Dismissed¶17

The Pr. Commissioner of Income Tax -Central -3 v. Ms. Rachna Gupta

Delhi HC6 Jul 2026ITA/471/2026

Case brief

AI extract

What is this about?

ITA 471/2026; CM APPL. 39737/2026; Pr. Commissioner of Income Tax Central-3 v. Ms. Rachna Gupta; High Court of Delhi; ITAT Delhi Bench ‘F’; ITA No. 5418/DEL/2018; Assessment Year 2018; penny stocks; Channel Nine Entertainment; M/s. CCL International; short term capital gain; genuineness of share transactions; account-payee cheque; disclosed sources; bona fide informed investor; gradual rise in share prices; Principal CIT vs. Smt. Krishna Devi ITA 125/2020 dated 15.01.2021; appeal dismissed; delay of 313 days in re-filing condoned; exemption allowed; Justices Dinesh Mehta and Rajneesh Kumar Gupta; order dated 06.07.2026.

What did the court decide?

This Court finds no error or infirmity in the findings recorded by the Tribunal. ¶15

The Pr. Commissioner of Income Tax -Central -3 Vs Ms. Rachna Gupta — Delhi HC (2026) — LawSathi Research

What the court decided

AI extract

Outcome

Dismissed

¶17

Issue for consideration

Whether the Tribunal erred in allowing the respondent-assessee's appeal and in setting aside the addition made by the Assessing Officer in respect of the short term capital gains. +1 more

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Court's answer

This Court finds no error or infirmity in the findings recorded by the Tribunal.

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Ratio / Principle

The transactions carried indicia of genuineness: the assessee purchased 6000 shares of Channel Nine Entertainment on 18.03.2013 for Rs.1,59,000/- by cheque issued from her own bank account, held them for nearly 15 months, sold the entire lot on 03.07.2014 for Rs.29,71,941/-, received the proceeds by account-payee cheque and duly deposited them in her bank account.

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Key takeaways

The shares were held for a sufficient period and the increase in the share prices of the scrips in question was gradual, not a sudden surge in which the shares swelled to staggering figures within 20-30 days.ratio¶13
The nature of the transactions and the profit derived by the respondent-assessee cannot be held to be non-genuine merely because the scrips were held as penny stocks; the penny-stock character by itself is no reason to disallow the short term capital gain if the assessee establishes on record that the transactions were undertaken out of disclosed sources and she earned the profit as a bona fide and informed investor.ratio¶14

Detailed headnote1 paragraphs

Delhi High Court dismisses the appeal (ITA 471/2026) of the Pr. Commissioner of Income Tax (Central)-3 against the order dated 20.12.2024 of ITAT Delhi Bench ‘F’, New Delhi (ITA No. 5418/DEL/2018, Assessment Year 2018), whereby the Tribunal had allowed Ms. Rachna Gupta's short term capital gains from transactions in penny stocks (Channel Nine Entertainment; M/s. CCL International). The Court found the transactions genuine: 6000 shares bought on 18.03.2013 for Rs.1,59,000/- by cheque issued from the assessee's own bank account, held nearly 15 months, the entire lot sold on 03.07.2014 for Rs.29,71,941/-, with proceeds received by account-payee cheque and duly deposited in her bank account; the rise in share prices was gradual rather than a sudden 20-30 day surge. The penny-stock character of the scrips cannot, by itself, justify treating the gain as non-genuine where the assessee transacts out of disclosed sources as a bona fide and informed investor. The Court endorsed the Tribunal's reliance on this Court's decision in Principal CIT vs. Smt. Krishna Devi (ITA 125/2020, dated 15.01.2021). Delay of 313 days in re-filing condoned; exemption application allowed. Respondent unrepresented.

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$~22

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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- ITA 471/2026, CM APPL. 39737/2026

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THE PR. COMMISSIONER OF INCOME TAX -CENTRAL -3

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.....Appellant Through: Mr.Gaurav Gupta, SSC, Mr.Shivendra Singh, Mr. Yojit Pareek, JSCs.

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versus

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MS. RACHNA GUPTA .....Respondent Through: None CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA

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O R D E R

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% 06.07.2026

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CM APPL. 39738/2026 (DELAY OF 313 DAYS IN RE-FILING)

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For the reasons stated in the application, the delay in re-filing of 313 days is condoned.

