ITAT Mumbai Upholds Section 68 Addition in Vandana Knitwear Penny Stock Case

The “B” Bench of the Income Tax Appellate Tribunal, Mumbai, dismissed the appeals of Mr. Nishit Praful Gogri for AYs 2012–13 and 2013–14, upholding additions made under Section 68 in respect of transactions in shares of Vandana Knitwear Ltd.

Reopening Over Alleged Penny Stock Gains

The assessee had filed his return declaring income of ₹12.41 lakh. The case was reopened under Section 147 on the ground that he had transacted in shares of M/s Vandana Knitwear Ltd., allegedly a penny stock used for accommodation entries. The assessee had purchased 70,000 shares at ₹10 per share and sold them within a short period at prices ranging between ₹140 and ₹149. The Assessing Officer observed that such a steep price rise was not supported by the company’s financials. Information from the Investigation Wing and reliance on statements of key persons connected with the company indicated that the scrip was used to provide accommodation entries. SEBI had also passed an order regarding irregularities in trading of the scrip. The Assessing Officer treated the sale consideration of ₹28.74 lakh as unexplained cash credit under Section 68. The CIT(A) upheld the addition.

Tribunal: No Evidence to Prove Genuineness

Before the ITAT, none appeared for the assessee despite opportunities. The Tribunal noted that no documentary evidence was produced to substantiate the genuineness of the transactions. In the absence of corroborative material and considering the sharp price rise unsupported by fundamentals, the Tribunal upheld the findings of the lower authorities.

Both appeals were dismissed.