Section 10(38) of the Income Tax Act

Income-tax Act, 2025: s.11

Section 10(38) falls under section 10 of the Income-tax Act, 1961, which corresponds to section 11 (Incomes not included in total income) of the Income-tax Act, 2025.

Read section 11 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 10(38) is (Central)-1 v. NRA Iron & Steel (P) Ltd. (103 Taxmann.com 48), cited in 696 of the 3,113 judgments on BharatTax that turn on this section.

Leading authorities on Section 10(38)

(Central)-1 v. NRA Iron & Steel (P) Ltd.
103 Taxmann.com 48 · 2019 · Supreme Court
696
citing judgments

When assessing cash credits, share capital, or loans, the assessee bears the onus to prove the identity, creditworthiness, and genuineness of transactions. This burden is not discharged merely by documentary evidence if field inquiries reveal accommodation entries or dealings with paper/shell companies.

PCIT v. Swati Bajaj
139 Taxmann.com 352 · 2022 · High Court
443
citing judgments

Tax authorities are entitled to examine surrounding circumstances and apply the test of human probabilities to determine the genuineness of long-term capital gains arising from the sale of manipulated penny stock, even if prima facie documents appear to support the transaction.

CIT v. Shyam R. Pawar
54 Taxmann.com 108 · 2015 · High Court
279
citing judgments

Transactions involving the purchase and sale of shares cannot be considered bogus where the assessee provides documentary evidence, unless the revenue brings substantial evidence on record to reject such proof. This principle is consistently applied in cases concerning claims of bogus long-term capital gains arising from penny stock transactions.

CIT v. Gopal Purohit
336 ITR 287 · 2011 · High Court
254
citing judgments

The gain from delivery-based share transactions, where shares are consistently treated as investments and valued at cost in the books, is assessable as capital gains and not business income. An assessee's consistent stand on classifying share transactions should generally be followed by the assessing officer in subsequent years.

Sanjay Bimalchand Jain v. PCIT-1, Nagpur
89 Taxmann.com 196 · 2018 · High Court
251
citing judgments

The exemption for long-term capital gains on share transactions is unavailable if the assessee fails to discharge the onus of proving the genuineness of gains arising from dubious share transactions designed to convert unaccounted income into tax-exempt capital gains. Courts will uphold an assessment based on the Revenue's evidence of price rigging or penny stock manipulation if the assessee cannot provide cogent evidence for the abnormal rise in share value.

PCIT v. Krishna Devi
126 Taxmann.com 80 · 2021 · High Court
249
citing judgments

The genuineness of share transactions, particularly those generating long-term capital gains, cannot be rejected solely based on general investigation reports, third-party statements, or a mere increase in share price, when the assessee provides comprehensive documentary evidence, without the Revenue bringing substantial evidence to the contrary.

CIT v. Jamnadevi Agarwal
328 ITR 656 · 2010 · High Court
230
citing judgments

When faced with allegations of bogus long-term capital gains from penny stocks, the Assessing Officer must discharge the onus of proving that the assessee's transactions were not genuine. The assessee can rely on the principle of preponderance of probability, and the Revenue must present substantial evidence to establish that the transactions were a colourable device or that the assessee was an entry operator.

Jai Steel (India) v. ACIT
259 CTR 281 · 2013 · High Court
224
citing judgments

Under Section 153A, for completed assessments (under Section 143(1) or 143(3)) where no incriminating material is found during a search under Section 132, the Assessing Officer cannot make additions to the income already assessed. Additions are only permissible if based on undisclosed income or assets discovered during the search.

P.V. Doshi v. CIT
113 ITR 22 · 1978 · High Court
179
citing judgments

The lack of jurisdiction to initiate reassessment proceedings under Section 147/148 cannot be waived and can be challenged at a later stage, even if not raised initially. An invalid reassessment due to such jurisdictional defects cannot sustain subsequent penalty proceedings.

CIT v. J.H. Gotla
156 ITR 323 · 1985 · Supreme Court
176
citing judgments

The Supreme Court holds that for income tax purposes, the term 'income' includes 'loss,' allowing for the set-off of a spouse's or minor child's business losses when their income is clubbed with the assessee. This decision emphasizes interpreting tax statutes, especially benevolent provisions, by considering the legislative scheme over a strict literal construction.

