Kolkata Penny Stock Scam: ITAT upholds Addition against Investor [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT) has upheld an addition of long-term capital gain against an investor who invested in a penny stock company in connection with the penny stock scam involving Rs. 36,000 Crores.

In the year 2016, the income tax department had unearthed a trail of Rs. 38,000 crore involving manipulation in 84 listed penny stocks for converting black money into white in Kolkata. As per a report released by the department, a copy of which is available with Mint, uncovered a trail of Rs. 38,000 crore involving manipulation in 84 BSE-listed penny stocks and through 5,000 listed and unlisted firms, many of them shell companies. It assumed that around 64,811 entities evaded taxes through such fraudulent methods.

In the present case, the assessing officer made an addition of Rs. 15,06,889/- against the assessee by treating the Long term capital gain on sale of shares of Alang Gases Ltd. including cost as alleged Unexplained cash credits under section 68 of the Income Tax Act, 1961.

After hearing the arguments from both the parties, the Tribunal observed that this case pertains to the additions made by Assessing Officer on account of detailed enquiries being carried out by Kolkata Investigation Directorate with regard to 84 penny stocks company as well as SEBI.

“The modus operandi involving operators, intermediaries and the beneficiaries have already been detailed in the investigation report prepared and disseminated by the Kolkata Investigation Directorate. Similar investigations were also conducted by the Directorate of Investigation at Mumbai and Ahmedabad,” the Tribunal observed.

While upholding the assessment order, the Tribunal observed that “Even before us, no new facts or circumstances have been placed on record and the orders passed by the revenue authorities have also gone unrebutted, therefore, we find no reason to interfere into or to deviate from such findings of the authorities below and we uphold the findings of the Ld.CIT(A) and reject the ground raised by the Assessee.”