ITAT : Rejects taxpayer’s LTCG exemption claim citing dubious trading in ‘penny stocks’

Bangalore ITAT rejects assessee-individual’s claim of ‘exempt’ long term capital gains (‘LTCG’) of Rs. 42 lakh arising on sale of ‘penny stocks’ during AY 2015-16, upholds AO’s stand that the LTCG booked by assessee were bogus and the gains were assessable as ‘business income’; Rejects assessee’s stand that the genuineness of LTCG claim cannot be doubted since the contract notes were placed on record and the payment were made through cheques identifying the company whose shares were transacted; Upon examining the financials of the company, ITAT observes that the financial worth of the company was very meager and not worth to be invested in, remarks that “With such financials, we are unable to understand how there can be manifold increase in the shares.”; Further observes that taking cognizance of BSE websites, money control website, investigation wing, SEBI reports, AO had noted that the price of these shares saw phenomenal rise and were constantly traded near the circuit limit (of 5%) so as to avail maximum price rise without hitting and triggering the circuit limit, and thereby avoid surveillance by the Stock Exchange Regulator; ITAT concludes that Revenue has brought sufficient material on record to demonstrate that unaccounted money was introduced in the books through LTCG by circuitous means.:ITAT