Judgments on Section 10(38)

Shri Udit Agarwal, Kolkata vs. DCIT(It)-2(1), Kolkata

Appeal is allowed accordingly

ITA 1839/KOL/2017[2014-15]Status: DisposedITAT Kolkata26 Dec 2018AY 2014-15

Bench: Shri S.S.Godara & Shri, M. Balaganeshassessment Year :2014-15 Shri Udit Agarwal V/S. Dcit (It)-2(1), 110, 3, Madan Mohan Burman Shanti Pally, Kolkata- Street, Kolkataa-007 107 [Pan No.Ahupa 0424 B] .. अपीलाथ" /Appellant ""यथ"/Respondent Shri Subash Agarwal, Advocate अपीलाथ" क" ओर से/By Appellant Shri Robin Choudhury, Addl. Cit-Dr ""यथ" क" ओर से/By Respondent 03-12-2018 सुनवाई क" तार"ख/Date Of Hearing 26-12-2018 घोषणा क" तार"ख/Date Of Pronouncement आदेश /O R D E R Per S.S.Godara:- This Assessee’S Appeal For Assessment Year 2014-15 Arises Against The Commissioner Of Income Tax (Appeals)-22,Kolkata’S Order Dated 10.05.2017 Passed In Case No.71/Cit(A)/22/Kol/14-15/16-17 Involving Proceedings U/S 143(3) Of The Income Tax Act, 1961; In Short ‘The Act’. Heard Both The Learned Representatives. Case File Perused. 2. The Assessee’S Sole Substantive Ground Challenges Correctness Of Both The Lower Authorities’ Action Treating Its Long Term Capital Gains (Ltcg) Of ₹64,99,391/- To Be Unexplained Cash Credits U/S 68 Of The Act. The Cit(A)’S Detailed Discussion To This Effect Reads As Under:- ”06. Decision: 1. I Have Carefully Considered The Action Of The Ld. Ao In Treating The Amount Of Rs.67,24,391/- Being Claimed By The Appellant To Be Proceeds Of Shares Sold To Be Ltcg & Claimed As Exempt. The Findings Of The Ld. Ao Are Based On The Information Being Supplied By The Investigation Wing Of The Department At Kolkata. I Have Also Carefully Examined The Submissions Of The Appellant, Wherein

Section 143(3)Section 68

ITO, Ward - 40(2), Kolkata vs. Shri Suresh Chand Gupta, Kolkata

Appeal is dismissed

ITA 1730/KOL/2017[2014-15]Status: DisposedITAT Kolkata26 Dec 2018AY 2014-15

Bench: Shri S.S.Godara & Dr. A.L. Sainiassessment Year :2014-15 Ito Ward-40(2) V/S. Shri Suresh Chand Gupta 2Nd Floor, 3 16, Tara Chand Dutta Government Place Street, Kolkata-700073 West,Kolkata-700001 [Pan No.Aczpg 0724 C] .. अपीलाथ" /Appellant ""यथ"/Respondent Shri Ajoy Kr. Singh, Cit-Dr अपीलाथ" क" ओर से/By Appellant Shri Manish Tiwari, Fca ""यथ" क" ओर से/By Respondent 26-11-2018 सुनवाई क" तार"ख/Date Of Hearing 26-12-2018 घोषणा क" तार"ख/Date Of Pronouncement आदेश /O R D E R Per S.S.Godara:- This Revenue’S Appeal For Assessment Year 2014-15 Arises From The Commissioner Of Income Tax (Appeals)-12, Kolkata’S Order Dated 20.04.2017, Passed In Case No.10190/Cit(A)-12/Kol/Ward-40(2)/2016-17, In Proceedings U/S. 143(3) Of The Income Tax Act, 1961; In Short ‘The Act’. Heard Both The Parties. Case File Perused. 2. The Revenue’S Sole Substantive Ground Raised In The Instant Appeal Pleads That The Cit(A) Has Erred In Law & On Facts In Reversing The Assessing Officer’S Action Treating Assessee’S Alleged Long Term Capital Gains (Ltcg) Of ₹3,84,74,960/- To Be Bogus In The Nature Of Unexplained Cash Credits U/S 68 Of The Act. The Cit(A)’S Detailed Discussion Qua The Impugned Sole Issue Reads As Under:- “3.2 I Have Perused The Observations & Findings Contained In The Assessment Order. I Have Also Considered The Submission Of The Appellant Along With Paper Book Filed By Ld. A/R Which Contained, Inter-Alia, The Following Documents:-

Section 10(38)Section 142(1)Section 143(3)Section 68