The Tax Publishers022 TaxPub(DT) 0064 (Ahd-Trib) Sabbirali Alimiya Saiyed v. ITO In Favour of Assessee, Ahd-Trib, ITA No. 904/Ahd/2018, 10-Nov-2021

INCOME TAX ACT, 1961

Section 68 Section 10(38)

Merely the fact that assessee invested in penny stocks, which gave rise to huge capital gains in a short period, did not mean that share transactions were bogus as all the documents and evidences were produced. Therefore, capital gain earned by assessee could not be held bogus merely on the basis of some report finding unearthed in case of third party/parties unless cogent material brought against assessee.

Income from undisclosed sources - Addition under section 68 - Long-term capital gain on sale of shares - AO treated LTCG as bogus and unexplained money merely on the basis of some report finding unearthed in case of third party/parties without cogent material brought against assessee

During the course of survey statement of Sanjay Vora of Anand Rathi Share and Stock Brokers Ltd., the statement of Soumen Choudhury of Gateway Financial Services Ltd. was recorded under section 131, wherein it was accepted that the company namely, AGIL was used in penny stock transactions to provide bogus long-term capital gain to certain class of the beneficiaries in consideration of cash. AO based on the information emanated from investigation wing of Calcutta treated long-term capital gain declared by assessee on sale of shares of AGIL as bogus and manipulated, leading to the addition under section 68. Held: The assessee before AO furnished following details: Ledger account of investment in shares of AGIL. Share certificates of M/s AGIL, Application for dematerialization of share of AGIL, Bank statement showing transaction of purchase and sale of shares of AGIL. Also there was no dispute raised by AO with respect to the facts that: payments are received through account payee cheques, Shares were sold through stock exchange after the payment of STT, transactions had been confirmed by brokers, inflow of shares was reflected in Demat account, Shares were transferred through Demat account and assessee did not know the buyers. There was no evidence that assessee has paid cash to buyer or broker for booking LTCG and shares were purchased by the pre-determined buyer. The assessee was not a party in the alleged rigging up of the price of the shares/scripts of Company AGIL to generate the long term which is exempted under section 10(38). He had no nexus or any relation with the company, its directors or entry operators who accepted to the modus operandi. Assessee might have got only incidental benefit of price rise. Merely the fact that assessee invested in penny stocks which gave rise to huge capital gains in a short period, did not mean that transaction was bogus as all the documents and evidences were produced. Therefore, capital gain earned by assessee could not be held bogus merely on the basis of some report finding unearthed in case of third party/parties unless cogent material brought against assessee.

Relied:Pr. CIT v. Smt. Krishna Devi (2021) 126 Taxmann.com 80 (Del-HC) : 2021 TaxPub(DT) 544 (Del-HC) and Parasben Kasturchand Kochar Mehta Lodha & Co. Chartered Accountant v. ITO bearing ITA No. 549/Ahd/2008, dt. 20-2-2020

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15



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