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2025 (3) TMI 1045 - AT - Income TaxAddition u/s 68 - penny stock transaction - information emanating from the search action conducted by the Investigation Wing - assessee argued and stated that the assessee has not claimed any short term or long term capital gain related to sale of these scrips - HELD THAT - In the impugned assessment order AO discussed various analysis made by the investigating wing of Kolkata and SEBI. In none of the statements or reports of Investigation Wing or orders of SEBI the name of the assessee was mentioned for manipulation. CIT(A) acknowledged the documents filed by the assessee in both the stage which are demat account contract notes ledger and details of sales and purchases. None of the documents are duly rejected by the Ld.AO during the assessment proceedings and the veracity of the documents are never been challenged. Assessee is trading share regularly with huge volume and may be the assessee has dealt with suspicious scrips merely on the basis of movement of share price and there is nothing on record to prove that the assessee has in no way involved in price rigging or in any irregularities. Decided against revenue.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The assessment was reopened under section 147 of the Income-tax Act, 1961, based on information from the Investigation Wing about alleged fictitious losses from trading in penny stocks. The legal framework involves sections 143(3) and 147 of the Act, dealing with assessment and reassessment of income. Court's Interpretation and Reasoning The Tribunal considered whether the losses claimed by the assessee from trading in shares of Blue Circle Services Ltd, Shreenath Commercial & Finance Ltd, and Chirawa Cements Ltd were fictitious. The Tribunal noted that the assessee was a regular trader with substantial turnover and that the losses were part of the overall trading activity. Key Evidence and Findings The assessee provided various documents, including contract notes, ledger details, and bank statements, to substantiate the genuineness of the transactions. The Tribunal found that the Assessing Officer did not challenge the authenticity of these documents. Application of Law to Facts The Tribunal applied the legal principles from previous ITAT decisions, which favored the assessee in similar cases involving alleged penny stocks. The Tribunal found that the assessee's trading activity was genuine and that the losses were part of normal business operations. Treatment of Competing Arguments The revenue argued that the losses were fictitious, relying on reports from the Investigation Wing and SEBI. However, the Tribunal found that these reports did not specifically implicate the assessee in any manipulation. The assessee's argument that the transactions were genuine and supported by documentation was accepted. Conclusions The Tribunal concluded that the assessee's losses from the alleged penny stocks were genuine and part of regular trading activity. The Tribunal upheld the findings of the Ld. CIT(A) and dismissed the revenue's appeal. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning "In light of the above discussion, and particularly considering that the appellant is a regular trader in the stock market with a substantial turnover, the judgment of the Hon'ble jurisdictional ITAT, Mumbai Bench, in the case of M/s. Munish Financial (supra), directly applies to the facts of the present matter." Core Principles Established The Tribunal reaffirmed the principle that genuine trading losses, even if incurred in penny stocks, should not be disallowed without concrete evidence of manipulation or irregularities. Final Determinations on Each Issue
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