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)

Ratan Lal Agarwala, Kolkata vs. ITO, Ward - 36(1), Kolkata

In the result, appeal of the assessee is allowed

ITA 586/KOL/2018[2014-15]Status: DisposedITAT Kolkata12 Sept 2018AY 2014-15

Bench: Sri J. Sudhakar Reddy) Assessment Year: 2014-15 Ratan Lal Agarwal……..…….....................…………….………………………………………..……….……..Appellant 1, R.N. Mukherjee Road Lal Bazar Kolkata – 700 001 [Pan : Acrpa 9773 H] Income Tax Officer, Ward-36(1), Kolkata.……………………………….…..………..……………...Respondent Appearances By: Shri Miraj D. Shah, A/R, Appeared On Behalf Of The Assessee. Shri Sital Chandra Das, Addl. Cit, D/R. Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : August 28Th, 2018 Date Of Pronouncing The Order : September 12Th , 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 (Appeals) - 10 Kolkata, (Hereinafter The ‘Ld. Cit(A)’), Dt. 15/02/2018, 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 Consideration Is, As To Whether, The Addition In Question Made U/S 68 Of The Act, In Respect Of Sale Profits Of Shares Of Essar India Ltd., Is Valid In Law. The Assessee Had Disclosed Long Term Capital Gain On The Purchase & Sale Of Shares Of Essar India Ltd. The Assessing Officer As Well As The Ld. Cit(A) Were Of The View That This Is A Pre-Arranged Bogus Long Terms Capital Gain. They Rejected The Contentions Of The Assessee & The Entire Receipt Was Treated U/S 68 Of The Act. 5% Fo The Same Was Also Added U/S 69 Of The Act, As Commission Paid. The Assessee In Support Of His Contentions Has Filed The Following Documents, During The Course Of Assessment Proceedings :- A) Copies Of Bank Statements B) Ledger Copies C) Demat Statements D) Contract Notes

Section 250Section 68Section 69

Ramesh Chandra Tibrewal, Angul vs. ITO, Angul Ward, Angul

In the result, appeal of the assessee is allowed for statistical purposes

ITA 128/CTK/2018[2014-15]Status: DisposedITAT Cuttack28 Aug 2018AY 2014-15

Bench: Shri N.S.Saini, Am & Shri Pavan Kumar Gadale, Jm आयकर अपील सं./Ita No.128/Ctk/2018 ("नधा"रण वष" / Assessment Year :2014-2015) Ramesh Chandra Tibrewal, Vs. The Income Tax Officer, At:Boinda, Po:Kishoreganj Angul Ward, Angul, Odisha Dist: Angul, Odisha-759127 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aanpt 1412 E (अपीलाथ" /Appellant) (""यथ" / Respondent) .. "नधा"रती क" ओर से /Assessee By : Shri P.R.Mohanty, Ar राज"व क" ओर से /Revenue By : Shri Subhendu Dutta, Dr सुनवाई क" तार"ख / Date Of Hearing : 29/08/2018 घोषणा क" तार"ख/Date Of Pronouncement 29/08/2018 आदेश / O R D E R Per Shri Pavan Kumar Gadale, Jm: This Is An Appeal Filed By The Assessee Against The Order Of Cit(A)- 2, Bhubaneswar, Dated 25.12.2017 Passed In I.T.Appeal No.0201/2016- 17 For The Assessment Year 2014-2015. 2. The Assessee Has Raised The Following Grounds Of Appeal :- 1. That The Ld. Cit (Appeals) Has Erred In Law By Dismissing The Appeal Ex-Party Without Providing Adequate Opportunity & Presuming The Assessee Is Not Interested In The Appeal Violates The Principle Of Natural Justice. Hence The Order Passed By The Ld. Cit Appeal Needs To Be Annulled. 2. That The Ld. Cit (Appeals) Has Erred In Law & On Facts In Confirming The Disallowances Of Rs. 10,82,835/- In An Ex- Party Order Even Without Examining The Merits Of The Case Is Not Sustainable In The Eye Of Law & Hence The Order Of The Ld. Cit Appeal Needs To Be Annulled. 3. That Based On The Facts & Circumstances Of The Case, The Ld. Cit Appeal Has Erred In Confirming The Addition Made By Ao Simply Because Of Non Submission Of Related Papers Is Not Sustainable In The Eye Of Law & Hence The Claim Of The Assessee As Exempted Long Term Capital Gain U/S 10(38)

For Appellant: Shri P.R.Mohanty, ARFor Respondent: Shri Subhendu Dutta, DR
Section 10(38)Section 143(1)Section 143(2)Section 143(3)

Bijay Kumar Tibrewal, Angul vs. ITO, Angul Ward, Angul

In the result, appeal of the assessee is allowed for statistical purposes

ITA 127/CTK/2018[2014-15]Status: DisposedITAT Cuttack28 Aug 2018AY 2014-15

Bench: Shri N.S.Saini, Am & Shri Pavan Kumar Gadale, Jm आयकर अपील सं./Ita No.127/Ctk/2018 ("नधा"रण वष" / Assessment Year :2014-2015) Bijay Kumar Tibrewal, Vs. The Income Tax Officer, At:Boinda, Po:Kishoreganj Angul Ward, Angul, Odisha Dist: Angul, Odisha-759127 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Abfpt 3971 P (अपीलाथ" /Appellant) (""यथ" / Respondent) .. "नधा"रती क" ओर से /Assessee By : Shri P.R.Mohanty, Ar राज"व क" ओर से /Revenue By : Shri Subhendu Dutta, Dr सुनवाई क" तार"ख / Date Of Hearing : 29/08/2018 घोषणा क" तार"ख/Date Of Pronouncement 29/08/2018 आदेश / O R D E R Per Shri Pavan Kumar Gadale, Jm: This Is An Appeal Filed By The Assessee Against The Order Of Cit(A)- 2, Bhubaneswar, Dated 25.12.2017 Passed In I.T.Appeal No.0200/2016- 17 For The Assessment Year 2014-2015. 2. The Assessee Has Raised The Following Grounds Of Appeal :- 1. That The Ld. Cit (Appeals) Has Erred In Law By Dismissing The Appeal Ex-Party Without Providing Adequate Opportunity & Presuming The Assessee Is Not Interested In The Appeal Violates The Principle Of Natural Justice. Hence The Order Passed By The Ld. Cit Appeal Needs To Be Annulled. 2. That The Ld. Cit (Appeals) Has Erred In Law & On Facts In Confirming The Disallowances Of Rs.16,76,800/- In An Ex- Party Order Even Without Examining The Merits Of The Case Is Not Sustainable In The Eye Of Law & Hence The Order Of The Ld. Cit Appeal Needs To Be Annulled. 3. That Based On The Facts & Circumstances Of The Case, The Ld. Cit Appeal Has Erred In Confirming The Addition Made By Ao Simply Because Of Non Submission Of Related Papers Is Not Sustainable In The Eye Of Law & Hence The Claim Of The Assessee As Exempted Long Term Capital Gain U/S 10(38)

For Appellant: Shri P.R.Mohanty, ARFor Respondent: Shri Subhendu Dutta, DR
Section 10(38)Section 143(1)Section 143(2)Section 143(3)