| Question And Answer | |
|---|---|
| Subject: | Sec.68 and penny stock |
| Category: | Income-Tax |
| Querist: | Manoj |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | cash credits, Penny stock, Penny Stocks, Section 68 |
| Date: | May 21, 2022 |
Assessee is individual and regularly doing investment in share. He has invested share of few co. He has purchase the shares of two co through authorised stock broker and paid the amount by account payee cheques . After 4 years of holding the said shares He sold the shares again through authorise stock brokers and received money as per settlement of stock exchange. During the course of assessment proceedings , AO has given show cause as to why sale proceeds of shares should not be added U/Sec. 68 on the ground that the shares of these co are penny stock and the rise of share price is 4O0 times. The said co does not have Turnover or strong Financials. And also show case as to why the remaining unsold shares on the same price should not be taxes as unexplained investment. Assessee has given detailed reply, however AO has made addition U/Sec.68 the sale proceeds of shares and unsold shares on same price without giving any reference to any section. Whether AO is justified in doing so?
The issue of penny stock allegations would have to be evaluated on a case-to-case basis. With details such as i. SEBI inquiry or action ii. Source of information for the Department iii. Justification for rise in share price, if any, et cetera.
With respect to the alleged unexplained investment, the Assessee should demonstrate before the CIT(A) that the same does not attract any provision of the Act. Therefore, the same should be deleted.