INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Bogus long-term capital gain on sale of shares -

Assessee claimed long-term capital gain on sale of certain shares as exempt under section 10(38). AO taking note of huge hike in price of shares held assessee's claim to be bogus and made addition of sale proceeds of shares under section 68. According to assessee, risk appetite determines the profit in sale and purchase of shares and when he had invested money by purchasing concerned shares through banking channel its sale could not be questioned. Held: It was not a case of risk appetite to determine profit, rather entire transaction was in the papers only and concerned company had no legs to stand to make 282 times of return to its investors. Neither in past nor in subsequent years, assessee had indulged into any investment having huge windfall. Had assessee been so intelligent qua the intricacies of share market, he would have definitely undertaken such risk taking activiteis in the past or future by making investment in unknown stock. Also, shares were dematerialized just before sale at astronomical price because direct evidence in such circumstances was usually not available. Accordingly, whole transactioh of purchase of the stock with huge windfall to assessee was sham to get bogus profit at astronomical rate under the garb of LTCG in connivance with entry providers to make undisclosed income as disclosed one by evading tax and AO was, therefore, justified in making addition.

Followed:Pooja Ajmani v. ITO, Ward 20(4), New Delhi in [ITA No. 5714/Del/2018, dt. 25-4-2010] : 2019 TaxPub(DT) 3301 (Del-Trib) and Udit Kalra C/O Dev Raj Sharma v. ITO, Ward-50 (1), New Delhi [ITA No. 6717/Del/2017, dt. 8-1-2019] : 2019 TaxPub(DT) 2566 (Del-Trib).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2014-15

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