ITAT Delhi Allows LTCG Claim in Yamini Investment Scrip Case

The “A” Bench of the Income Tax Appellate Tribunal, Delhi, allowed the appeals of M/s Acme Auto (P) Ltd. for AYs 2016–17 and 2017–18. The dispute concerned denial of exemption under Section 10(38) on alleged penny stock transactions in the scrip of Yamini Investment Company Ltd.

Background: LTCG Treated as Bogus

The Assessing Officer treated the long-term capital gain (LTCG) arising from sale of shares of Yamini Investment Company Ltd. as unexplained cash credit under Section 68 read with Section 115BBE. An additional 6% was added under Section 69C as alleged commission. The assessee had originally purchased shares of Anax Com Trade Ltd. in FY 2012–13. These shares were split and later merged into Yamini Investment Company Ltd. pursuant to a High Court-approved amalgamation. Part of the merged shares were sold through stock exchange, and LTCG was claimed exempt under Section 10(38). The CIT(A) upheld the addition, relying heavily on SEBI findings regarding price manipulation in the Yamini scrip.

Tribunal: Suspicion Cannot Replace Evidence

The ITAT noted that:

1. The original investment was made through banking channels and disclosed in successive balance sheets.
2. The shares were held for several years before sale.
3. All sale transactions were through stock exchange with contract notes, demat records and bank entries.
4. MAT at 18.5% had been paid.

The Tribunal observed that SEBI orders did not directly implicate the assessee or its specific transactions. The denial of exemption was based on generalized suspicion regarding penny stock modus operandi rather than concrete evidence. Holding that human probability cannot override documentary evidence in absence of specific linkage, the Tribunal deleted the additions for both years.

Both appeals were allowed.