INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Long-term capital gain on sale of shares alleged as bogus -

Assessee claimed exemption under section 10(38) as regards long-term capital gain on sale of shares. AO disallowed claim of assessee's by holding that broker, through whom assessee had sold shares, was a tainted stock broker who was banned by SEBI in 2010. Thus, AO taxed sale proceeds of shares as unexplained credit under section 68.Held: Evidences furnished by assessee demonstrated that assessee's had sold shares through screen based trading through SEBI registered broker and transactions were subjected to Security Transaction Tax and proceeds of sales, after deduction of such expenses, were credited to the bank accounts of assessee. AO had not commented on veracity of such crucial evidence filed by assessee. Assessee had sold the shares in the year 2016, i.e., after a gap of about six years and in the meantime Investigation Wing of IT Department had carried out investigation and vide report, dated 27-4-2015 had identified 84 companies which were engaged in the business of providing accommodation entries and name of the scrip on which assessee had earned capital gain did not find its name in that list and neither name of broker found place in the list of brokers investigated by the Investigation Wing of Department. Accordingly, denial of claim under section 10(38) was not justified and addition under section 68 was deleted.

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