The Fact That A Scam Has Taken Place In Some Penny Stocks Does Not Mean That All Transactions In Penny Stocks Can Be Regarded As Bogus: ITAT Mumbai

The Fact That A Scam Has Taken Place In Some Penny Stocks Does Not Mean That All Transactions In Penny Stocks Can Be Regarded As Bogus: ITAT Mumbai

In the case of Vijayrattan Balkrishan Mittal vs DCIT, ITAT Mumbai has held that:

In deciding whether the claim is genuine or not, the authorities have to be guided by the legal evidence and not on general observations based on statements, probabilities, human behavior, modus operandi etc. The AO has to show with evidence the chain of events and live link of the assessee’s involvement in the scam including that he paid cash and in return received exempt LTCG gains (Sanjay Bimalchand Jain 89 TM 196 (Bom) distinguished).

An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the parry alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee’s action giving his involvement in the scam should be established. The allegation implies that cash was paid by the assessee and in return the assessee received LTCG, which is exempt from income tax, by way of cheque through banking channels. This allegation that cash had changed hands has to be proved with evidence, by the revenue.

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Dhanraj Sharma

Dhanraj Sharma is CEO of Tax Concept. He is on a Mission to Educate and Empower 10,000+ Professionals across the Country.

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