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)

Shantaben Parasmal Jain, Ahmedabad vs. The Deputy Commissioner of Income Tax, Circle-3(1), Vadodara

In the result, appeal of the assessee is allowed

ITA 726/AHD/2017[2010-11]Status: DisposedITAT Ahmedabad05 Oct 2018AY 2010-11

Bench: Shri Rajpal Yadav & Shri Waseem Ahmedआयकर अपील सं./ Ita No. 726/Ahd/2017 "नधा"रण वष"/Assessment Year: 2010-11 Shantaben Parasmal Jain, Vs. Dcit, 27, Vijay Society, Cir – 3(1), New Khanderao Road., Vadodara. Baroda. Pan No. Abwpj 8597 J अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri Prakash D. Shah, A.R. Revenue By : Shri S. N. Dev, Sr. D.R. सुनवाई क" तार"ख/Date Of Hearing : 08.08.2018 घोषणा क" तार"ख /Date Of Pronouncement : 15.10.2018 आदेश/O R D E R Per Waseem Ahmed: The Captioned Appeal Has Been Filed At The Instance Of The Assessee Against The Appellate Order Of The Learned Commissioner Of Income-Tax (Appeals)-I, Vadodara [“Cit(A)” In Short] Relevant To Assessment Year 2010- 11. 2. Assessee Has Raised The Following Grounds Of Appeal:- “1. That The Learned Commissioner Of Income Tax (Appeals) Has Erred In Law & Facts By Upholding The Reassessment Proceedings & Therefore The Order Passed By The Learned Ao Is Required To Be Quashed. 2. That The Learned Commissioner Of Income Tax (Appeals) Has Erred In Law & Facts By Confirming The Disallowance Of Long Term Capital Gain Of Rs. 87,57,789/- As Exempt Income & Adding Back To The Total Income Of The Appellant & Therefore The Learned Ao Should Be Directed To Allow The Claim Of Exempt Income. 3. That The Appellant Craves Liberty To Add, Amend, Alter & Delete Any Grounds Of Appeal Before The Final Hearing.”

For Appellant: Shri Prakash D. Shah, A.RFor Respondent: Shri S. N. Dev, Sr. D.R
Section 10(38)Section 147Section 148

Premlata Agarwal, Siliguri vs. ITO, Ward - 2(4), Siliguri

In the result the appeal of the assessee is allowed

ITA 874/KOL/2018[2014-15]Status: DisposedITAT Kolkata05 Oct 2018AY 2014-15

Bench: Sri J. Sudhakar Reddy) Assessment Year: 2014-15 Premlata Agarwal……………...……………...........…………..………………………………..….…….........Appellant Neelam Agarwal C/O. Subash Agarwal & Associates Siddha Gibson 1, Gibson Lane Suite-213 2Nd Floor Kolkata – 700 069 [Pan : Accpa 8188 P] Vs. Income Tax Officer, Ward-2(4), Siliguri…..……………………………………………..…..............Respondent Appearances By: Shri Subash Agarwal, Advocate, Appeared On Behalf Of The Assessee. Shri Saurav Kumar, Addl. Cit, D/R. Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : September 25Th, 2018 Date Of Pronouncing The Order : October 5Th , 2018 Order Per J. Sudhakar Reddy, Am :- This Appeal Filed By The Assessee Is Directed Against The Order Of The Learned Commissioner Of Income Tax (Appeals) – 13, Kolkata, (Hereinafter The ‘Ld. Cit(A)’), Dt. 21/02/2018, Passed U/S 250 Of The Income Tax Act, 1961 (Hereinafter The ‘Act’), Relating To Assessment Year 2014-15. 2. The Sole Issue That Arises For My Adjudication Is Whether The Assessing Officer Was Right In Rejecting The Claim Of The Assessee That He Had Earned Long Term Capital Gains On Purchase & Sale Of The Shares Of First Financial Services Ltd. The Ao Based On A General Report & Modus Operandi Adopted Generally In These Cases & On General Observations Has Concluded That The Assessee Has Claimed Bogus Long Term Capital Gain. He Made An Addition Of The Entire Sale Proceeds Of The Shares As Income & Rejected The Claim Of Exemption Made U/S 10(38) Of The Act. The Evidence Produced By The Assessee In Support Of The Genuineness Of The Transaction Was Rejected.

