CHHAYA KETAN MEHTA,MUMBAI vs. INCOME TAX OFFICER - 33(1)(3), MUMBAI

Facts

The assessee's appeal arises from the CIT(A)'s order confirming the AO's action of taxing Rs. 75,16,569 under Section 68 by denying exemption under Section 10(38) for gains on the sale of SRK Industries Ltd shares. The AO based the addition on an investigation report concerning penny stocks.

Held

The Tribunal held that the addition made by the AO under Section 68 was unsustainable as the assessee had provided sufficient documentary evidence to prove the genuineness of the transactions. The sale and purchase of shares were conducted through a recognized stock exchange via a SEBI-registered broker, with STT paid and consideration routed through banking channels. The AO had failed to controvert the evidence, and similar cases involving SRK Industries Ltd. shares had been decided in favour of the assessees.

Key Issues

Whether long-term capital gains from the sale of SRK Industries Ltd shares are eligible for exemption under Section 10(38) and if the addition under Section 68 is justified, given the documentary evidence provided by the assessee.