INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - LTCG on sale of shares -

AO based on information emanated from investigation wing pursuant to search conducted in case of third party, treated long-term capital gain (LTCG) declared by assessee on sale of equity shares of Kappac Pharma Limited. as bogus and made addition under section 68 alleging that there was an abnormal increase in share prices within a short span of two years which was not commensurate with the financial growth of the company. Held: There are various other factors for sudden rise and fall in the share prices of a listed company which are majorly linked to the market sentiments, performance of the sector, availability of shares i.e demand and supply, holding of the promoters, future prospects, etc. In the instant case, nothing on record was available to show that any enquiry was conducted by department at business premises of Kappac Pharma Ltd. and its involvement in this alleged racket of managing bogus LTCG. Kappac Pharma Ltd. was registered with Registrar of Companies and still live at the portal of Registrar of companies. All transfers of shares of particular listed company were well recorded in the Registrar of Shareholders. Even purchase of shares by assessee was directly from a shareholder company, being original allottee of equity shares of Kappac Pharma Ltd. which were subsequently transferred in the name of respective assessee(s). Assessee duly discharged onus to prove genuineness of purchase and sale of equity shares of listed company KPL (listed in Bombay Stock Exchange) by placing necessary documents to prove that purchase were directly from the shareholder and sold through a registered broker and nothing adverse was found by AO and KPL was not held to be a penny stock company. Further, addition was purely based on the report of the investigation wing in case of other persons finding no mention or the involvements of assessee(s) in any of such report and thus, claim of LTCG was rightly made as exempt income under section 10(38). Accordingly, addition made by AO could not be sustained, especially when alleged information received by AO from investigation wing about the company Kappac Pharma Limited was never made available to assessee which violated principles of natural justice.

Relied:Achal Gupta ITANo.501/LKW/2019 dated 16-12-2020 (Lkw-Trib) : 2021 TaxPub(DT) 593 (Lkw-Trib), Aditya Mundra ITANo.632/Ind/2019 dated 13-1-2021 (Ind-Trib) : 2021 TaxPub(DT) 403 (Ind-Trib), Sunil Agrawal HUF ITANo. 434/Kol/2020 dated 3-12-2020 (Kol-Trib), Shweta Agrawal ITA No. 280/IND/2019 dated 21-12-2020 (Ind-Trib) : 2021 TaxPub(DT) 3 (Ind-Trib), GTC Industries Limited -- (2017) 80 Taxmann.com 284 dated 7-3-2017 (Mum-Trib)(SB) : 2017 TaxPub(DT) 859 (Mum-Trib), Riaz Munshi ITA no. 8314/DEL/2018 dated 11-3-2020 (Del-Trib) : 2020 TaxPub(DT) 1632 (Del-Trib), Dipesh Ramesh Vardhan [ITA No. 7648/Ind/2019 dated 11-8-2020 (Mum-Trib) : 2020 TaxPub(DT) 3189 (Mum-Trib), Anoop Jain (2020) 114 taxmann.com 550 dated 10-1-2020(Del-Trib) : 2020 TaxPub(DT) 402 (Del-Trib), Vijay Ratan Mittal ITA No. 3429 of 2019 dated 1-10-2019 (Mum-Trib) : 2019 TaxPub(DT) 6971 (Mum-Trib) and Karuna Garg (2019) 109 Taxmann.com 403 (Del-Trib) : 2019 TaxPub(DT) 5700 (Del-Trib). Vidhi Malhotra (2019) 101 Taxmann.com 361 (Del-Trib) : 2019 TaxPub(DT) 909 (Del-Trib), Saurabh Mittal -- ITA No. 16 of 2018 dated 29-8-2018 (JP-Trib) : 2018 TaxPub(DT) 6515 (Jp-Trib), Pramod Kumar Lodha (2018) 100 Taxmann.com 8 (JP-Trib) : 2018 TaxPub(DT) 5338 (Jp-Trib) dated 16-7-2018 (JP-Trib), Rungta Properties ITA No. 105 of 2016 dated 8-5-2017 (Cal-HC) : 2017 TaxPub(DT) 1649 (Cal-HC) and Alpine Investments ITA No. 620 of 2018 dated 26-8-2008 (Cul-HC) : 2018 TaxPub(DT) 6427 (Cal-HC), Dilip Kumar and Company & Ors Civil Appeal No. 3327 of 2007, dated 30-7-2018 : 2018 TaxPub(EX) 737 (SC), Balmukund Acharya (2009) 310 ITR 310 (Bom) : 2009 TaxPub(DT) 1213 (Bom-HC).

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