Addition of Rs. 1,17,538/- u/s 68 for Penny Stock Transactions: ITAT Deletes Addition as Assessee Incurred Short-Term Capital Loss, Not LTCG [Read Order]
The assessee had claimed exemption under Section 10(38), but the JCIT(A) found a short-term loss of Rs. 13,600.50.
Short-Term Capital Loss - Taxscan
Short-Term Capital Loss - Taxscan
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition of Rs. 1,17,538/- under Section 68 of Income Tax Act,1961,for penny stock transactions as the assessee incurred a short-term capital loss, not Long Term Capital Gain (LTCG).
The Revenue-appellant appealed against the order dated 30.04.2025 for the Assessment Year (AY) 2012-13 passed by Joint Commissioner of Income Tax(Appeals)[JCIT(A)]. In this case, Harin Yogeshkumar Shah,respondent-assessee, filed his return for the Assessment Year 2012-13 declaring an income of Rs. 1,91,000/-. The Assessing Officer (AO ) received information that he had made transactions in penny stocks and claimed LTCG of Rs. 1,17,538/- as exempt under Section 10(38) of the Act.
The case was reopened under Section 147, and a notice under Section 148 was issued on 30.03.2019. The assessee did not respond, so the sale proceeds were treated as unexplained income under Section 68 and added to his total income, which was assessed at Rs. 3,08,540/- under Section 144 read with section 147 on 30.11.2019.
The assessee appealed, and the JCIT(A) allowed the appeal. The Revenue then filed an appeal before the tribunal.
The Revenue counsel argued that the assessee had taken accommodation entries through penny stock trades in M/s VMS Industries Limited. Since the assessee did not cooperate during the assessment, the AO treated Rs. 1,17,538/- as unexplained income and added it to his total income. The Revenue submitted that the JCIT(A) was wrong in deleting this addition.
No one appeared for the assessee.
The two member bench comprising Siddhartha Nautiyal ( Judicial Member) and Narendra Prasad Sinha (Accountant Member) reviewed the submissions of the Departmental Representative and the records. The AO initially noted that the assessee earned capital gains of Rs. 1,17,538/- from penny stock scrips of VMS Industries Limited and claimed exemption under Section 10(38) of the Act.
However, the AO also recorded a different amount of Rs. 1,38,510/-, showing uncertainty about the transaction value.
The JCIT(A) found that the assessee had incurred a Short Term Capital Loss of Rs. 13,600.50 on these share transactions. The Revenue did not challenge this finding or provide evidence to prove that the assessee earned LTCG or that the JCIT(A)’s conclusion was wrong.
Since the assessee had no LTCG but a STCL, the addition made by the Assessing Officer could not be sustained.
The tribunal upheld the order of the JCIT(A) and dismissed the Revenue’s appeal.
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