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. Sunil Kumar Jalan, Bangalore vs. Income Tax Officer, Ward- 6(3)(1), Bangalore

In the result, the appeal filed by the assessee is partly allowed for statistical purposes

ITA 337/BANG/2020[2014-15]Status: DisposedITAT Bangalore28 Feb 2023AY 2014-15

Bench: Shri Chandra Poojari & Shri George George K.Shri Sunil Kumar Jalan Vs The Income Tax Officer - 6(3)(1) No.703, 7Th Floor, Ebony Bmtc Building, 80Ft Road A Wing, Godrej Woods Apts 6Th Block, Koramangla Near Hebbal Flyover Bengaluru 560095 Bangalore 560024 Pan – Acdpj0966D (Appellant) (Respondent) Assessee By: Shri P.K. Prasad, Advocate Revenue By: Dr. Sankar Ganesh K., Addl. Cit-Dr Date Of Hearing: 23.02.2023 Date Of Pronouncement: 28.02.2023 O R D E R Per: George George K., J.M. This Appeal At The Instance Of The Assessee Is Directed Against The Cit(A)’S Order Dated 25.11.2019. The Relevant Assessment Year Is 2014-15. 2. The Brief Facts Of The Case Are As Follows: - The Assessee Is An Individual Engaged In Granite Business. For The Assessment Year (Ay) 2014-15 Return Of Income Was Filed On 28.11.2014 Declaring Total Income Of Rs.13,52,370/- Consisting Of Income From House Property, Capital Gains & Business Income. The Assessment Was Selected For Scrutiny & Notice Under Section 143(2) Of The Income Tax Act, 1961 (The Act) Was Issued On 18.09.2015. The Assessee’S Ar Attended Hearing On 30.12.2016 & 2 Shri Sunil Kumar Jalan Produced The Books Of Accounts & Other Details. The Assessing Officer (Ao) Concluded The Assessment Under Section 143(3) Of The Act Vide Order Dated 30.12.2016 Making The Following Addition: -

For Appellant: Shri P.K. Prasad, AdvocateFor Respondent: Dr. Sankar Ganesh K., Addl. CIT-DR
Section 10(38)Section 143(2)Section 143(3)Section 144

Minkal K. Doshi, Mumbai vs. ITO - 18(2)(2), Mumbai

In the result, the appeal of the assessee is partly allowed

ITA 1093/MUM/2020[2015-16]Status: DisposedITAT Mumbai24 Feb 2023AY 2015-16

Bench: Shri Aby T. Varkey, Jm आयकर अपील सं/ I.T.A. No.1093/Mum/2020 (निर्धारण वर्ा / Assessment Years: 2015-16) Minkal K. Doshi बिधम/ Ito-18(2)(2) Room No. 11/B, 5Th Floor, 3Rd Floor, Earnest House, Vs. Pallanji House, 35, New Nariman Point, Mumbai- Charni Road, Khetwadi, 400021. Mumbai-400004. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aiopd7813N (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri B. N. Rao Revenue By: Shri Nayana K. Kumar सुनवाई की तारीख / Date Of Hearing: 29/11/2022 घोषणा की तारीख /Date Of Pronouncement: 24/02/2023 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Assessee Against The Order Of The Ld. Commissioner Of Income Tax (Appeals)-29, Mumbai Dated 25.03.2019 For The Assessment Year 2015-16. 2. The Main Grievance Of The Assessee Is Against The Action Of The Ld. Cit(A) In Upholding The Addition Of Rs.24,66,000/- Made By The Ao In Respect Of Long Term Capital Gain (Ltcg) Claimed Of Rs.20,64,793/- Being Profit On Sale Of Rs.36,000/- Shares Of M/S. Greencrest (Earlier Known As M/S. Marigold Glass Industries Ltd.) & Claimed It As An Exempt Income U/S 10(38) Of The Income Tax Act, 1961 (Hereinafter “The Act”). 3. Brief Facts Are That The Ao Noted That The Assessee Had Filed On 25.09.2015 Return Of Income Declaring Total Income Of Rs.7,01,450/-. The Return Filed Has Been Processed U/S 143(1) Of The Act. Thereafter

For Appellant: Shri B. N. RaoFor Respondent: Shri Nayana K. Kumar
Section 10(38)Section 143(1)

Shri. Pravin M Mehta (HUF), Mumbai vs. ITO Ward 15(1)(2), Mumbai

In the result, appeal of the assessee is partly allowed

ITA 4870/MUM/2019[20006-07]Status: DisposedITAT Mumbai24 Feb 2023

Bench: Shri Aby T. Varkey, Jm आयकर अपील सं/ I.T.A. No.4870/Mum/2019 (निर्धारण वर्ा / Assessment Years: 2006-07) Shri Pravin M. Mehta बिधम/ Ito, Ward-15(1)(2) 3Rd /4Th Floor, Pratishtha (Huf) Vs. Ground Floor, Shop No. 8, Bhawan, Maharshi Karve 198/200, Earth Sampann Road, Mumbai-400021. Chs, 10Th Khetwadi Lane, Maharashtra-400004. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aaehm6552P (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: None Revenue By: Smt. Nayana K. Kumar (Sr. Ar) सुनवाई की तारीख / Date Of Hearing: 28/11/2022 घोषणा की तारीख /Date Of Pronouncement: 24/02/2023 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Assessee (Huf) Against The Order Of The Ld. Commissioner Of Income Tax (Appeals)-6, Mumbai Dated 24.05.2019 Passed For Ay. 2006-07. 2. None Appeared For The Assessee. The Assessee Has Raised Three (3) Grounds Of Appeal Of The Assessee Which Are As Under: - “1. The Ld. Assessing Officer Has Erred In Treating Sales Of Shares As Unexplained Investment Of Rs.8,41,867/- & Added To The Total Income. 2. The Ld. Assessing Officer Has Erred In Adding Rs.42,093/- As Income From Other Sources As Amount Paid For Commission. 3. The Ld. Assessing Officer Has Erred In Treating Rs.15,000 Shown In Balance-Sheet Loan/Creditor As Unexplained Cash Credit & Added To The Total Income.”

For Appellant: NoneFor Respondent: Smt. Nayana K. Kumar (Sr. AR)
Section 147