INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged bogus LTCG - Transaction of penny stock

During the course of assessment proceedings, the AO required the assessee to prove his claim of LTCG on sale of shares of PAL. The assessee sold these shares on BSE network and paid STT, service tax, stamp duty, etc. The assessee filed various details in support of his claim but AO rejected relying on report of investigation wing and held that receipt of sale proceeds from BSE broker or clearing system was unexplained cash credit and made addition under section 68. CIT(A) also confirmed the action of the AO.Held: AO had not pointed out any deficiency in the documents or inherent weakness in the explanation or doubted genuineness of the transactions for want of any evidence. The AO did not produce any evidence, whatsoever, to prove the allegation that unaccounted money changed hands between the assessee and the broker or any other person including the alleged entry provider nor proved that the assessee has taken any type of accommodation from any person or so-called entry providers to introduce unaccounted money into books by way of LTCG. The addition under section 68 was made merely on the basis of suspicion, presumptions and probability of preponderance without any direct evidence to prove the transactions as non-genuine or sham or demonstrating appellant's involvement in any kind of manipulation was illegal and cannot sustain. In absence of any findings specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. AO was duty bound to make inquiry from all concerned parties relating to the transactions and then to collect evidences that the transaction entered into by the assessee was also a collusive transaction. However, the AO had not brought on record any evidence to prove that the transactions entered by the assessee which were otherwise supported by proper third party documents were collusive transactions. In view of the above, the findings/allegations of the AO and CIT(A) were baseless, without any evidence, contrary to the facts and circumstances of the case and provisions of the Act. Hence, addition made by the AO was deleted by setting aside the order of CIT(A) based upon such findings and consequent addition under section 69C on the presumption that commission at the rate of 3% was paid was deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13 to 2015-16

INCOME TAX ACT, 1961

Section 153A

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