LTCG exemption cannot be denied on penny stock transactions solely based on price hike or investigation reports without evidence linking assessee to manipulation; genuineness upheld by banking channels, STT, and documents.

ORDER

PER VIMAL KUMAR, JM:

The application for condonation of delay of 349 days in filing the appeal and the appeal filed by the assesse is against the order dated 21.12.2018 of the Ld. Commissioner of Income Tax (Appeals)-20, New Delhi (hereinafter referred to as “Ld. CIT(A)”), u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), arising out of order dated 28.12.2016 of the of the Ld. Assessing Officer/ITO Ward-62(5), New Delhi (hereinafter referred to as “Ld. AO”), u/s 143(3) of the Act for Assessment Year 2014-15.

2. Brief facts of the case are that, assessee filed income tax return on 26.09.2014 declaring income of Rs.9,88,110/-. The case was selected for scrutiny. Notice u/s 143(2) of the Act was issued on 17.09.2015. Notice u/s 142(1) of the Act along with questionnaire was issued. Sh. Ravinder K Gupta, CA & AR attended proceedings filed necessary details. On examination it was found that assessee had shown income from Business and profession at Rs. 10,95,851/- and income from other sources at Rs. 6,709/-. In computation of income, an amount of Rs. 33,97,009/- was shown as long term capital gain and claimed as exempt u/s 10(38) of the Act. The Directorate of Investigation, Kolkata identified 84 listed penny stock companies, shares of which were used for generating bogus LTCG by various entry operators for the beneficiaries who approached the entry operators. The assessee is one of the beneficiaries who has obtained long term capital gains by way of trading the shares of M/s Cressanda Solutions Limited.

3. On completion of proceedings Ld. AO, vide order dated 28.12.2016 made addition of Rs.33,97,009/-. Against order dated 28.12.2016 of Ld. AO, the assessee filed appeal before Ld. CIT(A) which was dismissed vide order dated 21.12.2018.

4. Being aggrieved, appellant-assessee preferred present appeal. Being aggrieved, appellant-assessee preferred the application for condonation of delay of 349 days. Through application dated 27.05.2025 assessee preferred additional grounds of appeal. As per directions dated 15.10.2025, assessee submitted original and revised grounds consolidated as under:-

1. That the Ld. CIT(A) erred on facts and in law in treating the long-term capital gain of INR 33,97,009/- as unexplained cash credit u/s 68 of the Income-tax Act, 1961 ['the Act'} despite the fact that the said long-term capital gains is on account of sale of long term investment in shares which shares were sold through the recognized stock exchange whose consideration was received through banking channels.

2. That in the facts and circumstances of the case the Commissioner of Income Tax (Appeals)-20, New Delhi is unsustainable in law because the case for scrutiny was picked up for scrutiny by the Assistant Commissioner whereas the assessment was actually made by Income Tax Circle, 62(1) who did not issue any statutory notice u/s 143(2) of the Act. 3. That in the facts and circumstances of the case the Commissioner of Income Tax (Appeals)-20, New Delhi erred in law in dismissing the appeal filed against the assessment order dated 28-12-2016 disregarding that the order was not sustainable in law because while the show cause notice issued by the AO proposed to tax income u/s 69A whereas travelling beyond his proposal he taxed the sum u/s 68 of the Income Tax Act, 1961.

4. That in the facts and circumstances of the case the Commissioner of Income Tax (Appeals)-20, New Delhi erred in law in dismissing the appeal filed against the assessment order dated 28-12-2016 without appreciating that the Investigation Wing Kolkata repo