|The Tax Publishers2020 TaxPub(DT) 5509 (Mad-HC) : (2021) 277 TAXMAN 0604
INCOME TAX ACT, 1961
Where assessee had not rendered cogent evidence to explain as to why shares in an unknown company had jumped to such a higher amount in no time and also failed to provide details of persons, who purchased said shares then the AO was justified in treating capital gain as bogus and making addition under section 68.
Income from undisclosed sources - Addition under section 68 - Bogus long-term capital gain on sale of shares -
Assessee claimed exemption under section 10(38) as regards long-term capital gain (LTCG) on sale of shares. AO took note of investigation conducted by Department at Calcutta as to how stock prices raised more than 500-1000 times. AO considered the modus operandi followed by the assessee and found entire claim made by assessee to be bogus and thus, made addition under section 68. Held: Assessee was not a regular investor in shares and had only invested in high risk stocks of abscure companies with no business activity or asset, which were identified as penny stocks. Not only AO, but also CIT(A) examined modus operandi of assessee and held that shares were purchased through off-market and not through stock exchange and selling rates were artificially hiked later on. Assessee had not rendered cogent evidence to explain as to why shares in an unknown company had jumped to such a higher amount in no time and also failed to provide details of persons, who purchased said shares. Not only assessee, even entire family was involved in this operation to convert their black money into white. It was a sham transaction only. Therefore, AO was justified in making addition under section 68.
FAVOUR : Against the assessee.
A.Y. : 2012-13
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