S. 68 : Cash credits-Long term capital gain-Penny stock-Sale of shares-Turbo Tech Engineering Ltd.-Kappac Pharma Ltd.-Acquired at Rs. 12 and sold at Rs. 720 per share-Abnormal price rise-General investigation report-Cash purchase and late dematerialization-No cogent evidence of genuine transaction – Addition upheld. [S. 10(38), 115BBE, 131, 133(6)]
The assessee claimed exemption u/s 10(38) on LTCG of ₹84,79,100 from sale of shares of Turbo Tech Engineering Ltd. and Kappac Pharma Ltd., purchased in cash in earlier years, dematerialised shortly before sale, and sold through a broker on the stock exchange. The AO, relying on Investigation Wing reports and the abnormal price rise in these scrips, held the transactions to be pre-arranged accommodation entries for converting unaccounted cash into exempt LTCG, and made addition u/s 68 taxable u/s 115BBE. The assessee’s plea of genuine transaction, reliance on broker’s affidavit, and request for cross-examination of persons whose statements were relied upon, were rejected. The CIT(A) upheld the addition. The Tribunal, after analysing the AO’s findings on price movements, financial health of the companies, and surrounding circumstances, held that the transactions were unnatural and suspicious, banking documents were self-serving, and the assessee failed to discharge the burden of proving genuineness as per the test of human probabilities Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) . Distinguishing cases like Pr. CIT v. Ziauddin A. Siddique (Appeal No. 2012 of 2017, dated 4-3-2022 (Bom)(HC) and Pr. CIT v. Krishna Devi (2021) 279 Taxman 148/ 431 ITR 361 (Delhi(HC) (SLP of Revenue was dismissed, PCIT v. Krishna Devi (2002) 287 ITR 91 (SC) and Co ordinate Bench order in Farzad Sheriar v .ITO( 2024)159 taxmann.com 9 / 119 ITR 298 (Mum.)(Trib.) dealing with same script . Followed Manvi Khandelwal v. ITO (ITA No. 3212/Del/2018 dt. 26-11-2019 (Delhi)(Trib), ACIT v. Arihant Kumar Jain (ITA No. 5342 /Del /2018 dt. 27-10-2021 (Delhi)(Trib) in respect of the same scrip, the appeal was dismissed and the addition sustained. (AY 2014-15) (ITA No. 3229/Mum/2023, dt. 22-07-2025)
Chitra Avdhesh Mehta (Smt.) v. ITO (SMC) (Mum.)(Trib.) www.itatonline.org
[Source : Hon’ble Shri Sandeep Gosain JM]