Penny Stock Transactions Found Genuine: ITAT Deletes ₹1 Cr Addition Relying on SEBI Report and Sister Case Precedent [Read Order]

Penny Stock Transactions Deemed Genuine: ITAT Grants Taxpayer Relief

In a significant ruling that could set a precedent for similar cases, the Income Tax Appellate Tribunal (ITAT) has declared certain penny stock transactions as genuine, providing relief to the concerned investor. The Tribunal overturned an addition of ₹1 Crore that the tax authorities had levied, citing evidence and precedent.

SEBI Report Plays Crucial Role in the Decision

The core of the ITAT’s decision hinged on a report from the Securities and Exchange Board of India (SEBI). The SEBI report, following a thorough investigation, reportedly found no evidence of price manipulation in the shares of Splash Media, the penny stock in question.

• The ITAT meticulously reviewed the SEBI findings.
• The report concluded that the transactions were not designed to artificially inflate the stock’s value.

Precedent Set in Sister Case and Other Rulings

The ITAT also considered the precedent established in a similar case involving the assessee’s sister. This prior ruling, along with other comparable judgements, further strengthened the argument that the transactions were legitimate investments. The tribunal emphasized the consistency of its stance in cases with similar factual backgrounds.

Key Arguments Considered by the Tribunal

The ITAT meticulously weighed various factors before arriving at its decision. These included:

• The assessee’s rationale for investing in the penny stock.
• The absence of concrete evidence linking the assessee to any manipulative practices.
• The overall investment pattern and its consistency with genuine investment behavior.

The ruling emphasizes the importance of relying on credible regulatory reports and established legal precedents when assessing the genuineness of financial transactions.