Raipur ITAT on Penny Stock Addition: Not permissible mechanically without any direct evidence showing the assessee’s involvement in rigging or providing/receiving accommodation entries
A recent decision of the ITAT Raipur in Anju Parekh vs. ITO (20 November 2025) offers important clarity on assessments involving alleged penny-stock transactions. The assessee had carried out purchase and sale of shares through a recognised stock exchange, paid STT, held the shares in a demat account and recorded all transactions through banking channels. Everything was properly disclosed in the return of income.
Despite this, the Assessing Officer treated the sale proceeds as unexplained cash credit under Section 68 based only on general Investigation Wing and SEBI findings about the scrip being used in wider market manipulation. The Tribunal held that such broad reports cannot be used mechanically without any direct evidence showing the assessee’s involvement in rigging or providing/receiving accommodation entries. Since all documents were genuine and there was no link connecting the assessee to any alleged network, the addition was found to be unsustainable.
The Tribunal also deleted the separate ad-hoc addition towards alleged commission for accommodation entries, observing that there was no material to show that any such payment was ever made.
Overall, the ruling reinforces a key principle: genuine, well-documented share transactions cannot be disbelieved merely on suspicion or broad industry-level reports. Assessments must rely on specific evidence, not assumptions.
The copy of the order is as under:
