INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Long-term capital gain on sale of shares - AO relied on investigation report without any cogent material and enquiry

AO based on information emanated from investigation wing on penny stocks, treated long-term capital gain on sale of shares declared by assessee as bogus and made addition under section 68. Held: AO extensively relied upon search and survey operations conducted by Investigation Wing of the IT Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which set out modus operandi adopted in business of providing entries of bogus LTCG. However, reliance placed by AO on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction was bogus, sham and nothing other than a racket of accommodation entries. AO made an attempt to delve into the question of infusion of respondent's unaccounted money, but he did not dig deeper. The payment for shares in question was also by Salasar Trading Company and notice was issued to this entity as well, but when notice returned unserved, AO did not take the matter any further. There was no dispute that shares were purchased online, payments were made through banking channel, and shares were dematerialized and sales were routed from de-mat account and consideration was received through banking channels. Accordingly, addition made by AO was not sustainable.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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