Loading judgment…
Facts
The assessee filed an ITR declaring income. The AO received information about penny stock transactions in VMS Industries Limited, leading to a reopening under Section 147. Despite the assessee claiming LTCG as exempt under Section 10(38), due to non-compliance, the AO added the entire sale proceeds of Rs.1,17,538/- as unexplained income under Section 68. The JCIT(A) deleted this addition, leading to the Revenue's appeal.
Held
The Tribunal upheld the JCIT(A)'s order, noting that the Revenue failed to controvert the finding that the assessee actually incurred a Short Term Capital Loss, not a Long Term Capital Gain, from the VMS Industries Limited transactions. The AO's basis for addition under Section 68, stemming from an alleged LTCG, was therefore found unsustainable.
Key Issues
Whether the JCIT(A) erred in deleting the addition made by the AO under Section 68 regarding alleged unexplained income from penny stock transactions, and if the assessee genuinely derived LTCG or incurred a STCL from these transactions.
Sections Cited
144, 147, 10(38), 148, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH, AHMEDABAD
Before: SHRI SIDDHARTHA NAUTIYAL & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the Revenue against the order of Additional/Joint Commissioner of Income Tax (A) (in short “the JCIT(A)”), Panchkula dated 30.04.2025 for the Assessment Year (A.Y.) 2012-13 in the proceedings under Section 144 r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The brief facts of the case are that the assessee had filed his return of income for the A.Y. 2012-13 on 18.01.2013 declaring income of Rs.1,91,000/-. The Assessing Officer had received an information that the assessee had made certain transactions in penny stock scrip and (Assessment Year: 2012-13) ITO vs. Harin Yogeshkumar Shah Page 2 of 4 LTCG of Rs.1,17,538/- derived thereon was claimed as exempt under Section 10(38) of the Act. Therefore, the case of the assessee was reopened under Section 147 of the Act and a notice under Section 148 of the Act was issued on 30.03.2019. There was no compliance by the assessee in the course of assessment proceedings. Therefore, the entire sale proceeds of Rs.1,17,538/- in respect of penny stock company M/s VMS Industries Limited was treated as unexplained income under Section 68 of the Act and added to the income of the assessee. The assessment was completed under Section 144 r.w.s. 147 of the Act on 30.11.2019 at a total income of Rs.3,08,540/-.
Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. JCIT(A) vide the impugned order and the appeal of the assessee was allowed.
Now, the Revenue is in appal before us. The following grounds have been taken in this appeal: - “1. Whether the CIT(A) has erred in facts and law in deleting the addition of Rs.1,17,538/- u/s.68 without considering the fact that the assessee is one of the beneficiaries of the penny stock scripts in respect of VMS Industries Limited and total value of capital gain is worked out at Rs.1,17,538/- ?
2. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.
3. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.”
Shri Suresh Chand Meena, the Ld. Sr. DR submitted that in this case an information was received that the assessee had taken (Assessment Year: 2012-13) ITO vs. Harin Yogeshkumar Shah Page 3 of 4 accommodation entry by trading in penny stock scrip of M/s. VMS Industries Limited. He submitted that since the assessee did not make any compliance in the assessment proceedings, the Assessing Officer treated the entire sale proceeds of Rs.1,17,538/- as unexplained and made the addition. Therefore, the Ld. JCIT(A) was not correct in deleting the addition as made by the Assessing Officer.
No one was present on behalf of the assessee,
We have considered the submissions of the Ld. Sr. DR and also gone through the materials brought on record. The Assessing Officer had recorded a finding that the assessee was a beneficiary of penny stock scrip of VMS Industries Limited and the total value of capital gain was Rs.1,17,538/- which was claimed as exempt under Section 10(38) of the Act. However, in paragraph no.5 of the order, the Assessing Officer has recorded that the exemption claimed under Section 10(38) of the Act in respect of LTCG in the shares of VMS Industries Limited was to the tune of Rs.1,38,510/-. Thus, the Assessing Officer was himself not sure about the exact amount of transaction that had taken place in the trading of the scrip of VMS Industries Limited. On the other hand, the Ld. JCIT(A) has given a finding that the assessee had incurred Short Term Capital Loss of Rs.13,600.50 in the share transactions of VMS Industries Limited. This finding of the Ld. CIT(A) has not been controverted by the Revenue. The Revenue has not brought any material on record to establish that the assessee had derived LTCG in the share transactions of VMS Industries Limited and that the findings of the Ld. JCIT(A) was incorrect. Considering the fact that there was no LTCG derived by the assessee in the transaction of scrip of VMS Industries Limited but there was Short Term Capital Loss, (Assessment Year: 2012-13) ITO vs. Harin Yogeshkumar Shah Page 4 of 4 the entire basis of addition as made by the Assessing Officer does not survive. We do not find any infirmity in the order of the Ld. JCIT(A) as the Revenue has been unable to controvert the finding given by him that no exemption u/s 10(38) was claimed by the assessee in respect of any LTCG. We, therefore, do not find any merit in the grounds as taken by the Revenue, which are dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on this 12th September, 2025.