Section 10(38)Section 250Section 69C

Smt. Sabita Gupta, Kolkata vs. ITO, Ward - 45(2), Kolkata

In the result the appeal of the assessee is allowed

ITA 864/KOL/2018[2014-15]Status: DisposedITAT Kolkata05 Oct 2018AY 2014-15

Bench: Sri J. Sudhakar Reddy) Assessment Year: 2014-15 Smt. Sabita Gupta………………...……………...........…………..………………………………..….…….........Appellant 132, Cotton Street 1St Floor Kolkata – 700 007 [Pan : Aczpg 5987 F] Vs. Income Tax Officer, Ward-45(2), Kolkata..……………………………………………..…..............Respondent Appearances By: Shri Subash Agarwal, Advocate, Appeared On Behalf Of The Assessee. Shri Saurav Kumar, Addl. Cit, D/R. Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : September 25Th, 2018 Date Of Pronouncing The Order : October 5Th , 2018 Order Per J. Sudhakar Reddy, Am :- This Appeal Filed By The Assessee Is Directed Against The Order Of The Learned Commissioner Of Income Tax (Appeals) – 13, Kolkata, (Hereinafter The ‘Ld. Cit(A)’), Dt. 21/02/2018, Passed U/S 250 Of The Income Tax Act, 1961 (Hereinafter The ‘Act’), Relating To Assessment Year 2014-15. 2. The Sole Issue That Arises For My Adjudication Is Whether The Assessing Officer Was Right In Rejecting The Claim Of The Assessee That He Had Earned Long Term Capital Gains On Purchase & Sale Of The Shares Of M/S. Unno Industries Limited & M/S. Ncl Research & Financial Services Ltd. The Ao Based On A General Report & Modus Operandi Adopted Generally In These Cases & On General Observations Has Concluded That The Assessee Has Claimed Bogus Long Term Capital Gain. He Made An Addition Of The Entire Sale Proceeds Of The Shares As Income & Rejected The Claim Of Exemption Made U/S 10(38) Of The Act. The Evidence Produced By The Assessee In Support Of The Genuineness Of The Transaction Was Rejected.

Section 10(38)Section 250

Neeraj Gupta, Kolkata vs. ITO, Ward - 44(1), Kolkata

In the result the appeal of the assessee is allowed

ITA 863/KOL/2018[2014-15]Status: DisposedITAT Kolkata05 Oct 2018AY 2014-15

Bench: Sri J. Sudhakar Reddy) Assessment Year: 2014-15 Neeraj Gupta……………………...……………...........…………..………………………………..….…….........Appellant 132, Cotton Street 1St Floor Kolkata – 700 007 [Pan : Adapg 0346 E] Vs. Income Tax Officer, Ward-44(1), Kolkata..……………………………………………..…..............Respondent Appearances By: Shri Subash Agarwal, Advocate, Appeared On Behalf Of The Assessee. Shri Saurav Kumar, Addl. Cit, D/R. Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : September 25Th, 2018 Date Of Pronouncing The Order : October 5Th, 2018 Order Per J. Sudhakar Reddy, Am :- This Appeal Filed By The Assessee Is Directed Against The Order Of The Learned Commissioner Of Income Tax (Appeals) – 13, Kolkata, (Hereinafter The ‘Ld. Cit(A)’), Dt. 28Th February, 2018, Passed U/S 250 Of The Income Tax Act, 1961 (Hereinafter The ‘Act’), Relating To Assessment Year 2014-15. 2. The Sole Issue That Arises For My Adjudication Is Whether The Assessing Officer Was Right In Rejecting The Claim Of The Assessee That He Had Earned Long Term Capital Gains On Purchase & Sale Of The Shares Of M/S. Unno Industries Limited & M/S. Ncl Research & Financial Services Ltd. The Ao Based On A General Report & Modus Operandi Adopted Generally In These Cases & On General Observations Has Concluded That The Assessee Has Claimed Bogus Long Term Capital Gain. He Made An Addition Of The Entire Sale Proceeds Of The Shares As Income & Rejected The Claim Of Exemption Made U/S 10(38) Of The Act. The Evidence Produced By The Assessee In Support Of The Genuineness Of The Transaction Was Rejected.

