Invalidating Reopening of Assessment for 'Bogus' Penny Stock Transactions: Supreme Court dismisses SLP [Read Judgement]

The Supreme Court dismissed the Special Leave Petition(SLP) arising out of impugned final judgment passed by the Calcutta High Court in which the court invalidated the reassessment proceedings under Section 147/148 of the Income Tax Act, 1961.

Justice Manoj Misra and Justice Manmohan dismissed the SLP citing the dismissal of Special Leave Petition (C) No. 15013/2026 by the court with the order dated 24.04.2026.

The Calcutta High Court has dismissed an income tax appeal filed by the Principal Commissioner of Income Tax, Kolkata, challenging the order of the Income Tax Appellate Tribunal (ITAT) which was in favour of the assessee, Pradip Kumar Jajodia HUF.

Before the High Court , the Revenue contended that the ITAT erred in deleting the addition without considering the alleged larger "scam of tax evasion" involving bogus Long Term Capital Gains (LTCG) generated through penny stocks. The Revenue argued that the Tribunal failed to give credence to investigations by the Income Tax Department and SEBI regarding the astronomical rise in share prices of companies with no net worth.

The High Court observed that the Tribunal had examined the facts in detail and correctly concluded that the action of the Assessing Officer was invalid. The ITAT had noted that the information regarding the trading in shares of Appu Marketing & Manufacturing Ltd./Ejecta Marketing Ltd. the very reason cited for reopening the assessment was already available on record when the original assessment under Section 143(3) was completed.

The High Court agreed with the Tribunal's view that the Assessing Officer's reasons did not constitute a "reason to believe" that income had escaped assessment, but merely a "reason to suspect."

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