The Pune Bench of Income Tax Appellate Tribunal (ITAT) has allowed the short term capital gain (STCG) for genuine equity transactions as the department failed to prove the assessee’s involvement in penny-stock manipulation.
The bench of Vinay Bhamore (Judicial Member) and Dr.Manish Borad (Accountant Member) has observed that assessee’s claim of having earned short term capital gain is genuine and needs to be allowed because the assessee has transacted through registered stock broker, purchased/sold through recognised stock exchange and transactions have been routed through banking channel and lastly there is no finding/investigation by Revenue authorities which could prove that assessee was directly involved with the promoters/entry operators managing the price of Equity shares of alleged penny stock company.
The appellant/assessee the assessee is an individual and declared income which was subsequently selected for scrutiny under CASS. In the return of income, assessee has declared income under various heads including short term capital gain of Rs.2,87,979/- from sale of 16000 Equity shares of Blazon Marbles Limited.
The assessee furnished the details before the Assessing Officer about the genuineness of purchase and sale of the Equity shares of the alleged company along with claiming that they have been purchased and sold on registered stock exchange through a registered stock broker and the shares have been routed through banking channel and Demat account.
However, AO was not satisfied and he observed that the assessee has dealt in penny stock company and therefore added the total sale consideration under section 68 of the Income Tax Act.
The tribunal held that the department has failed to contradict the fact that the purchases were made through banking channels and the source of the purchases has not been disputed at any stage and therefore deduction of purchase is allowable against the alleged sale consideration.
Case Details
Case Title: Sonal Ashish Shah Versus ITO
Case No.: ITA No.2541/PUN/2024
Date: 03.06.2025
Counsel For Appellant: Sagar Tilak
Counsel For Respondent: Akhilesh Srivastva