Section 10(38)Section 250

Santosh Choraria, Kolkata vs. ITO, Ward - 36(3), Kolkata

In the result the appeal of the assessee is allowed

ITA 521/KOL/2018[2014-15]Status: DisposedITAT Kolkata05 Oct 2018AY 2014-15

Bench: Sri J. Sudhakar Reddy) Assessment Year: 2014-15 Santosh Choraria………………...……………...........…………..………………………………..….…….........Appellant 408, Marshall House Flat-413 25, Strand Road Kolkata – 700 001 [Pan : Acdpc 1830 F] Vs. Income Tax Officer, Ward-36(3), Kolkata..……………………………………………..…..............Respondent Appearances By: Shri S.M. Surana, Advocate, Appeared On Behalf Of The Assessee. Shri P.K. Mondal, Addl. Cit, D/R. Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : September 24Th, 2018 Date Of Pronouncing The Order : October 5Th , 2018 Order Per J. Sudhakar Reddy, Am :- This Appeal Filed By The Assessee Is Directed Against The Order Of The Learned Commissioner Of Income Tax (Appeals) – 10, Kolkata, (Hereinafter The ‘Ld. Cit(A)’), Dt. 12Th February, 2018, Passed U/S 250 Of The Income Tax Act, 1961 (Hereinafter The ‘Act’), Relating To Assessment Year 2014-15. 2. The Sole Issue That Arises For My Adjudication Is Whether The Assessing Officer Was Right In Rejecting The Claim Of The Assessee That He Had Earned Long Term Capital Gains On Purchase & Sale Of The Shares Of M/S. Essar India Ltd. The Ao Based On A General Report & Modus Operandi Adopted Generally In These Cases & On General Observations Has Concluded That The Assessee Has Claimed Bogus Long Term Capital Gain. He Made An Addition Of The Entire Sale Proceeds Of The Shares As Income & Rejected The Claim Of Exemption Made U/S 10(38) Of The Act. The Evidence Produced By The Assessee In Support Of The Genuineness Of The Transaction Was Rejected.

Section 10(38)Section 250

Kamala Devi Mohta, Kolkata vs. ITO, Ward - 45(3), Kolkata

In the result the appeal of the assessee is allowed

ITA 387/KOL/2018[2014-15]Status: DisposedITAT Kolkata05 Oct 2018AY 2014-15

Bench: Sri J. Sudhakar Reddy) Assessment Year: 2014-15 Kamala Debi Mohta………………..…………...........…………..………………………………..….…….........Appellant Flat-1A Floors Castlake District 74, Maulana Abul Kalam Azad Road Phoolbagan Kolkata – 700 054 [Pan : Adqpm 9713 M] Vs. Income Tax Officer, Ward-45(3), Kolkata..……………………………………………..…..............Respondent Appearances By: Shri S.L. Kocchar, Advocate, Appeared On Behalf Of The Assessee. Shri P.K. Mondal, Addl. Cit, D/R. Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : September 24Th, 2018 Date Of Pronouncing The Order : October 5Th , 2018 Order Per J. Sudhakar Reddy, Am :- This Appeal Filed By The Assessee Is Directed Against The Order Of The Learned Commissioner Of Income Tax (Appeals) – 13, Kolkata, (Hereinafter The ‘Ld. Cit(A)’), Dt. 30Th November, 2017, Passed U/S 250 Of The Income Tax Act, 1961 (Hereinafter The ‘Act’), Relating To Assessment Year 2014-15. 2. The Sole Issue That Arises For My Adjudication Is Whether The Assessing Officer Was Right In Rejecting The Claim Of The Assessee That He Had Earned Long Term Capital Gains On Purchase & Sale Of The Shares Of M/S. Kailash Auto Finance Ltd. The Ao Based On A General Report & Modus Operandi Adopted Generally In These Cases & On General Observations Has Concluded That The Assessee Has Claimed Bogus Long Term Capital Gain. He Made An Addition Of The Entire Sale Proceeds Of The Shares As Income & Rejected The Claim Of Exemption Made U/S 10(38) Of The Act. The Evidence Produced By The Assessee In Support Of The Genuineness Of The Transaction Was Rejected.

