TaxTMI 
TaxTMI 
2026 (8) TMI 274
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....ing Ltd. (EML) which are bogus penny stocks used for providing bogus LTCG. The assessee company had also made sale and purchase of two such penny stocks naming EML and GBFL amounting to Rs. 8,49,760/- during the F.Y. 2015-16 relevant to A.Y. 2016-17. Thus, the AO held that the assessee had claimed bogus LTCG/STCL amounting to Rs. 8,49,760/- during A.Y. 2016-17. 3. The AO, after following the procedure laid down in section 148A, passed an order u/s 148A(d) of the Act after recording reasons for reopening of the case and obtaining approval from the specified authority u/s 151 of the Act. In response to the notice u/s 148, the assessee has filed its return of income on 27.04.2023. Thereafter, the AO issued notice u/s 143(2) of the Act. Subsequently, the AO issued notices u/s 142(1) dated 04.10.2023 and 08.09.2023 along with questionnaire. In response, the assessee filed its reply. The AO issued detailed show-cause notice on 27.02.2024 against which the assessee furnished its submissions. After detailed discussion, the AO made the following additions: (i) Trading in GBFL & EML (penny stocks) : Rs. 8,49,760/-, (ii) Trading transactions related to Alankit Ltd. : Rs. ....
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....bove penny stocks. In most of the transactions, the appellant has done day trading of the stocks or in case of some transactions holding period is of few days. Therefore, in most of transactions, the purchase shares were not credited to the demat account of the appellant company. 8.5. During the assessment proceedings, the appellant had strongly contended that it had not made any investment in the said penny stocks neither it had declared any LTCG claiming exemption u/s 10(38) of the Act. The Appellant has not claimed any LTCG/STCG/LTCL/STCL in its computation of income during the relevant assessment year which is evident from the computation of income of the Appellant. To substantiate its claim the appellant had furnished copy of trading summary with respect to each transaction in the shares of the penny stocks under reference. During the appellate proceedings, the appellant has furnished the same documents which has been perused and considered carefully. The AO had accepted the veracity of the trading summary filed by the appellant and could not point out any adverse inference in this regard. However, he has made impugned additions for the reason that the appellant compa....
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.... LTCG. There is nothing adverse to comment on the above analysis, but there arises a concern with the axiomatic conclusion drawn by the AO that the appellant has also done accommodation entries for claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes without further corroboration on the basis of cogent material. 8.8. Reliance in this regard is placed on the judgement of the Hon'ble High Court of Delhi in the case of PCIT versus Bindu Garg (2022) 115 CCH 0304 and PCIT vs Krishna Devi (2021) 319 CTR (Del) 168, both of which cases related to trade in penny stocks in which it was held that any addition made merely on the basis of report of investigation wing without any independent enquiry by the AO is bad in law. Further, in the case of the addition of transaction in PMC Fincorp Ltd and Excel Castronics Ltd, the appellant has submitted that it has incurred a loss that does not warrant addition under section 68 as there is no cash credit which is apparent the documents submitted by the Appellant. In the case of addition of the alleged fictitious profit, the appellant has already paid tax on the same at the highest tax rate by i....
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....e appellant but could not point out as to how and from whom this money was received by the appellant. 9.3.2. In its written submission the appellant company has raised technical issue referring some case laws. I considered carefully the submission of the appellant with legal propositions referred by it. Apart from the case laws relied upon by the appellant, some other judicial pronouncement is relevant to mention here. Hon'ble Delhi High Court in the case of ATS Infrastructure Ltd vs ACIT held that if there is difference in reasons recorded show cause notice u/s 148A(b) and final order u/s 148A(d), entire reopening would be invalid. ***** 9.3.3. In the case of PCIT vs Naveen Infradevelopers & Engineers Pvt. ltd. ITA 524/2024 (16.10.2024) Hon'ble Delhi High Court held as under: "Undisputedly, the controversy involved in the present case - whether any addition can be made by the AO pursuant to initiation of reassessment proceedings, notwithstanding that no addition is made on the grounds on the basis of which the assessment was reopened - is covered by an earlier decision of this Court in Ranbaxy Laboratories Ltd. v. Commissioner of Income Tax: 2011 336 ITR 136 (Del....
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....ion of Rs. 1,84,72,770/- pertains to the trading transactions made by the assessee in 4 penny stocks (GBFL & EML Rs. 8,49,760/-, Alankit Ltd. Rs. 5,02,968/-, PMC Fincorp Ltd Rs. 4,43,842/- and Excel Castronics Ltd Rs. 1,66,76,200). Though these are penny stock, the clinching finding of fact given by the CIT(A) remains unrebutted that the assessee has not taken benefit of LTCG or exemption u/s 10(38), Bogus loss, Unsecured loans etc on account of purchase & sale of these penny stocks. The AO not only accepted the veracity of the share trading summary, he also could not point out any adverse inference in this regard with any cogent evidence. We concur therefore, with the CIT(A) that the impugned addition are made merely for the reason that the assessee had traded in the identified penny stocks. We further note that the assessee has traded in such stocks from where it has earned profits as well as loss and the same is accounted for in its Profit and Loss account on which the assessee has paid tax. Moreover, the findings of the CIT(A), that the assessee's documents such as the trading account, demat account, trade summary and bank statements show that the transactions have been carried....