The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax(Appeals)[CIT(A)]’s decision on the addition of Rs. 1.49 Crore for bogus long-term capital gains (LTCG) derived from penny stocks.
Gyan Prakash Gupta,appellant-assessee, appealed against the order dated 31.05.2019, passed by CIT(A) for the assessment year 2015-2016.The issue was the assessment of Rs. 1,49,56,620/- instead of the returned income of Rs. 41,630/-, due to an addition of Rs. 1,49,14,984/- for bogus LTCG from penny stocks.
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The assessee aggrieved by the order of the AO appealed before the CIT(A).
The CIT(A) dismissed the appeal and upheld the AO’s decision. The assessee failed to provide enough evidence to challenge the AO’s findings regarding the non-genuineness of the transactions. The LTCG claimed by the assesse came from penny stocks that showed an unjustified price rise, with no support from company financials or market forces, indicating market manipulation. The assessee could not disprove these findings, leading to the confirmation of the addition.
The CIT(A) referred to the case of Som Nath Maini vs. CIT, where the burden of proving genuineness was on the taxpayer. Despite presenting evidence, the Court found the transactions suspicious, mainly due to the sharp price increase. Similar conclusions were drawn in other cases, such as ACIT vs. Som Nath Maini, where the Tribunal confirmed the addition due to unrealistic price hikes.
The CIT(A) noted that circumstantial evidence was enough to prove the fraudulent nature of the transactions. While the assessee cited lower court judgments to support their claims, higher court rulings favored the revenue’s position. As a result, the CIT(A) upheld the AO’s decision, confirming the addition.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The two member bench comprising Yogesh Kumar US ( Judicial Member ) and Shamim Yahya ( Accountant Member ) noted that the assessee failed to appear despite several notices. The appeal was disposed of after hearing the revenue counsel and reviewing the records. It found the case involved penny stock transactions and noted that the CIT(A) had addressed all arguments in a well-reasoned order.
Therefore, the tribunal upheld the CIT(A)’s decision and rejected the grounds raised by the assessee.In result,the appeal filed by the assessee was dismissed.
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