Section 10(38)Section 250

Harish Kumar Jain, Kolkata vs. ITO, Ward - 34(3), Kolkata

In the result the appeal of the assessee is allowed

ITA 1404/KOL/2018[2014-15]Status: DisposedITAT Kolkata05 Oct 2018AY 2014-15

Bench: Hon’Ble Shri J.Sudhakar Reddy, Am] Assessment Year : 2014-15 Harish Kumar Jain -Versus- I.T.O., Ward-34(3), Kolkata Kolkata (Pan: Acspj 6317 R) (Appellant) (Respondent) For The Appellant: Shri A.K. Tibrewal, Fca & Shri Amit Agarwal, Advocate For The Respondent: Shri Piyush Mukherjee, Addl. Cit, Sr. Dr Date Of Hearing : 03.10.2018 Date Of Pronouncement : 05.10.2018 Order Per J.Sudhakar Reddy, Am: This Is An Appeal Filed By The Assessee Directed Against The Order Of The Commissioner Of Income Tax-(A)-10, Kolkata Dated 24.05.2018 Passed U/S 250 Of The Income Tax Act, 1961 (The ‘Act ‘) Relating To A.Y. 2014-15. 2. The Sole Issue That Arises For My Adjudication Is Whether The Assessing Officer Was Right In Rejecting The Claim Of The Assessee That He Had Earned Long Term Capital Gains On Purchase & Sale Of The Shares Of M/S Kailash Auto Finance Ltd. The Ao Based On A General Report & Modus Operandi Adopted Generally In These Cases & On General Observations Has Concluded That The Assessee Has Claimed Bogus Long Term Capital Gain. He Made An Addition Of The Entire Sale Proceeds Of The Shares As Income & Rejected The Claim Of Exemption Made U/S 10(38) Of The Act. The Evidence Produced By The Assessee In Support Of The Genuineness Of The Transaction Was Rejected.

For Appellant: Shri A.K. Tibrewal, FCA & Shri Amit Agarwal, AdvocateFor Respondent: Shri Piyush Mukherjee, Addl. CIT, Sr. DR
Section 10(38)Section 250Section 69C

Smt. Bina Agarwal, Kolkata vs. ITO, Ward - 34(1), Kolkata

In the result the appeal of the assessee is allowed

ITA 1403/KOL/2018[2014-15]Status: DisposedITAT Kolkata05 Oct 2018AY 2014-15

Bench: Hon’Ble Shri J.Sudhakar Reddy, Am] Assessment Year : 2014-15 Smt. Bina Agarwal -Versus- I.T.O., Ward-34(1), Kolkata Kolkata (Pan: Acgpa 6318 K) (Appellant) (Respondent) For The Appellant: Shri Subash Agarwal, Advocate For The Respondent: Shri Piyush Mukherjee, Addl. Cit, Sr. Dr Date Of Hearing : 03.10.2018 Date Of Pronouncement : 05.10.2018 Order Per J.Sudhakar Reddy, Am: This Is An Appeal Filed By The Assessee Directed Against The Order Of The Commissioner Of Income Tax-(A)-10, Kolkata Dated 25.04.2018 Passed U/S 250 Of The Income Tax Act, 1961 (The ‘Act ‘) Relating To A.Y. 2014-15. 2. The Sole Issue That Arises For My Adjudication Is Whether The Assessing Officer Was Right In Rejecting The Claim Of The Assessee That He Had Earned Long Term Capital Gains On Purchase & Sale Of The Shares Of M/S Kailash Auto Finance Ltd. The Ao Based On A General Report & Modus Operandi Adopted Generally In These Cases & On General Observations Has Concluded That The Assessee Has Claimed Bogus Long Term Capital Gain. He Made An Addition Of The Entire Sale Proceeds Of The Shares As Income & Rejected The Claim Of Exemption Made U/S 10(38) Of The Act. The Evidence Produced By The Assessee In Support Of The Genuineness Of The Transaction Was Rejected.

For Appellant: Shri Subash Agarwal, AdvocateFor Respondent: Shri Piyush Mukherjee, Addl. CIT, Sr. DR
Section 10(38)Section 250Section 69C