PENNY stock Ruling

DCIT vs. Rakesh Saraogi & Sons (HUF) (ITAT Raipur)

S. 10(38) Bogus Capital Gains Penny Stocks: Assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in Demat accounts with Govt depository and traded on stock exchange Nothing on record to suggest assessee gave cash and purchased cheque from broker (Sanjay Bimalchand Jain (Bom HC) distinguished)

There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account

ACIT vs. Janak Global Resources Pvt. Ltd (ITAT Chandigarh)

S. 36(1)(iii): Dept's argument that Maxopp Investment/Avon Cycles 402 ITR 640 (SC) overrules the presumption that advances to sister concerns are made from own funds and not borrowed funds is not correct. Law on interpretation of judgements explained

It is evident from the above that the issue before the Hon’ble Apex Court was not whether the presumption theory would apply or not where there are mixed funds and the assessee had demonstrated availability of sufficient own funds for making the investments . No discussion on this aspect has also been done by the Hon’ble Apex Court and merely noting that the assessee had utilized mixed funds, the Hon’ble Apex Court held that the principle of apportionment would apply. Without any discussion or deliberat ion on the presumption theory, the proposi t ion laid down in the case of Avon Cycles Ltd. (supra) by the Hon’ble Apex Court has to be restricted to the extent of the issue before the Hon’ble Apex Court and facts before i t and not beyond that . And on that basis the decision of the Hon’ble Supreme Court in the case of Avon Cycles Ltd. (supra) can be read only to the extent of upholding the principle of apportionment of expenses incurred in the context of the l imi ted fact of mixed funds avai lable wi th assessee and no further. The proposition laid down cannot be stretched even logically to address the fact si tuat ion where suf f icient own interest free funds are available with assessee, which fact was not there before the Hon’ble Apex court in the case of Avon Cycles (supra) , and to negate the presumption that the own funds were used for making the investment , which was nei ther the quest ion raised before the apex court and therefore not addressed by i t also.