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Application stands allowed.

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CM APPL. 39739/2026 (Exemption)

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Allowed, subject to all just exceptions.

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Application stands disposed of.

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ITA 471/2026 and CM APPL. 39737/2026

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The instant appeal is directed against the order dated 20.12.2024 passed by Income Tax Appellate Tribunal (hereinafter referred to as ‘Tribunal’) Delhi Bench, ‘F’, New Delhi 2015-16 in ITA No. 5418/DEL/2018 for the Assessment Year 2018.

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This is a digitally signed order.

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The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/07/2026 at 11:57:32

¶20

Mr. Gaurav Gupta, learned Senior Standing Counsel for the appellantDepartment vehemently argued that the Tribunal having correctly found that the respondent-assessee had transacted in penny stocks has allowed the assessee’s appeal on unsustainable grounds.

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He submitted that the assessee had purchased 6000 shares of a company known as Channel Nine Entertainment and M/s. CCL International on 18.03.2013, and those shares which were purchased for a sum of Rs.1,59,000/- after sometime (03.07.2014) were sold at a staggering sum of Rs.29,71,941/- and similarly the shares of other companies which were purchased for a sum of Rs.4,68,000/- were sold at a capital gain of Rs.43,31,362/-. He argued that the short term capital gain which the assessee had disclosed was not a profit derived out of genuine purchase and sale of shares.

¶22

He argued that during the inquiry, the assessee, who is a lady, had stated that she did not know anything about the purchase, sale or nature of transactions and that it was her son who used to deal with the share. He added that upon queries being put to the assessee’s son, he was unable to satisfy the Assessing Officer (AO) about any knowledge about financials of the company nor he had any experience in share trading. He simply stated that he had some gut feeling or input that these shares would witness upward movement in the near future.

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Learned Senior Standing Counsel argued that such huge gain is highly surprising and one would be surprised to learn that the share prices started reducing immediately, once the assessee had sold her shares.

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Learned counsel argued that the Tribunal has, therefore, erred in setting aside the addition made by the AO.

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This is a digitally signed order.

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The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/07/2026 at 11:57:32

¶27

Heard learned counsel for the appellant and perused the record.

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We find that the respondent-assessee had purchased 6000 shares of Channel Nine Entertainment on 18.03.2013 for a sum of Rs.1,59,000/-; she held those shares for nearly 15 months and sold the entire lot of 6000 shares on 03.07.2014 for a sum of Rs. 29,71,941/-. More importantly, the assessee had purchased those shares by way of cheque issued from her bank account and the proceeds thereof were also received by her by way of account pay cheque and the same was duly deposited by her in the bank account.

¶29

The fact that these shares were held for a sufficient period, coupled with the fact that the increase in the share prices of the scrips in question was gradual and it was not a sudden surge in the sense that the shares swelled to staggering figure in 20-30 days.

¶30

In that era, when the dealings in unlisted stocks was permitted, it was not uncommon that the assessee could have a tip or information about cartels which would take share prices to exceptional heights. The nature of transactions and the profit derived by the respondent-assessee cannot be held to be a non genuine profit, simply because the scrips in question were held as a penny stock. The same by itself cannot be a reason to disallow the short term capital gain, if an assessee is able to establish on record that the transactions were undertaken out of disclosed sources and she had earned the profit as a bona fide and informed investor.

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We do not find any error or infirmity in the findings recorded by the Tribunal.

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In any case the Tribunal has relied upon a judgment of this Court rendered in the case of Principal CIT vs. Smt. Krishna Devi in ITA 125/2020 dated 15.01.2021 which undoubtedly find us.

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This is a digitally signed order.

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The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/07/2026 at 11:57:32

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The appeal, therefore, fails.

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All interlocutory applications stand disposed of.

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DINESH MEHTA, J.

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RAJNEESH KUMAR GUPTA, J.

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JULY 6, 2026 neelam

¶40

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 08/07/2026 at 11:57:32

The Pr. Commissioner of Income Tax -Central -3 v. Ms. Rachna Gupta

Case brief

What is this about?

What did the court decide?

The Pr. Commissioner of Income Tax -Central -3 v. Ms. Rachna Gupta

Case brief

What is this about?

What did the court decide?

What the court decided

Issues for consideration

Cases cited

Procedural history

Parties & counsel

Coram

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