Investment in penny stock can’t be termed as bogus investment: HC
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- Last Updated on 27 September, 2022
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Case Details: PCIT v. Jagat Pravinbhai Sarabhai - [2022] 142 taxmann.com 247 (Gujarat)
Judiciary and Counsel Details
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- N.V. Anjaria & Bhargav D. Karia, JJ.
- Manish Bhatt, Sr. Adv. & Karan Sanghani for the Appellant.
Facts of the Case
Assessee filed the return of income for the assessment year 2011-12 on 29-3-2012 declaring his total income Rs. 3,11,490. Subsequently, the assessment was reopened as information was received that assessee has indulged in the script of the shell company. He had claimed long-term capital gain on the sale of shares of Devika Proteins Limited and the amount was claimed as exemption.
The Assessing Officer (AO) treated said gains as bogus and in nature of penny stock. He made additions to the said amount under section 68. On appeal, the CIT(A) held that since shares were in the nature of old investment, they could not be treated as penny stock by any stretch of the imagination. Tribunal upheld to view taken by the CIT(A).
Aggrieved-AO filed the instant appeal before the Gujarat High Court.
High Court Held
The Gujarat High Court held that the genuineness of investment in the shares by the assessee was substantiated by him by producing copy of the transaction statement for the period from 1-6-2001 to 1-10-2010. The investment was made in the year 2000-01. The shares were retained for more than ten years and were sold after such a long time.
These circumstances suggested that the investment was not bogus or investment made in penny stock. The shares were purchased in order to invest and not to earn exempted income by frequent trading in a short span.
The finding recorded by the appellate authority and confirmed by the appellate tribunal was based on the material before them. They were in the realm of findings of fact. No error could be noticed in the findings and the conclusion that the investment was longstanding and genuine and was not penny stock based on which the capital gain was wrongly claimed.
List of Cases Reviewed
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- Order of ITAT, Ahmedabad in IT Appeal No. 1505 of 2019, dated 1-12-2021 (para 6.1) affirmed
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