ITAT Confirms Rs. 1.88 Crore Addition for Fake Penny Stock Gains; Appeal Dismissed

The present appeal has been filed by an individual named Rohit Prakashchandra Shah (Appellant) against the Income Tax Officer (Respondent) in the Income Tax Appellate Tribunal (ITAT) Ahmedabad “B” Bench, Ahmedabad, before Ms Suchitra Kamble (Judicial Member) and Shri Narendra Prasad Sinha (Accountant Member). The case was heard on September 23, 2025, and the final ruling was issued on October 30, 2025.

The current appeal had been filed objecting to an order dated 19.12.2023, issued by the National Faceless Appeal Centre (NFAC), Delhi, under Section 147/144B of the Income Tax Act, 1961. On March 11, 2015, the assessee filed his income tax return (ITR) for the assessment year 2014-15, declaring total income as Rs. 5.28 Lakh. Later on, the income tax department got information through the Insight Portal that he had claimed exempt income of around Rs. 1.88 crore from the sale of shares in a penny stock company, Nyssa Corporation Limited. This sale was reported to be a fake transaction arranged through an entry operator named Naresh Jain.

Considering this, the Income Tax Department reopened his case under Section 147 and made an addition of the entire Rs. 1.88 crore as unexplained cash credit.

Assessee’s Arguments:

On this, the assessee served the following arguments:

1. Invalid Opening of Case:

• He claimed that the reasons laid down by the Income Tax Department to reopen the case were invalid, and the assessing officer did not have any real evidence and just followed generic alerts. Further, the CIT(A) dismissed his appeal without addressing detailed submissions.

2. Genuine Share Transaction:

• He argued that all share transactions were honest, made through demat accounts and stock exchange channels. Disputed treating them as accommodation entries.

Tribunal’s Decision:

When the tribunal analysed the arguments of both sides, it made the following conclusions:

• The tribunal held the reopening of the case by the Income Tax Department under Section 147 as valid and ruled that Section 153C (regarding search cases) does not apply here. Even though a paragraph was missing in AO’s reasons, sufficient info was available on the Insight Portal. AO had enough material to form a “reason to believe” income escaped assessment.
• The tribunal dismissed the assessee’s claim of LTCG (Long-Term Capital Gain). As the assessee failed to prove the genuineness of the share purchase. No proper share purchase bills, contract notes, or broker details were submitted. The entire sale proceeds were treated as unexplained income under Section 68.

Final Outcome:

• The ITAT upheld the addition of Rs. 1,88,34,063 as unexplained cash credit. Meaning, the appeal has been dismissed and a decision has been announced in favour of the Income Tax Officer.