2023 (3) TMI 1504 - AT - Income Tax

Bogus LTCL - bogus transaction of shares through penny stock - HELD THAT -It is pertinent to note that as per the SEBI report the script VAS Infrastructure Ltd. was not blacklisted and was not termed as penny stock by the Stock Exchange Regulatory Authority. The period for purchase and sale was mentioned by the AO dealt with 10000 shares for which the trading data was taken into account by the CIT(A). The details filed by the assessee such as contract note of transactions in respect of Monarch Research And Brokerage Pvt. Ltd. which is a registered stock broker as well as copy of trading bills were also presented before the Assessing Officer as well as before the CIT(A). The assessee has paid Securities Transaction Tax i.e. STT and all the transaction was through banking channel. Besides the investigation report the AO has not pointed out any discrepancy in the evidences produced by the assessee, therefore, CIT (A) has rightly allowed the bill of the assessee and deleting the addition. There is no need to interfere with the finding of the CIT(A). Hence, the appeal of the Revenue is dismissed.

Summary

Issues:
Appeal against deletion of addition of bogus LTCL claimed under section 10(38) of the Act from shares transaction through penny stock for A.Y. 2011-12.

Analysis:
The appeal was filed by the Revenue against the order passed by the Ld. CIT(Appeals)-10, Ahmedabad for A.Y. 2011-12. The Revenue contended that the CIT (A) erred in law and in facts by deleting the addition of Rs. 3,33,466/- as bogus LTCL claimed under section 10(38) of the Act from shares transaction through penny stock. The assessee had declared total income at Rs. 4,46,520/- for the relevant assessment year. The case was reopened under Section 148 of the Act based on information received regarding the use of VAS Infrastructure Ltd. as a penny stock for accommodation entries. The Assessing Officer observed the purchase and sale of 10000 shares of VAS Infra, resulting in a loss of Rs. 3,33,466/-, which was treated as a bogus loss.

The assessee appealed before the CIT(A), who allowed the appeal. The Revenue argued that VAS Infrastructure Ltd. was blacklisted and declared a penny stock, justifying the addition made by the Assessing Officer. However, the CIT(A) found that the script was not blacklisted as per the SEBI report and the trading data supported the transactions. The assessee provided relevant documents like contract notes and trading bills, showing compliance with regulations such as payment of STT and transactions through banking channels. The CIT(A) concluded that there were no discrepancies in the evidence provided by the assessee, leading to the deletion of the addition. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal dismissed the appeal of the Revenue, emphasizing the lack of discrepancies in the evidence produced by the assessee and the compliance with regulatory requirements. The decision was based on the findings that the script was not blacklisted and that the transactions were supported by proper documentation and conducted through legitimate channels.