INCOME TAX ACT, 1961

Section 68

Income from undisclosed source - Addition under section 68 - Bogus LTCG - Transactions of purchase and sale of shares

During the year, assessee had declared income earned from Long Term Capital Gain on sale of shares which was claimed exempt under section 10(38). AO held that the transactions was bogus or sham and nothing but a racket of accommodation entries, by way of long term capital gain exempt from tax, amount of capital gains claimed as LTCG exempt from tax was held to be not genuine and addition was made as per the provisions of section 68 and provision of section 115BBE were also applied. CIT(A) dismissed the appeal of assessee. Held: Assessee was not a regular investor in shares and had failed to furnish the proof of source for the purchase transactions. Also considering the findings of the Investigation Wing, inquiries conducted in the case of assessee, brokers, operators and the entry providers and the nature of transaction entered into by assessee, the LTCG claimed exempt under section 10(38) could not be allowed and the amount received back as sales proceeds on sale of shares was required to be added back towards his taxable income under section 68. Therefore, appeal of assessee was dismissed.

Followed:McDowell And Co. Limited v. Commercial Tax Officer (1985) 154 ITR 148 (SC) : 1985 TaxPub(DT) 1186 (SC) The Pr. CIT (Central), Ludhiana v. Prem Pal Gandhi (2018) 401 ITR 253 (P&H) : 2018 TaxPub(DT) 451 (P&H-HC) Relied: CIT I v. Himani M. Vakil in (Tax Appeal No. 1502 of 2011, dt. 25-9-2012) : 2019 TaxPub(DT) 277 (Guj-HC) The CIT v. Shri Mukesh Ratilal Marolia. in (ITA No. 456 of 2007, dt. 7-9-2011) : 2016 TaxPub(DT) 3526 (Bom-HC)

REFERRED :

FAVOUR : Against the assessee

A.Y. :

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