| The Tax Publishers2020 TaxPub(DT) 1632 (Del-Trib) INCOME TAX ACT, 1961
Section 68
Where assessee submitted sufficient documentary evidences before AO to prove genuineness of LTCG claimed on sale of shares, the AO was not justified in treating such LTCG as bogus and adding the same under section 68 on account of unexplained income.
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Income from undisclosed sources - Addition under section 68 - Alleged bogus LTCG through penny stock companies - Treatment as unexplained income
Assessee claimed long-term capital gain (LTCG) on sale of shares of a company 'E' before AO. However, AO noted that such long-term capital gain was not shown in return of income claimed as exempt. He, thereafter, noted the brief details of modus operandi of tax evasion through bogus LTCG and referred the report of Investigation Wing to show that it was a case of booking of bogus LTCG through penny stock companies. AO also noted that SEBI indicted the assessee as one of beneficiary of LTCG of artificial price jacking of shares of the 'E', a paper company. Accordingly, the AO concluded that the assessee failed to prove that he entered into genuine transaction and the LTCG claimed on sale of shares of the 'E' was treated as bogus and same was added under section 68. He further made addition on account of commission paid for sale of shares. Held: AO merely reproduced modus operandi of entry providers who booked bogus long-term capital gains through penny stock companies. Assessee filed financials of 'E', which clearly showed that the said company was dealing in actual business activities. Further, its financials were very heavy and as such the modus operandi of penny stock companies would not be available in the case of the 'E'. Further, it was found that both purchase and sale transactions in respect of shares were done through banking channel and also the transaction of the sale was made through Demat Account, which was corroborated by contract note and other details. Further, the interim order of SEBI releied upon by the AO was revoked against the assessee and the 'E'. Moreover, the AO did not make any further investigation or enquiry into the matter and merely relied upon the interim order of the SEBI and investigation carried out by the Investigation Wing. Therefore, both the impugned additions made by the AO were deleted.
Distinguished:Suman Poddar v. ITO, dated 25-7-2019 Udit Kalra v. ITO [ITA No. 220/2019, dt. 8-3-2019]
REFERRED : Amar Nath Goenka v. ACIT 54 CCH 344 (Del-Trib)
FAVOUR : In assessee's favour
A.Y. :
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