Share zooms 23 times in 16 months: Investor faces ₹9.5 mn tax on income of ₹9.2 mn; know why

Making a killing in the stock market is a dream of every investor. However, there can be questions in certain cases as a Mumbai-based investor has found out. She purchased shares for approximately ₹4.41 lakh and about 16 months later, sold a significant portion of her holding for over ₹92 lakh. The Income Tax Department rejected her claim of it being a case of capital gains. The matter is related to Mumbai investor Sandhya Rakesh Sharma. She bought the shares for around Rs 4.41 lakh and sold a major portion of his holding for over Rs 92 lakh.

Kolkata: Making a killing in the stock market is a dream of every investor. However, there can be questions in certain cases as a Mumbai-based investor has found out. Sometimes, even a small investment in the stock market can yield substantial profits. However, if a stock’s price rises sharply, the Income Tax Department may investigate. One such case involves Mumbai investor Sandhya Rakesh Sharma. She purchased shares for approximately ₹4.41 lakh. Approximately 16 months later, she sold a significant portion of her holding for over ₹92 lakh. The investor claimed tax exemption by declaring this income as long-term capital gain, but the Income Tax Department rejected it. Now, the Income Tax Appellate Tribunal (ITAT) in Mumbai has also rejected her appeal. Let’s have a look at the case which can be a lesson for many investors.

According to reports, the case dates back to FY14. The Income Tax Department suspected that the investor’s substantial profit from selling shares in a company whose price had risen was due to alleged stock market manipulation rather than genuine trading conditions. The department considered the entire proceeds from the sale of shares as an unexplained cash credit and added an additional amount for alleged commissions. The tribunal upheld the department’s action.

Earning ₹92 lakh from a share worth ₹4.41........

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