The Madras High Court has determined that suspension of evidence is insufficient for disallowances under Section 68 concerning penny-stock LTCG claims, reinforcing the necessity for substantial proof in such assessments.
Suspicion Cannot Replace Evidence in Penny-Stock LTCG Cases
The Madras High Court recently ruled in favor of taxpayers involved in penny-stock long-term capital gains (LTCG) claims, holding that suspicion cannot substitute for concrete evidence in disallowances under Section 68. The court highlighted that mere assertions by the Revenue do not constitute valid grounds for denial of legitimate claims.
This decision emphasizes the burden of proof lies with the Revenue to substantiate any allegations of irregularities in transactions related to penny stocks. The court reiterated that robust evidence, rather than conjecture, is essential in tax assessments.
For legal practitioners, this judgment serves as a pivotal reference point in advising clients on LTCG claims, stressing the importance of maintaining extensive documentation and valid proofs to support capital gains, particularly in cases subject to scrutiny involving penny stocks.
Citations
- Madras HC Case (2026) Volume Reporter Page
