Atmiben Alipitkumar Doshi v. ITO– [2023] (Ahmedabad – ITAT)
In 2012, the assessee paid cash for shares of a corporation at a price of 20 rupees each. The assessee sold the shares during the year, realising long-term capital gains of Rs. 675 per share, and claimed that these profits were exempt under section 10(38).
The Assessing Officer (AO) noticed that this stock was being looked at as part of a probe into penny stock firms. Due to the modifications made by AO on account of such capital gains, which were treated as unexplained income under Section 68, the claim of exemption on those profits was rejected.
Aggrieved-assessee brought the current appeal before the Tribunal after the CIT(A) upheld the addition made by the AO in the appeal.
The Tribunal determined that the assessee paid cash for each share of the scrip at a price of Rs. 20 from Kappac Pharma Limited. Later, the shares were sold on various dates on the Bombay Stock Exchange, and each share gained Rs. 675 in 24 months. In addition, the assessee paid Rs. 20 for shares while the market price was Rs. 17.45.
Since the assessee bought the shares of Kappac Pharma Limited outside of the usual stock exchange for Rs. 20, the purchase of the shares, which had a share price of Rs. 17.45, appeared fraudulent. The fact that the assessee presented his transaction statement, debit note, and share certificate together with his demat statement does not change the fact that he was well aware of brokers when it came to penny stocks.
As a result, the additions made in accordance with Section 68 must be affirmed because the AO and the CIT(A) correctly denied the LTCG exemption under Section 10(38).
