Taxman called a penny-stock gain bogus after ₹70,000 became ₹1.93 crore, here’s what Mumbai ITAT said
AI Summary
This ruling underscores the importance of robust documentation for investors, particularly in the context of penny stocks, which are often scrutinized for potential manipulation. Retail investors should take note of the tribunal's emphasis on individual evidence rather than blanket assumptions about stock performance, as this could influence how future tax assessments are conducted. As the market continues to evolve, maintaining thorough records and understanding the nuances of tax regulations will be crucial for safeguarding capital gains.
A Mumbai investor’s ₹70,000 investment in Toyam Industries Ltd turned into a ₹1.93 crore long-term capital gain. The tax department treated the gain as an accommodation entry linked to alleged manipulation in the stock. The Mumbai Income Tax Appellate Tribunal, however, found that the department had not established a specific link between the investor and the alleged manipulation.
The ruling is significant for investors because the tribunal focused less on whether the stock itself had been investigated and more on what evidence existed against the individual taxpayer. In its 4 September 2026 order, the Mumbai bench deleted the ₹1.93 crore addition made under Section 68 of the Income Tax Act.
Original Article
Published on Livemint
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