My long-term capital gain on a listed share has been treated as bogus because the scrip appears in the investigation wing's penny-stock report — can the department do that when all my paperwork is in order?
It depends, and this record cannot tell you which way this batch went. The Calcutta High Court heard the Revenue's appeals under section 260A against a common Tribunal order of 26 June 2019 that had allowed some 90 assessees' appeals on penny-stock long-term capital gains. The questions framed were whether the Tribunal ignored the direct and circumstantial evidence of price manipulation, whether its order was perverse, and whether the exemption and the related commission disallowance were rightly deleted. The harvested text carries the facts and the parties' arguments but stops before the Court's reasoning and order, so the holding is not stated here.
Decided by the High Court (High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side; T.S. Sivagnanam and Hiranmay Bhattacharyya JJ; judgment of the Court delivered by T.S. Sivagnanam J. Reserved 12 May 2022, delivered 14 June 2022) on 2022-06-14, reported as ITAT No. 6 of 2022 and connected appeals, High Court at Calcutta. It bears on section 260A, section 10(38) of the Income Tax Act 1961, in Capital Gains and Evidence & Burden of Proof matters.
This is the lead Calcutta High Court decision on the bogus long-term capital gains cases built on the Kolkata investigation wing's report of 27 April 2015. That report identified 84 listed penny stocks, more than 32 broking entities, over 5,000 shell companies, a traced cash trail of about Rs.1,570 crore and roughly 60,000 beneficiary PANs, and it drove assessments across the country. The recurring dispute is the same everywhere: the assessee produces contract notes, demat statements, bank entries and a recognised broker, and says the department is proceeding on suspicion and on third-party material never put to him; the department says the pattern of a 2,800 per cent rise in a flat market in a company with no business speaks for itself. A single High Court judgment disposing of a batch of about 90 such appeals is the natural first citation on either side.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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In the lead case the assessee returned income of Rs.6,57,300 for assessment year 2014-15 and claimed a long-term capital gain of Rs.28,23,500 as exempt. She had bought 50,000 shares of Surabhi Chemicals and Investment Ltd for Rs.1,00,000 in March and August 2012 and sold them between 4 and 7 December 2013 for Rs.29,23,500 — a rise of about 2,823 per cent in seventeen to twenty-one months, in a market the Assessing Officer described as recessive. She produced returns, accounts, computation, demat account, contract notes and bank statements, and named a recognised broker. The Assessing Officer relied on the Kolkata investigation wing's report of 27 April 2015 on bogus long-term capital gains through penny stocks, and on a further letter of 3 July 2015 naming Surabhi Chemicals among rigged scrips. The addition was confirmed by the Commissioner (Appeals). The Tribunal, sitting as a single member, allowed about 90 assessees' appeals by a common order of 26 June 2019 without separate findings on each case, and the Revenue appealed under section 260A.
Not established from the text available. The harvested judgment runs to 150 pages; what was captured is the opening, the facts of the lead case and part of the parties' submissions. The Court's own analysis and its operative order are not in the text, so no holding is recorded here. What the text does show is the shape of the contest: the Revenue's substantial questions were whether the Tribunal ignored direct and circumstantial evidence of manipulation of the Surabhi Chemicals share price, whether its order was perverse for that reason, and whether it was right to delete the disallowance of the long-term capital gain of Rs.28,23,500 and of related commission of Rs.14,118. The Court also recorded, without contest from the assessees' counsel, that the Tribunal had rendered no separate findings for the individual assessees.
Not established from the text available; the Court's reasoning falls in the part of the judgment that was not harvested. The competing positions on the record are these. For the Revenue: the investigation report traces a cash trail from deposit accounts to beneficiaries, identifies the modus operandi — a dormant company, a share split, thin trading, a bell-shaped price curve engineered over about a year to deliver a target gain to selected beneficiaries — and the report concerns the company, not the assessee, so its non-disclosure causes no prejudice; the right to disclosure is not absolute. For the assessees: the additions rest on third-party material never independently verified and never put to them; suspicion cannot take the place of proof; the purchases were on the exchange, paid by cheque, with delivery taken through a reputed broker; a small investment yielding a large gain is not by itself evidence of a sham; and where the Assessing Officer made no enquiry, the failure cannot be cured by assumption. Several appeals also raised whether the Commissioner could invoke section 263 at all where an enquiry had in fact been made and no firm finding of error was recorded. How the Court resolved any of this is not visible in the text harvested.
