Income Tax Department vs. Shri Gopal Tayal

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ITA/39/2022HC 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. The Court noted that this appeal was part of a bunch of appeals, and the main case was ITA No. 56 of 2021. The High Court had already dismissed the appeals filed by the Revenue in 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 for deleting the addition or the arguments presented by the assessee were not detailed in this High Court order, as the dismissal was based on a prior common order concerning similar appeals.

What were the facts?

The appeal is filed by the Income Tax Department (Revenue) 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 pertains to Assessment Year 2014-15. The Revenue is aggrieved by the ITAT's deletion of an addition of Rs. 17,78,822/- made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals). The AO had treated M/s Life Line Drugs & Pharma Ltd. as a bogus penny stock company used for claiming Long Term Capital Gain exempt under Section 10(38). The present appeal is part of a batch of appeals, and the High Court has previously dismissed similar appeals filed by the Revenue.

What were the issues?

1. Whether on the facts and circumstances of the case, the ITAT was justified in law in deleting the addition of Rs.17,78,822/-, which was confirmed by the CIT(A), despite the Investigation Wing's findings 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: Not recorded in the judgment. - Revenue's contention: The ITAT was not justified in deleting the addition, as the company was established as a bogus penny stock script used for claiming exempt Long Term Capital Gain. 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 human probabilities by ignoring the judgment of Sumati Dayal V/s CIT (1995) 80 Taxman 89 (SC) concerning astronomical price increases without substantial business activity or profit-earning apparatus? - Assessee's contention: Not recorded in the judgment. - Revenue's contention: The ITAT failed to appreciate human probabilities and the precedent set in Sumati Dayal V/s CIT regarding share price manipulation.

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. 39 of 2022 BETWEEN:- INCOME TAX DEPARTMENT PRINCIPAL COMMISSIONER OF INCOME TAX 1 AAYKAR BHAWAN NEAR WHITE CHURCH (MADHYA PRADESH) .....PETITIONER (BY MS. VEENA MANDLIK-ADVOCATE) AND SHRI GOPAL TAYAL WARD NO. 8 AGRAWAL COLONY NIWALI ROAD 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.246/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 of Rs.17,78,822/- 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 1 Signed by: PRAVEEN Signing time: 30/05/2024 7:23:36 PM Signature Not Verified (S. A. DHARMADHIKARI) JUDGE (GAJENDRA SINGH) JUDGE penny stock script 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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