Ratnakar M. Pujari v. ITO

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 68Bogus capital gains----Since assesse was indulged in non-genuine and bogus capital gains from transaction of sale and purchase of shares of S Investment and Consultancy Limited which was penny stock company and pre-dated contract notes were issued by the brokers to manipulate and introduce long-term capital gains in favour of the assessee, therefore, the said capital gains were added under section 68 as unexplained cash credits.--AO, on the basis of information received from Addl. CIT (Inv.), Mumbai that assessee was indulging in non-genuine and bogus capital gains from transaction of sale and purchase of shares of S Investment and Consultancy Limited which was penny stock company and pre-dated contract notes were issued by the brokers to manipulate and introduce long-term capital gains in favour of the assessee which were exempt from tax under section 10(38) leading to escapement of income from taxation, issued notice under section 148 which was within four years from the end of the relevant assessment year. Held: There was a conclusive and final finding of fact that purchases of shares were bogus and sham as was held by the Revenue in the assessment year 2005-06, which has not been dislodged so far as the assessee accepted the said findings which became conclusive. Revenue in the case of assessee's brother had also declared the purchase and sale of shares as bogus but brought to tax, gains arising from sale of shares as short-term capital gains. This was also not of help as the Revenue in the instant case had come to the conclusive finding which attained finality that the transactions of purchase of shares were sham and bogus transactions camouflaged with an intention to evade taxes.