The Delhi High Court in case report [2025] 174 taxmann.com 918 (Delhi)[20-05-2025] given a clear signal that all transactions in shares of penny stock company are not sham transactions and that the department cannot go hunting cases of taxpayers who have indulged in market transactions in such scrips.
In this case the AO acted on the basis of information from the Investigation Wing which had following flags:
(i) that DEL was a penny stock listed with BSE and trading in the said scrip was ‘suspicious’;
(ii) that the stock of DEL was being ‘used to facilitate introduction of income of members of beneficiaries in the form of exempt capital gains or short term loss in the books of account’;
(iii) that there was a sharp rise in the market price of the shares of DEL, which was not supported by fundamentals of the company; and
(iv) investigation had reported that purchase and sale of shares was concentrated with few persons/entities which were either non-filers or had nominal return of income.
This is held as not sufficient to mark a case for reopening. According to the High Court it is merely hinting at suspicion.