The AO treated the transactions of sale of shares of listed companies as bogus and added the sale proceeds as unexplained income u/s 68 of the Act and also added commission u/s 69C for alleged accmodation entries . CIT (A) confirmed the order of the AO. On appeal allowing the appeal of the assessee the Tribunal held that the fact that a scam has taken place in some penny stocks does not mean that all transactions in penny stocks can be regarded as bogus. In deciding whether the claim is genuine or not, the authorities have to be guided by the legal evidence and not on general observations based on statements, probabilities, human behavior, modus operandi etc. The AO has to show with evidence the chain of events and live link of the assessee’s involvement in the scam including that he paid cash and in return received exempt Long term capital gains . Addition cannot be made as unexplained income . Addition cannot be made on estimated commission for alleged accommodation entries . (Note: Sanjay Bimalchand Jain v .PCIT (2018) 89 Taxman.com 196 (Bom) (HC) is distinguished)(ITANo.3427-3429/Mum/2019, 3311-3313/Mum/2019/3426/Mum/2019/3264/3265/Mum/2019/3247/3248/Mum/2019, dt. 01.10.2019)(AY. 2012-13)
Vijayattan Balkrishan Mittal v. DCIT ( 2020) 203 TTJ 288 (Mum) (Trib).www. itatonline .org Mahendra B.Mittal HUF v .Dy CIT ( 2020) 203 TTJ 288 (Mum.) (Trib.) www.itatonline.org Mahendra Balakrishan Mittal v .Dy .CIT ( 2020) 203 TTJ 288 (Mum.) (Trib.) www.itatonline .org Pooja Mahendra Mittal v .Dy CIT ( 2020) 203 TTJ 288 (Mum.) (Trib.) www.itatonline .org
S. 10(38) : Long term capital gains from equities – Penny stocks- Burden is on the revenue to show with evidence the chain of events and live link of the assessee’s involvement in the scam including that he paid cash and in return received exempt Long term capital gains -Denial of exemption is held to be not jaustified-Addition cannot be made as unexplained income- Addition cannot be made on estimated commission for alleged accommodation entries . [ S.45 , 68,69C ]