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Issues involved: Alleged computation of long-term capital gain in respect of alleged unquoted shares of group companies.
Assessment Year 2005-06: The appellant claimed Long Term Capital Gain (LTCG) from the sale of two penny stocks, which the department considered as in genuine due to trading in penny stocks. The broker involved in the deal was suspended for creating an artificial market, raising doubts on the legitimacy of the transactions. The appellant's lack of experience in trading and the companies' lack of fundamentals were highlighted. The Commissioner of Income-tax (Appeals) erred in accepting the transactions as genuine. The department's appeal was dismissed. Assessment Year 2006-07: The department disallowed the addition of Long Term Capital Gain, questioning the genuineness of transactions involving penny stocks and brokers creating artificial markets. The Commissioner of Income-tax (Appeals) found the transactions legitimate, supported by proper documentation, compliance with tax regulations, and transactions through banks. The department's grounds were dismissed, and the appeal was rejected. The Appellate Tribunal ITAT Kolkata heard appeals against separate orders of the Commissioner of Income-tax (Appeals) for the assessment years 2005-06 and 2006-07 regarding alleged long-term capital gains from unquoted shares. The tribunal found the transactions genuine, supported by proper documentation and compliance with tax regulations. The department's doubts regarding the brokers' actions were dismissed, leading to the dismissal of both departmental appeals for the respective assessment years.
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