This article explores the tribunal’s decision on ITA No. 28/Del/2021 for the assessment year 2011-12, involving the dispute between DCIT Circle-43(1) and Rajesh Aggarwal over alleged penny stock transactions.
The Department challenged the order of CIT(Appeals)-14, which had earlier quashed the addition of Rs. 7,20,130 made by the AO on account of long-term capital gains from the sale of shares in Nouveau Multimedia Ltd., deemed a penny stock by the AO but not recognized as such in subsequent rulings.
The hearing, conducted on June 28, 2023, brought forth arguments from both sides. The Department contended that the CIT(A)’s deletion of the addition was erroneous, basing their arguments on a specific circular exempting such cases based on the nature of transactions.
The ITAT, through meticulous examination of the case presented by both the Department and the assessee, concluded that the transactions were not in the nature of penny stock trades. This was substantiated by historical rulings and assessments of similar cases, along with a re-evaluation of the company’s status in the market.
The tribunal’s decision to dismiss the revenue’s appeal highlights the importance of thorough documentation and genuine transaction evidence in disputes over the characterization of stock transactions as ‘penny stock’. This case sets a precedent on how tax authorities may interpret similar transactions in the future.
The tribunal’s dismissal of the appeal due to low tax effect and the non-applicability of the exception clause of the cited CBDT Circular emphasizes the critical nature of judicial scrutiny in tax matters, particularly those involving stock transactions.
DCIT vs Rajesh Aggarwal: Dismissal of Capital Gains Addition on Alleged Penny Stock Transactions
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