The Income Tax Act permits exemption of long-term capital gains if supported by adequate documentation; reliance solely on investigative reports without direct evidence is inadequate for tax additions.

ORDER

Per Sanjay Garg, Judicial Member:

The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “CIT(A)”), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi dated 14.06.2023 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2015-16.

2. The grounds of appeal raised by the assessee are as under:

“1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.54,82,894/- on account of LTCG earned from share transactions done through stock exchange treated as alleged unexplained cash credit u/s.68 of the Income Tax Act, 1961 . on

2. It is therefore prayed that the: above addition may please be deleted as learned members of the tribunal may deem it proper.

3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”

3. The brief facts of the case are that the assessee bought 10,000 shares of Kappac Pharma Ltd. (KPL) having face value of Rs.20/- on 12/10/2012 through offline transaction. These shares were sold between 07/04/2014 to 20/03/2014 at the sale price of Rs.58,82,804/- through share broker M/s. Emkay Global Financial Services Ltd. and through the platform of stock exchange. The AO noted that KPL was a penny stock and was featuring in the list of DIT (Inv.), Kolkata as a company providing bogus long term capital gains / loss. Relying upon the said report of the Investigation Wing, the AO held that long term capital gains declared by the assessee on the sale of the aforesaid scrip of KPL were bogus and made the impugned additions. The Ld. CIT(A) confirmed the addition so made by the AO.

4. At the outset, Ld. AR of the assessee has submitted that the issue is squarely covered by the decision of the Co-ordinate Bench of the Tribunal in the case of mother-in-law of the assessee titled as Lalita Ramniranjan Agarwal vs. ITO , in ITA No.662/Ahd/2023, decided vide order dated 28.02.2025, wherein also the issue as to whether the long term capital gains earned by the assessee Lalita Ramniranjan Agarwal on the sale of scrip of KPL on identical facts was to be treated as bogus or genuine. The Tribunal after considering the relevant facts and the case laws has decided the issue in favour of the assessee by observing as under:

“2.3. The Ld. A.O. considered the above submissions and held that the Director of M/s. Kappac Pharma Ltd. and M/s. Sankeshwar Metals Pvt. Ltd. are the same namely Shri Anand Ramanlal Trivedi who was actively involved in off-market transactions of shares in fraudulent ways and SEBI has also initiated action against them for fraudulent activities. Further the assessee is not regular investor in shares and the purchase of shares of KPL is the first transaction of shares done by the assessee and therefore the claim of exemption u/s.10(38) is not accepted as genuine. Therefore the AO treated the amount of Rs.52,75,306/- as not genuine and added as the total income of the assessee u/s. 68 of the Act and demanded tax thereon.

3. Aggrieved against the same, assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) held that the transaction as bogus and confirmed the addition as bogus Penny Stock Long Term Capital Gain and confirmed the addition made by the Assessing Officer.

4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal:

“1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals)