₹21 share jumps to ₹488 in 16 months, but ITAT rejects woman's ₹88 lakh capital gains claim. Here's why
An investment of ₹4.41 lakh in the stock market grew into sale proceeds of more than ₹92 lakh in just 16 months. However, what appeared to be an extraordinary return turned into a lengthy income tax dispute after the tax department questioned the authenticity of the transactions.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has now upheld additions of nearly ₹94.80 lakh to the investor's taxable income, ruling that bank statements, demat records and broker contract notes were insufficient to establish the genuineness of the transactions in the circumstances of the case.
In Sandhya Rakesh Sharma v. Income Tax Officer, ITA No. 7732/MUM/2025, concerning assessment year 2014-15, the Mumbai ITAT dismissed the taxpayer's appeal on 12 October 2026. The dispute centred on whether unusually high returns from shares of a company suspected of price manipulation could qualify for a long-term capital gains tax exemption.
According to the tribunal order, Sharma purchased 21,000 shares of Santoshimaa Tradelinks Ltd on 19 November 2012 at ₹21 per share, investing ₹4.41 lakh through an off-market transaction.
Following corporate restructuring, the shares were converted into those of Sunrise Asian Ltd.
Between 25 November 2013 and 12 March 2014, she sold 18,850 shares through 14 transactions on the Bombay Stock Exchange (BSE), at an average price of approximately ₹488.50 per share. The transactions generated total sale proceeds of ₹92,03,421.
In her income tax return, Sharma declared long-term capital gains of ₹88,07,571 and claimed exemption under Section 10(38) of the Income-tax Act, 1961, which provided tax relief on qualifying listed equity gains under the law applicable at that time.
However, the income tax department reopened the assessment after receiving information from its Kolkata investigation wing about suspected accommodation entries involving penny stocks.
The investigation identified Sunrise Asian as one of the companies whose shares were allegedly used to generate artificial long-term capital gains and short-term capital losses.
The assessing officer observed that the company's share price had increased from around ₹50 to more than ₹615 during the period examined, despite weak financial fundamentals. The department concluded that the price movement was inconsistent with the company's underlying financial performance.
Sharma maintained that her transactions were genuine because the shares were sold through a registered stockbroker on a recognised stock exchange. She submitted bank statements, demat account records and contract notes to establish the purchase and sale of shares.
She also argued that she had not been named in the Securities and Exchange Board of India's (SEBI) investigation and challenged the department's reliance on third-party statements without providing an opportunity for cross-examination.
However, the tribunal examined the transactions alongside the findings of the tax department and SEBI. The order referred to SEBI's investigation into Sunrise Asian and connected entities over alleged fraudulent price manipulation.
In 2022, the market regulator imposed a joint and several penalty of ₹1 crore on the company, five former directors and 80 connected entities. Market-access restrictions were also imposed on the company and certain directors.
The tribunal observed that Sharma's transactions fell within the period examined by SEBI. Another factor was her failure to appear for personal examination despite summons issued by the assessing officer.
The tribunal noted that her authorised representatives had submitted written explanations, but the reasons for her non-appearance were not satisfactorily explained. It held that documentary records showing the movement of shares and money did not, by themselves, establish that the underlying transactions were genuine.
Considering the unusual price appreciation, weak company fundamentals, investigation findings and the taxpayer's failure to satisfactorily address the concerns, the tribunal upheld the department's conclusions.
The income tax department made three additions to Sharma's income.
The largest was ₹92,03,421, representing the entire sale proceeds from the shares. This was treated as unexplained cash credit under Section 68 of the Income-tax Act. The department also added ₹2,76,103 under Section 69C, estimating a 3% commission allegedly paid for arranging accommodation entries.
Sharma disputed the commission payment, but the tribunal upheld the addition. A further ₹56 relating to an unexplained investment in two shares of Essar India Ltd was also added. Together, these additions amounted to ₹94,79,580.
Importantly, this figure represents additions to taxable income, not the actual income tax payable. The final tax liability would depend on the applicable provisions, tax computation and consequential proceedings.
The tribunal dismissed the taxpayer's appeal, finding no reason to interfere with the additions upheld by the first appellate authority.
For stock market investors, the ruling highlights the importance of maintaining investment records and responding to tax department queries. It also demonstrates that transactions routed through recognised exchanges and banking channels are not automatically immune from scrutiny.
However, unusually high investment returns alone do not establish tax evasion. The decision turned on the specific evidence, investigation findings and circumstances examined by the tribunal.
Kirti jha
Kirti Jha is a Senior Content Producer at Mint, where she writes on mutual funds, taxation, personal finance and macroeconomic developments. Her reporting focuses on helping readers understand complex financial developments through data-driven, research-backed stories that explain how policy changes, market trends and regulatory decisions affect investors and households. <br><br> Before joining Mint, Kirti worked at ET Money, where she specialised in mutual fund research and investment analysis. She tracked portfolio disclosures, fund manager strategies, sectoral allocation shifts and investment trends, distilling large datasets into investor-focused insights. Her work combined quantitative analysis with consumer-centric storytelling, enabling readers to better understand fund positioning, portfolio changes and long-term investment opportunities.<br><br> Kirti holds a Bachelor's degree in Economics from Indraprastha College for Women, University of Delhi, and a Master's in Finance from the Jindal School of Banking & Finance at O.P. Jindal Global University. Her academic training emphasised analytical thinking, quantitative research and financial decision-making, providing a strong foundation in understanding capital markets, financial systems and economic policy. With a combined experience in investment research and financial journalism, she is committed to producing accurate, accessible and insightful journalism that empowers readers to make well-informed financial decisions.
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HomeMoneyPersonal Finance ₹21 share jumps to ₹488 in 16 months, but ITAT rejects woman's ₹88 lakh capital gains claim. Here's why
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