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)

Sandeep Saraf(HUF), Kolkata vs. ITO, Ward-43(6), Kolkata

In the result, the appeal of the assessee is dismissed

ITA 155/KOL/2021[2015-16]Status: DisposedITAT Kolkata31 Oct 2022AY 2015-16

Bench: : Sri Rajpal Yadav & Sri Manish Boradआयकर अपील सं"या/ I.T.A. No.155/कोल/2021 "नधा"रण वष"/Assessment Year: 2015-16 Sandeep Saraf-Huf ...…………............................ (अपीलाथ"/Appellant [Pan: Aajhs 1452F] Vs. Pcit-15, Kolkata ………........................................(""यथ")/Respondent Appearances By: Sh. Rajeeva Kumar, Advocate, Ld.Ar & Md. Ghayas Uddin, Cit, (D/R) सुनवाई क" "त"थ/ : Aug 30Th, 2022 Date Of The Hearing Date Of Pronouncing The Order : Oct. 31 , 2022 Order Per Manish Borad: This Appeal Filed By The Assessee Pertaining To The Assessment Year (In Short “Ay”) 2015-16 Is Directed Against The Order Passed U/S 263 Of The Income Tax Act, 1961 (In Short The “Act”) By Ld. Pr. Commissioner Of Income-Tax-15, Kolkata [In Short Ld. “Pcit”] Dated 22.06.2020 Which Is Arising Out Of The Assessment Order Framed U/S 143(3) Of The Act Dated 25.05.2017. I.T.A. No.155/Kol/2021 Ay 2015-16 Sandeep Saraf-Huf 2. Registry Has Informed That The Appeal Is Time Barred By 247 Days. Condonation Application Has Been Filed By The Assessee( Which Is Available On Record). Perusal Of The Same Shows That The Delay Was On Account Of Covid-19 Restrictions. We, Therefore, In View Of The Judgment Of The Hon 'Ble Supreme Court Vide Miscellaneous Application No. 21 Of 2022 Find That The Limitation Period In Filing Appeal Between 15.03.2020 Till 28.02.2022 Has Been Excluded For Calculating The Limitation Period. Since The Period Of Limitation In The Case Of The Assessee Falls During This Period, The Same Deserves To Be Excluded & We, Therefore, Condone The Delay Of 247 Days & Admit The Appeal For Adjudication.

Section 10(38)Section 143Section 143(3)Section 14ASection 263