Income Tax Department vs. Shri Vrindavan Tayal

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ITA/38/2022HC 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 Revenue. It noted that the issue had been considered in a batch of appeals, with the main case being ITA No. 56 of 2021. In that main case, the High Court had dismissed the appeals filed by the Revenue vide a common order dated 30.04.2024. Therefore, 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 arguments presented by the parties on the merits of the penny stock issue were not elaborated upon in this order, as the dismissal was based on a prior common order. No issue was expressly left undecided.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, 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 appeal pertains to Assessment Year 2014-15 and concerns the deletion of an addition made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals). The dispute involves the claim of Long Term Capital Gain (LTCG) exempt under Section 10(38) of the Act, allegedly derived from a penny stock company, M/s Life Line Drugs & Pharma Ltd. The High Court noted that this issue was considered in a batch of appeals, with the main case being ITA No. 56 of 2021, where the Revenue's appeals were dismissed by a common order dated 30.04.2024.

What were the issues?

1. Whether on the facts and circumstances of the case, the ITAT was justified in law in deleting the addition made by the AO, which was confirmed by the CIT(A), by ignoring the findings of the Investigation Wing that M/s Life Line Drugs & Pharma Ltd. was a bogus penny stock company used for claiming bogus Long Term Capital Gain exempt under Section 10(38) of the Income Tax Act, 1961? (Assessee's contention: The ITAT was justified in deleting the addition. Revenue's contention: The ITAT was not justified as the company was a bogus penny stock script used for bogus LTCG claims, relying on the Investigation Wing's findings). 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 occurred without substantial business activity or profit earning apparatus? (Assessee's contention: The ITAT was justified. Revenue's contention: The ITAT failed to appreciate human probabilities and the precedent in Sumati Dayal V/s CIT regarding share price increase without 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. 38 of 2022 BETWEEN:- INCOME TAX DEPARTMENT PRINCIPAL COMMISSIONER OF INCOME TAX AAYKAR BHAWAN, NEAR WHITE CHURCH (MADHYA PRADESH) .....PETITIONER (BY MS. VEENA MANDLIK-ADVOCATE) AND SHRI VRINDAVAN 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.242/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 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 ? 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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