2022 (11) TMI 1343 - AT - Income Tax

Disallowance of STCL u/s. 68 - script is penny stock - AR contended that the impugned purchase was made through BSE and that the assessee has held the shares for about six months and the assessee has furnished all the relevant details of payment made for purchase of the impugned share from bank account to the broker and the details of the broker, etc - HELD THAT - As decided in Smt. Shikha Dhawan 2018 (6) TMI 1451 - ITAT DELHI wherein it was held that the assessee was able to prove the genuinely of the transaction of purchase and sale of shares and that the same has been routed through recognized stock exchange and when the Revenue has got no other material on record to rebut the claim of the assessee of exemption claimed u/s.10(38) of the Act, the addition is to be deleted Assessee has proved the genuity of the transaction by furnishing all the required documentary evidence. It is also pertinent to point out that the lower authorities have not rebutted the claim of the assessee, other than the information received from DDIT that M/s. Vas Infrastructure Ltd. is a penny stock. CIT(A) has not dealt with the issue in details except for relying on the order of the A.O. No independent enquiries have been carried out by the lower authorities as to the impugned transaction - we set aside the order of the ld. CIT(A) and delete the addition made u/s. 68 - Decided in favour of assessee.

Summary

Issues Involved:
Disallowance of short term loss and addition on sale proceedings related to share transactions in M/s. Vas Infrastructure Ltd. under section 68 of the Income Tax Act, 1961 for Assessment Year 2012-13.

Detailed Analysis:

Issue 1: Disallowance of Short Term Loss and Addition on Sale Proceedings
- The appellant filed an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of short term loss and addition on sale proceedings concerning share transactions in M/s. Vas Infrastructure Ltd.
- The Assessing Officer disallowed the short term capital loss (STCL) claimed by the appellant under section 68, citing that the company was a penny stock used for laundering unaccounted money.
- The Commissioner of Income Tax (Appeals) upheld the addition, stating that the appellant failed to substantiate the claim.
- The appellant contended that the purchases were made through a recognized stock exchange, held the shares for six months, and provided relevant details and documents to support the transactions.
- The Departmental Representative argued that the financials of M/s. Vas Infrastructure Ltd. indicated money laundering activities and the sharp rise in share prices was unjustified.
- The Tribunal observed that the appellant had provided detailed financial information, payment details, and broker-related documents to prove the genuineness of the transactions.
- Relying on previous decisions, the Tribunal found that the lower authorities did not conduct independent inquiries and set aside the addition made under section 68.
- The Tribunal emphasized that the appellant transacted through recognized stock exchanges and proper banking channels, proving the genuineness of the transactions.
- Citing relevant case law, the Tribunal concluded that the appellant had sufficiently demonstrated the legitimacy of the share transactions and deleted the addition made by the lower authorities.
- The Tribunal allowed the appeal, setting aside the order of the Commissioner of Income Tax (Appeals) and deleting the addition of Rs.1,05,541 under section 68 of the Act for the Assessment Year 2012-13.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the arguments presented by both parties and the Tribunal's reasoning behind its decision.