No independent inquiry in penny stock case – ITAT Mumbai deleted addition of Rs. 4 Cr due to denial of LTCG exemption under Section 10(38)
In the case of Sonal Snehal Shah vs. ITO, the ITAT Mumbai quashed the reassessment proceedings for AY 2012-13. The Assessing Officer had treated over Rs. 4 crore of Long-Term Capital Gains from the sale of Banas Finance Ltd. shares as unexplained cash credits under Section 68, based on an investigation report labeling the company a “penny stock.” The reassessment was initiated solely on this report, without independent inquiry, and the LTCG exemption under Section 10(38) was denied.
The ITAT held that the reassessment lacked proper basis and ruled in favor of the assessee.
The copy of the order is as under:
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