AI Drafter 
TaxTMI 
TaxTMI 
2025 (2) TMI 292
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.... Rs. 1,17,78,534/- made under Section 68 of the Income Tax Act, 1961 [hereinafter referred to as "the Act"] by the Dy. Commissioner of Income Tax, Central Circle - 1(1), Ahmedabad, [hereinafter referred to as "AO"] as per his order passed under section 143(3) of the Act. Facts of the Case: 2. The assessee filed the return of income for A.Y. 2015-16 on 22.08.2015, declaring a total income of Rs. 40,66,310/-, which was processed under Section 143(1) of the Act. The case was subsequently picked up for scrutiny, and a notice under Section 143(2) of the Act was issued on 26.07.2016, duly served upon the assessee. The case was initially under the jurisdiction of ACIT, Central Circle-3(3), Ahmedabad. However, it was transferred to DCIT, Cent....
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....ld through ASE Capital Market Ltd. on the Bombay Stock Exchange (BSE) between 24th and 25th November 2014, at a price between Rs. 251 and Rs. 252.5 per share, generating an LTCG of Rs. 1,17,78,534/-. The AO found the increase in price from Rs. 20.59 per share to Rs. 252.5 per share within a short span highly suspicious. 3.1. The AO relied on various reports and investigations conducted by the Income Tax Department in Kolkata, Delhi, and Mumbai, which unearthed accommodation entry operations in penny stocks. The AO identified common features of penny stock companies, which were present in KPL as well: 1. Initial allotment of shares to beneficiaries through preferential allotment or off-market transactions. 2. Sharp rise ....
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....ck exchange, Payment was made via account payee cheques, Delivery of shares was done via Demat accounts, the shares were held for more than 15 months, qualifying them as LTCG under Section 10(38) of the Act. The assessee also argued that Transactions Were Conducted via SEBI-Registered Brokers and STT (Securities Transaction Tax) was paid. The assessee also stated that the AO relied on general observations about penny stock manipulation, without direct proof against the assessee. 3.4. The AO rejected the argument that the purchase and sale were genuine. The AO concluded that penny stock frauds operate as an ecosystem and relying on the decision of Co-ordinate bench in case of ITO vs. Shamim M. Bharwani (Mumbai ITAT) [69 Taxmann.com 65] tr....
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.... in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 4. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 5. This case is covered under exception as per CBDT's Circular No.23 of 2019 dated 06.09.2019 read with Office Memorandum dated 16.09.2019 vide F.No.279/Misc./M-93/2018-ITJ(Pt.). 7. During the course of hearing before us, the Departmental Representative (DR) relied on the order of AO and pointed out that the purchase was made offline, and assessee has traded in only one share. The Authorized Representative (AR) of the assessee argued that the assessee has not dealt with only one share and the CIT(A) has concluded that the as....
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....xamined the material placed on record. The primary issue for consideration in the present appeal is the addition of Rs. 1,17,78,534/- made under Section 68 of the Act, treating the Long-Term Capital Gain (LTCG) on sale of shares of Kappac Pharma Ltd. as non-genuine. The DR) has relied on the order of the AO, contending that the purchase was made offline and that the assessee has traded in only one share, which raises doubts regarding the genuineness of the transaction. On the other hand, the AR has vehemently opposed this contention and demonstrated that the assessee has been making investments in multiple shares over the years, and her investment in shares is substantial in proportion to her total capital, as also observed by the CIT(A) in....
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....ically observed that the assessee has been making investments in various shares over the years, which forms part of her regular investment portfolio. The Revenue has not controverted this factual finding with any contrary evidence. 10.5. As regards the reliance placed by the AR on the Hon'ble Gujarat High Court's judgment in the case of Affluence Commodities Pvt. Ltd. (Tax Appeal No. 264 of 2024), we find merit in the argument that when the purchase of the same shares by the counterparty has been held to be genuine, the sale by the assessee cannot be treated as bogus, unless the Revenue establishes with concrete material that the transaction was pre-arranged or collusive. The AO has not brought any such evidence on record. 10.6. The R....