High Court Upholds ITAT Order: No Substantial Question of Law Arises in Penny Stock Transaction Case.

The HC dismissed the Revenue's appeal challenging the ITAT order for AY 2011-12, which involved the deletion of an addition related to a bogus loss in penny stock transactions. The CIT(A) and ITAT found the transactions genuine, supported by contract notes and banking channels. The HC upheld these concurrent factual findings, determining no substantial question of law arose, and dismissed the appeal without costs.

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Issues:
Challenge to ITAT order on addition of bogus loss in penny stock for AY 2011-12.

Detailed Analysis:
The tax appeal challenged the ITAT order for AY 2011-12, raising the issue of deletion of an addition of Rs.3,33,466 made on account of disallowance of a bogus loss incurred in penny stock. The appellant contended that the transaction was part of an organized tax evasion scam involving penny stock companies. The case was reopened under section 147 of the IT Act based on information received regarding the use of VAS Infrastructure Ltd for accommodation entry of bogus LTCG/Loss. The AO added the amount to the total income, initiating penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.

In response to the notice, the assessee filed the return of income but failed to provide clarifications regarding the penny stock transactions. The AO considered the loss as bogus, aimed at providing accommodation entries for inflated LTCG. However, on appeal before the Principal CIT, it was argued that the transactions were genuine, supported by contract notes, and conducted through the banking channel. The CIT(A) found the share transactions to be genuine, leading to the deletion of the addition.

The Tribunal affirmed the CIT(A)'s view, noting that the script VAS Infrastructure Ltd. was not blacklisted and was not classified as a penny stock by the SEBI. The details provided by the assessee, including contract notes and trading bills, along with payment of STT through banking channels, were considered genuine. The Tribunal found no discrepancies in the evidence produced by the assessee and dismissed the appeal of the Revenue.

The High Court, after reviewing the orders of the CIT(A) and the Tribunal, concluded that there were concurrent factual findings supporting the genuineness of the transactions. As no substantial question of law arose for adjudication, the appeal was dismissed with no order as to costs.

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