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Facts
The Revenue appealed the deletion of an addition made under Section 68 of the Income Tax Act. The addition was related to the sale value of scrips of M/s. Nivyah Infrastructure & Telecom Services Ltd., which the Assessing Officer considered to be a penny stock used for accommodation entries. The assessee had declared minimal short-term capital gains from these transactions.
Held
The Tribunal held that the facts did not support the AO's finding that the share price was rigged for huge profits. The minimal profit and the small increase in share price during the holding period indicated that the transaction was genuine. Therefore, the deletion of addition by the CIT(A) was upheld.
Key Issues
Whether the deletion of addition by the CIT(A) under Section 68, relating to sale of penny stock scrips, was justified when the profits were minimal and the share price movement did not indicate manipulation.
Sections Cited
250, 68, 148, 147, 142(1)
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Income Tax Appellate Tribunal, “K(SMC
Before: SHRI NARENDRA KUMAR BILLAIYASHRI SANDEEP SINGH KARHAIL
Date of Hearing – 26/06/2025 Date of Order - 30/06/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M.
The Revenue has filed the present appeal against the impugned order dated 06.06.2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Additional / Joint Commissioner of Income Tax (Appeals) - 2, Coimbatore [“the Addl./ Joint CIT(A)”], for the assessment year 2012-13.
In this appeal, the Revenue has raised the following grounds: - “1. “On the facts and circumstances of the case and in law the learned CIT(A) has erred in deleting the addition of Rs. 1,29,176/- u/s. 68 of the IT Act towards the sale value of scrips of M/s. Nivyah Infrastructure & Telecom Services Ltd.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the company and the broker/other entities were involved in price manipulation in the scrip and the scrip was utilized by entry operators for providing accommodation entries under the garb of LTCG/ STCG/ STCL/ Business Loss by manipulating / rigging of the Share price. 3. "On the facts and in the circumstances of the case, the Hon'ble ITAT is requested to entertain this appeal, though, the tax effect is below the monetary limit prescribed in the CBDT Circular No.5 of 2024 dt. 15/03/2024 as the case falls under exception clause (h) laid down in Para 3.1 of CBDT Circular No.5 of 2024 dt. 15/03/2024.”
3. The sole grievance by the Revenue is against the deletion of addition made under section 68 of the Act.
4. The brief facts of the case are that the assessee is an individual and for the year under consideration filed his return of income on 17.09.2012, declaring a total income of ₹ 1,74,845/-. Subsequently, on the basis of the information received from the DDIT (Inv.), Unit- 8(3), Mumbai, that the assessee has traded in penny stock scrip of M/s. Nivyah Infrastructure & Telecom Services Ltd., and is one of the beneficiaries of accommodation entrie transaction, notice under section 148 of the Act was issued on 29.03.2019 and proceedings under section 147 of the Act were initiated. Thereafter, statutory notice under section 142(1) was also issued, however, there was no compliance on behalf of the assessee. Accordingly, the Assessing Officer (“AO”) proceeded to complete the assessment on the best judgment on the basis of the material available on record. The AO, after noting the fact that M/s. Nivyah Infrastructure & Telecom Services Ltd. is a penny stock listed on BSE and has been used to facilitate introduction of unaccounted income of beneficiaries in the form of exempt capital gain/short-term capital loss and the price of the shares were rigged to gain huge profit/loss through manipulated affair, made the addition of the entire sale consideration received by the assessee from the transaction in shares of the aforesaid scrip.
5. The Addl./ Joint CIT(A), vide impugned order, after perusing the contract note for purchase of sale of scrip, broker ledger, HDFC bank statement, scrip-wise detail, etc. as submitted by the assessee concluded that there was no extraordinary movement of the scrip during the period and there was no huge rise in the price of the concerned scrip. The Addl./ Joint CIT(A) also held that there is nothing on record to show that the assessee’s transactions in the aforesaid scrip were fabricated and fictitious. Accordingly, the Addl./ Joint CIT(A) deleted the entire addition made by the AO under section 68 of the Act. Being aggrieved, the Revenue is in the appeal before us.
During the hearing, the learned Departmental Representative (“learned DR”) vehemently relied upon the findings of the AO in the assessment order.
On the other hand, the learned Authorised Representative (“learned AR”) by referring to the documents placed on record submitted that the assessee earned minimal short-term capital gains of ₹ 7,085/- from the transaction in scrip of M/s. Nivyah Infrastructure and Telecom Services Ltd. and the same was also offered to tax during the year under consideration.
We have considered the submissions of both sides and perused the material available on record. In the present case, on the basis that the assessee has transacted scrip of M/s. Nivyah Infrastructure and Telecom Services Ltd., which was considered by the Revenue as a penny stock, the entire sale consideration received by the assessee was added to the total income of the assessee under section 68 of the Act. From the record, we find that the assessee purchased a total of 3200 shares of M/s. Nivyah Infrastructure and Telecom Services Ltd. for a total consideration of ₹1,09,938/- at a purchase price of ₹ 34.36 per share, which were sold for a total consideration of ₹ 1,17,023/-, thus resulting in a minimal profit of ₹ 7,085/-. Thus, this very fact itself goes contrary to the findings of the AO that the price of the shares of M/s. Nivyah Infrastructure and Telecom Services Ltd. were rigged to gain huge profit. Further, we find that during the entire period of holding shares of M/s. Nivyah Infrastructure and Telecom Services Ltd. by the assessee, the price of the share was only increased by ₹ 2.21/-. Therefore, we do not find any infirmity in the findings of the learned Addl. / Joint CIT(A) in deleting the addition made by the AO under section 68 of the Act, and the same are upheld. As a result, the grounds raised by the Revenue are dismissed.
In the result, the appeal by the Revenue is dismissed. Order pronounced in the open Court on 30/06/2025