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Handle my notice → Ask a CA on WhatsAppIt depends, and this record cannot tell you which way this batch went. The Calcutta High Court heard the Revenue's appeals under section 260A against a common Tribunal order of 26 June 2019 that had allowed some 90 assessees' appeals on penny-stock long-term capital gains. The questions framed were whether the Tribunal ignored the direct and circumstantial evidence of price manipulation, whether its order was perverse, and whether the exemption and the related commission disallowance were rightly deleted. The harvested text carries the facts and the parties' arguments but stops before the Court's reasoning and order, so the holding is not stated here. This was decided by the High Court (High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side; T.S. Sivagnanam and Hiranmay Bhattacharyya JJ; judgment of the Court delivered by T.S. Sivagnanam J. Reserved 12 May 2022, delivered 14 June 2022) and bears on section 260A, section 10(38) of the Income Tax Act 1961. It is reported as ITAT No. 6 of 2022 and connected appeals, High Court at Calcutta. This is the lead Calcutta High Court decision on the bogus long-term capital gains cases built on the Kolkata investigation wing's report of 27 April 2015. That report identified 84 listed penny stocks, more than 32 broking entities, over 5,000 shell companies, a traced cash trail of about Rs.1,570 crore and roughly 60,000 beneficiary PANs, and it drove assessments across the country. The recurring dispute is the same everywhere: the assessee produces contract notes, demat statements, bank entries and a recognised broker, and says the department is proceeding on suspicion and on third-party material never put to him; the department says the pattern of a 2,800 per cent rise in a flat market in a company with no business speaks for itself. A single High Court judgment disposing of a batch of about 90 such appeals is the natural first citation on either side. If it applies to you, the first step is this: Ask for the investigation report and any statement relied on, in writing, and record the refusal — the cross-examination point runs through every one of these appeals.
In the lead case the assessee returned income of Rs.6,57,300 for assessment year 2014-15 and claimed a long-term capital gain of Rs.28,23,500 as exempt. She had bought 50,000 shares of Surabhi Chemicals and Investment Ltd for Rs.1,00,000 in March and August 2012 and sold them between 4 and 7 December 2013 for Rs.29,23,500 — a rise of about 2,823 per cent in seventeen to twenty-one months, in a market the Assessing Officer described as recessive. She produced returns, accounts, computation, demat account, contract notes and bank statements, and named a recognised broker. The Assessing Officer relied on the Kolkata investigation wing's report of 27 April 2015 on bogus long-term capital gains through penny stocks, and on a further letter of 3 July 2015 naming Surabhi Chemicals among rigged scrips. The addition was confirmed by the Commissioner (Appeals). The Tribunal, sitting as a single member, allowed about 90 assessees' appeals by a common order of 26 June 2019 without separate findings on each case, and the Revenue appealed under section 260A. The matter was decided on 2022-06-14 by the High Court (High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side; T.S. Sivagnanam and Hiranmay Bhattacharyya JJ; judgment of the Court delivered by T.S. Sivagnanam J. Reserved 12 May 2022, delivered 14 June 2022). On those facts the High Court held as follows. Not established from the text available. The harvested judgment runs to 150 pages; what was captured is the opening, the facts of the lead case and part of the parties' submissions. The Court's own analysis and its operative order are not in the text, so no holding is recorded here. What the text does show is the shape of the contest: the Revenue's substantial questions were whether the Tribunal ignored direct and circumstantial evidence of manipulation of the Surabhi Chemicals share price, whether its order was perverse for that reason, and whether it was right to delete the disallowance of the long-term capital gain of Rs.28,23,500 and of related commission of Rs.14,118. The Court also recorded, without contest from the assessees' counsel, that the Tribunal had rendered no separate findings for the individual assessees.
Not established from the text available; the Court's reasoning falls in the part of the judgment that was not harvested. The competing positions on the record are these. For the Revenue: the investigation report traces a cash trail from deposit accounts to beneficiaries, identifies the modus operandi — a dormant company, a share split, thin trading, a bell-shaped price curve engineered over about a year to deliver a target gain to selected beneficiaries — and the report concerns the company, not the assessee, so its non-disclosure causes no prejudice; the right to disclosure is not absolute. For the assessees: the additions rest on third-party material never independently verified and never put to them; suspicion cannot take the place of proof; the purchases were on the exchange, paid by cheque, with delivery taken through a reputed broker; a small investment yielding a large gain is not by itself evidence of a sham; and where the Assessing Officer made no enquiry, the failure cannot be cured by assumption. Several appeals also raised whether the Commissioner could invoke section 263 at all where an enquiry had in fact been made and no firm finding of error was recorded. How the Court resolved any of this is not visible in the text harvested.
