Assessee's Off-Market Share Purchase by Cheque Differs Materially from Facts Relied Upon by Single Bench: ITAT overrides Single Bench [Read Order]

The Revenue had appealed against the order passed by the National Faceless Assessment Centre (NFAC) for the assessment year 2013-14.

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Coming to the facts of the case, the assessee filed the income tax returns for AY 2013-14 on 28.09.2013, declaring an income of Rs. 10,58,210 and claiming Rs. 80,88,456 as exempt Long-Term Capital Gains under Section 10(38) of the Income Tax Act from the sale of equity shares. The Investigation Wing flagged the assessee for trading in penny stocks (M/s CCL International Ltd.).

A notice under Section 148 of the Income Tax Act, 1961, was issued on 30.03.2021. In response, the assessee refiled the same return on 06.04.2021 with no changes.

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The AO concluded that the transactions were a colourable device to evade tax, citing the company's identification as a penny stock, its abrupt share price movements, and SEBI's actions against brokers involved in similar scams. The AO treated the entire sale proceeds of Rs. 95,25,646, as unaccounted income and completed the assessment accordingly. The assessee appealed before the CIT(A).

The CIT(A) relied on the judgments of Achal Gupta, I.T.A. No.501/Lkw/2019, and Reeshu Goel Vs. Income Tax Officer in I.T.A. No. 1691/Del/2019, in which the same scrip from which the assessee had obtained a long-term capital gain had been held to be

genuine by recording detailed findings that the scrip of CCL International Ltd is genuine and not a penny stock or paper entity. The same scrip from which the assessee had obtained a long-term capital gain had been held to be genuine by recording detailed findings that the scrip of CCL International Ltd is genuine and not a penny stock or a paper entity.

The ITAT considered a contrary ruling in ITA No. 3809/Del/2018, where additions were sustained based on a broker's admission and the company's unrealistic financials.

The bench, by going through the facts of the case, noted that the order of the single bench was hinged on the unfavourable statement, which has been held against the assessee, and the assessee has purchased the share in an off-market mode.

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The bench noted that the taxpayer also bought shares off-market, but did so by cheque, and no negative statement was mentioned anywhere in the records. So, the facts of this case are significantly different from the earlier one.

The ITAT relied on a ruling by a division bench that dealt with a similar issue but had facts more like those of the current case.

The ITAT, comprising Madhumita Roy (Judicial Member) and Khettra Mohan Roy (Technical Member), allowed the appeal in favour of the Revenue.

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