Alleged penny-stock capital gain addition deleted where share transactions were documented and profits were offered to tax

Addition for alleged bogus long-term capital gain on sale of shares was deleted because the scrip was not among the penny stocks relied on in assessment. Contract notes and audited financial statements evidenced the share purchase and sale, while sale proceeds were recorded in the profit and loss account. The resulting profit was offered to tax at the maximum marginal rate, with no exemption claimed for long-term capital gain. The article notes that deletion of the addition was upheld in favour of the assessee.

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Issues: Whether the addition for alleged bogus long-term capital gain from sale of shares, treated as a penny-stock transaction, was sustainable.

Analysis: The concerned scrip was not included in the list of 84 penny stocks relied upon in the assessment. Contract notes and the audited financial statements evidenced the purchase and sale of the shares. The sale proceeds were recorded in the profit and loss account, and the resulting profit was offered to tax at the maximum marginal rate. No exemption under Section 10(38) was claimed.

Conclusion: The deletion of the addition was upheld; the finding is in favour of the assessee.

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