The Tax Publishers2020 TaxPub(DT) 5277 (Del-Trib)

INCOME TAX ACT, 1961

Section 68

Addition made under section 68, treating long-term capital gain on sale of shares as bogus simply referring to general observations and modus operandi of entry operators and further supporting report of Investigation Wing could not be upheld when AO failed to produce any material/evidence to dislodge or controvert genuineness of conclusive documentary evidences produced by assessee in support of her claim considering the fact that she was a genuine investor and was from past many years.

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

AO received information from Investigation Wing as regards in respect of alleged suspicious sale transactions in shares of Lifeline Drugs and Pharma Ltd. (LDPL), which generated exempted long-term capital gains to assessee. Accordingly, AO treated LTCG as bogus and made addition of sale proceeds under section 68. Held: LDPL, known as Arihant Multi Commercial Ltd., was not a paper company nor a shell company. In financial year 2013-14, Revenue from operations were at Rs. 40,85,02,313 and total assets were at Rs. 32,79,07,684 which included investment, trade receivables, cash and cash equivalent, short-term loans and advances and tangible assets. The share capital and reserves and surplus were at Rs. 3,62,40,000 and Rs. 17,65,16,912 respectively. Trade payables were at Rs. 10,80,74,165. These financials go to show that LDPL was not a shell company. SEBI has suspended trading in shares of LDPL with effect from 28-8-2015, whereas assessee had sold shares from May 2014 to December 2014, many months before suspension of scrip. It was not the case of AO, nor there was any evidence on record to show that SEBI had declared all transactions done in scrip of LDPL prior to suspension as null and void. AO failed to produce any material/evidence to dislodge or controvert genuineness of conclusive documentary evidences produced by assessee in support of her claim considering the fact that she was a genuine investor and was from past many years. Accordingly, addition made under section 68, simply referring to general observations and modus operandi of entry operators and further supporting report of Investigation Wing could not be upheld.

Relied:Adamine Construction (P) Ltd. (2018) 99 Taxman 45 (SC) : 2018 TaxPub(DT) 7167 (SC) and Deepak Nagar (2019) 73 ITR (Trib) 74 : 2019 TaxPub(DT) 5141 (Del-Trib)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16



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