ITAT Applies Test of Human Probabilities, Rejects ₹84.8 Lakh Penny Stock LTCG Claim as ‘Unnatural and Pre-Arranged’

The ITAT has applied the "test of human probabilities" to reject a long-term capital gains claim of ₹84.8 lakh from "penny stocks," deeming it "unnatural and pre-arranged." The tribunal observed that the sudden and disproportionate surge in the stock's price, followed by a quick sale, was not a genuine investment but a meticulously planned scheme to convert black money. The ITAT’s decision highlights the intensified scrutiny by tax authorities on such fraudulent transactions. This ruling serves as a warning to individuals and entities engaging in such schemes and reinforces the judiciary's commitment to curbing tax evasion and financial manipulation.