S. 68 : Cash credits-Long-term capital gains-Penny stock-Addition based solely on Investigation Wing report without independent enquiry-Documentary evidences not disproved-Transactions through demat and stock exchange-Addition deleted-Suspicion cannot replace evidence. [S. 10(38), 45]
The assessee earned long-term capital gains on sale of shares of Lifeline Drugs and Pharma Ltd. and claimed exemption under section 10(38). The Assessing Officer treated the gains as bogus on the basis of Investigation Wing report alleging the scrip to be a penny stock and made addition under section 68 along with commission expenditure. The Tribunal held that the assessee had furnished complete documentary evidences such as purchase details, demat statements, contract notes and bank records and the transactions were carried out through a recognized stock exchange via SEBI registered brokers. No defects were found in the evidences. The Assessing Officer relied primarily on general reports and third-party statements without conducting independent enquiry or bringing any material to directly link the assessee with alleged accommodation entries. It was observed that the assessee was a regular investor and other share transactions were accepted as genuine. Suspension of trading in the scrip took place after the assessee’s transactions and could not invalidate earlier transactions. Following coordinate bench decisions on identical facts, the Tribunal held that suspicion, however strong, cannot take the place of evidence and in absence of any cogent material to disprove the assessee’s claim, the addition was unsustainable. Accordingly, the addition under section 68 and the consequential commission addition were deleted and the assessee’s appeals were allowed while the Revenue’s appeal was dismissed. (AY. 2014–15 & 2015–16 (ITA No. 751/Mum/2024, 872 & 873/Mum/2024 dt. 25.03.2026)
Mahaveer Sukhanraj Kawar v. ITO (Mum.) (Trib.) www.itatonline.og.
[Coram : Hon’ble Shri Saktijit Dey, VP and Hon’ble Shri Makarand Vasant Mahadeokar, AM]