2023 (8) TMI 505 - AT - Income Tax

Addition u/s. 69B - shares traded by the assessee alleged to be a penny stock - addition made by the A.O. on the ground that the assessee has not made any offline purchases and there was no LTCG and only a short rotational transaction resulting in short term capital gain (STCG for short) and short term capital loss (STCL for short) and that too a nominal loss - HELD THAT - Assessee has furnished all the supporting documentary evidences to substantiate the genuinity of the said transaction. It is also evident that the assessee has not only invested in the scrip of M/s. Vas Infrastructure Ltd. but has also made investment of huge sum in other scrips as well. The fact that the assessee has not made any off line purchases and has not claimed LTCG but has merely incurred a nominal loss in our view, cannot be a case of doubtful investment in penny stock. AO has also not made any enquiry as to the payments made by the assessee to the recognized broker nor has the A.O. brought on record any material evidence to show that it was a mere bogus transaction except for the information received from DDIT (Investigation) that M/s. Vas Infrastructure Ltd. was a penny stock. Even otherwise, if it is assumed that M/s. Vas Infrastructure Ltd. was a penny stock, we find no reason to hold the assessee liable for having invested in the said share in the absence of any corroborative evidence. We are also conscious of the fact that mere suspicion that the assessee has invested in alleged penny stock scrip cannot be made basis of addition u/s. 69B of the Act. In the absence of any material evidences to corroborate the information received from DDIT that M/s. Vas Infrastructure Ltd. is a penny stock, we find no justification in upholding the addition made by the A.O - Decided against revenue.

Summary

Issues involved:
The judgment involves the challenge by the Revenue and cross objection by the assessee regarding the addition made under section 69B of the Income Tax Act in relation to shares traded by the assessee in a company alleged to be a penny stock.

Revenue's Challenge:
The Revenue contested the deletion of the addition made under section 69B by the Assessing Officer, arguing that the company's shares were manipulated to provide accommodation entries. They relied on the identification of the stock as a penny stock by the Investigation Wing and cited legal precedents to support their case.

Assessee's Defense:
The assessee, on the other hand, defended their position by highlighting their regular investment activities in shares, providing detailed evidence of transactions, and emphasizing the nominal nature of the loss incurred. They referenced previous Tribunal decisions where similar additions were deleted and relied on the order of the Commissioner of Income Tax (Appeals) in support of their case.

Tribunal's Analysis and Decision:
Upon reviewing the submissions and evidence, the Tribunal observed that the assessee had invested in the shares of the company in question along with other substantial investments, conducted transactions online through a registered broker, and provided supporting documentation for the transactions. The Tribunal noted the absence of offline purchases, lack of long-term capital gains, and the minimal loss declared by the assessee. They concluded that there was no justification for upholding the addition made by the Assessing Officer under section 69B, as there was insufficient evidence to support the claim that the company was a penny stock. The Tribunal dismissed the Revenue's appeal, finding no infirmity in the order of the Commissioner of Income Tax (Appeals).

Cross Objection by Assessee:
The assessee filed a cross objection challenging the jurisdiction of the Assessing Officer and the validity of the assessment order. However, since the addition made by the Assessing Officer was already deleted by the Commissioner of Income Tax (Appeals) and upheld by the Tribunal, the cross objection was dismissed.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue and the cross objection filed by the assessee, upholding the decision of the Commissioner of Income Tax (Appeals) to delete the addition under section 69B. The judgment was pronounced in open court on 07.08.2023.