LTCG for Sale of Equity Shares as Bogus, not eligible to Exemption u/s 10(38) of Income Tax Act: ITAT confirms Income Tax Addition [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) confirmed addition on the ground that Long Term Capital Gain (LTCG) for sale of equity shares as bogus, not eligible to exemption under Section 10(38) of Income Tax Act, 1961. The appellants in the present appeals are Rajendra Kumar Gupta and Others.

The issue is involved in the appeal is relating to the disallowance of claim of exemption u/s. 10(38) of the Income Tax Act in respect of LTCG arising from sale of shares and in some cases challenging the additions for commission expenditure for arranging such LTCG.

The appeal is with regard to genuineness of the claim of exempt income under section 10(38) of the Income Tax Act in respect of long-term capital gain arising from sale of equity shares from the listed companies, which were held to be the penny stock companies by both the lower authorities and the long-term capital gain so claimed being bogus in nature and additions for undisclosed commission expenditure incurred for arranging bogus LTCG.

The Tribunal has adjudicated the similar issue under identical facts in the case of Shyam Sunder and after placing reliance on the judgment of the Jurisdictional High Court in the case of Swati Bajaj & Other.

 A Bench consisting of SonjoySarma, Judicial Member and Dr. Manish Borad, Accountant Member observed that “We, therefore, respectfully following the decision of this Tribunal dated 17.10.2022 as well as in the light of ratio laid down by the Jurisdictional High Court in the case of Swati Bajaj & Others find no infirmity in the orders of the CIT(Appeals) holding the alleged LTCG for sale of equity shares as bogus and not eligible to exemptions under section 10(38) of the Income Tax Act and also confirming the addition of commission expenditure incurred for arranging bogus LTCG and dismiss the appeals of the assesses.”

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