1] Whether on facts and circumstances of the case, the ITAT was justified in law in deleting the addition made by AO, which was confirmed by CIT (A), ignoring the findings of Investigation Wing that M/s Life Line Drugs & Pharma Ltd. was clearly established as a bogus penny stock script 1 Signed by: PRAVEEN Signing time: 30/05/2024 7:23:36 PM Signature Not Verified (S. A. DHARMADHIKARI) JUDGE (GAJENDRA SINGH) JUDGE company which was used for claiming bogus Long Term Capital Gain as exempt U/s 10 (38) of the Income Tax Act, 1961 ? 2] Without prejudice to the above, on facts and within the legal spectrum of the case, the ITAT was justified in not appreciating the spirit and substance of the rest of human probabilities by ignoring the judgment of SumatiDayal V/s CIT (1995) 80 Taxman 89 (SC) where astronomical increase in price of share and that too without any substantial business activity or profit earning apparatus ? 02. This issue came up for consideration in bunch of appeals, main case is ITA No.56 of 2021 and this Court has dismissed the appeals filed by the revenue vide common order dated 30.04.2024. 03. In view of the aforesaid, the present appeal is dismissed and the order dated 30.04.2024 passed in ITA No.56 of 2021 shall be applicable mutatis mutandis in the facts and circumstances of the present case also. Praveen

2 Signed by: PRAVEEN Signing time: 30/05/2024 7:23:36 PM Signature Not Verified

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