ITAT Mumbai Allows LTCG Exemption on Lifeline Drugs Shares; Deletes Section 68 Additions and Commission Allegation

Key Facts and Tribunal Findings

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, allowed appeals filed by Mahaveer Sukhanraj Kawar for Assessment Years 2014–15 and 2015–16, deleting additions made on account of alleged bogus long-term capital gains (LTCG) from sale of shares of Lifeline Drugs and Pharma Ltd.

The assessee had acquired shares of the company through preferential allotment and subsequently sold them on the Bombay Stock Exchange (BSE), declaring LTCG of ₹95.58 lakh and ₹1.07 crore in the respective years. The gains were claimed as exempt under Section 10(38).

The Assessing Officer treated the transactions as accommodation entries based on an Investigation Wing report categorising the scrip as a “penny stock.” The exemption claim was denied, and the gains were added as unexplained cash credit under Section 68. A further addition was made towards alleged commission paid for arranging such entries.

The Tribunal noted that the shares were held in demat form, transactions were executed through SEBI-registered brokers on the BSE platform, and payments were routed through banking channels. All supporting documents were furnished, and no specific defect was identified by the authorities.

It further observed that the assessee was a regular investor in shares, and similar transactions in other scrips were accepted by the department. The reliance placed solely on Investigation Wing reports, without independent verification or contrary evidence, was held to be insufficient.

The Tribunal held that the transactions could not be treated as non-genuine in absence of any material disproving the documentary evidence. Accordingly, it directed deletion of additions under Section 68 as well as the consequential commission addition.