It was decided by the High Court on 2022-06-14 and is reported as ITAT No. 6 of 2022 and connected appeals, High Court at Calcutta. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 260A, section 10(38), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not established from the text available. The harvested judgment runs to 150 pages; what was captured is the opening, the facts of the lead case and part of the parties' submissions. The Court's own analysis and its operative order are not in the text, so no holding is recorded here. What the text does show is the shape of the contest: the Revenue's substantial questions were whether the Tribunal ignored direct and circumstantial evidence of manipulation of the Surabhi Chemicals share price, whether its order was perverse for that reason, and whether it was right to delete the disallowance of the long-term capital gain of Rs.28,23,500 and of related commission of Rs.14,118. The Court also recorded, without contest from the assessees' counsel, that the Tribunal had rendered no separate findings for the individual assessees. It arises in Capital Gains and Evidence & Burden of Proof matters, on section 260A, section 10(38) of the Income Tax Act 1961, and was decided by High Court at Calcutta, Special Jurisdiction (Income Tax), Original Side; T.S. Sivagnanam and Hiranmay Bhattacharyya JJ; judgment of the Court delivered by T.S. Sivagnanam J. Reserved 12 May 2022, delivered 14 June 2022. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Build the file beyond contract notes: source of funds, why this scrip was chosen, holding pattern across your other investments, and whether the sale followed the twelve-month mark by days or by years. If the Tribunal decided your appeal by simply following an earlier order without separate findings on your facts, expect the Revenue to attack that as perversity under section 260A; get your own facts recorded. Read the operative part of this judgment on the Calcutta High Court's own site before relying on it either way — the text harvested here does not carry the Court's conclusions.
High Courts differ on this point. The Bombay High Court in PCIT v Ziauddin A Siddique and the Delhi High Court in PCIT v Krishna Devi went the other way on comparable facts, declining to disturb Tribunal findings that deleted such additions on the footing that an addition under section 68 denying the section 10(38) exemption could not rest on an investigation report and 'human probabilities' where the purchase, holding and sale were documented and the assessee was not shown to be party to any manipulation; both, however, were section 260A decisions turning on the absence of a substantial question of law, and the Calcutta High Court has itself distinguished Krishna Devi on its facts rather than dissenting from it (PCIT v Zulu Merchandise Pvt Ltd, 1 August 2025), so what a practitioner faces is a divergence of approach that Tribunals outside Calcutta act on, not two squarely opposed ratios. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is the most serious gap in the batch. The judgment runs to 150 printed pages; the harvested text is clipped — about 76,033 characters from the middle are missing and the remainder is cut off at 110,000 characters — so what was read amounts to roughly pages 1 to 17 and 60 to 67. Those pages carry the cause title, the facts of the lead case, the investigation report and the parties' submissions. The Court's discussion and its operative order were not read, and no holding, ratio or outcome is asserted above. The `favours` field is recorded as "mixed" only because the schema admits no value for "not established"; it should not be relied on. The sections listed are section 260A, which the judgment names expressly, and the exemption for long-term capital gain on securities transaction tax paid listed shares, which the visible text describes but does not cite by number. `key_quote` has been left out deliberately: the only words of the Court in the text read are procedural, and quoting them would suggest a ratio that is not there. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not established from the text available. The harvested judgment runs to 150 pages; what was captured is the opening, the facts of the lead case and part of the parties' submissions. The Court's own analysis and its operative order are not in the text, so no holding is recorded here. What the text does show is the shape of the contest: the Revenue's substantial questions were whether the Tribunal ignored direct and circumstantial evidence of manipulation of the Surabhi Chemicals share price, whether its order was perverse for that reason, and whether it was right to delete the disallowance of the long-term capital gain of Rs.28,23,500 and of related commission of Rs.14,118. The Court also recorded, without contest from the assessees' counsel, that the Tribunal had rendered no separate findings for the individual assessees.
TaxSphere, “PCIT v Swati Bajaj”, https://taxnotice.vittsphere.com/caselaw/case/pcit-v-swati-bajaj/ (validity last checked 2026-08-29)
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The Assessing Officer has added my long-term capital gain on a share whose price rose 4,849%, relying on the Investigation Wing's penny-stock report. Is the price rise by itself enough?
The officer refused me cross-examination of the person whose statement he used. Does that alone get the addition deleted?
My client sold two lots of long-term shares in the same year — one at a loss on shares whose gain would have been exempt under s.10(38), the other at a taxable gain. Can the loss be set off against the gain?
SEBI has found that the broker rigged the price of the scrip I sold. Does that finding by itself make my capital gain bogus?
