2019 (6) TMI 1699 - AT - Income Tax

Addition u/s.69A - treating the income under the head Short Term Capital Gain declared by the assessee as bogus by applying provision of Section 115BEE and taxing it @ 30% - assessee is a doctor by profession and has declared income by way of income from profession, income from salary and income from other sources - assessee is a doctor by profession and has declared income by way of income from profession, income from salary and income from other sources - HELD THAT - AO has merely gone by the fact that during the investigation carried out by the Department in Kolkata, one of these scrips were found to be used by brokers for providing accommodation entries, but that material fact alone without any other further inquiry or any other material to link that assessee to be involved in any sham transaction or beneficiary of any accommodation entry. Theoretical discussion made by the AO cannot nail the assessee. The sales turnover of PSIT Infrastructure goes to show that it had the sale turnover at Rs. 328.38 crore in March, 2016 and similarly in case of Pearl Agriculture also sales turnover was Rs. 23.89 crore in March, 2014. Thus, to hold that these companies were purely a paper company without any business credential cannot be accepted. Assessee had dealt in several scrips over the period of time and has been regular investor in shares and has been showing gain and loss in the shares on year to year basis. No other transaction has been doubted except for two small scrips for over all transaction of 1.23 lacs. This goes to show that bona fide and it cannot be held to be that the assessee was involved in some kind of money laundering or any kind of accommodation entry. - Decided in favour of assessee.

Summary

Issues:
Challenge to addition of Short Term Capital Gain as bogus under Section 69A of the Act.

Analysis:
The appeal was filed against the order by the Commissioner of Income Tax for the Assessment Year 2015-16, challenging the addition of Rs.1,23,273 under Section 69A of the Act. The assessee, a doctor by profession, declared income from various sources, including Short Term Capital Gain from the sale of shares. The dispute centered around the Short Term Capital Gain declared by the assessee from the sale of shares of two companies. The Assessing Officer treated this gain as bogus and taxed it at 30% under Section 115BEE.

The Assessing Officer based the decision on an investigation by the Directorate of Investigation, Kolkata, which uncovered a scheme of generating bogus entries for Capital Gain. Despite the detailed reply by the assessee, the AO rejected the explanation, considering the companies' lack of financial strength and the meager profits. The AO also highlighted the inconsistency of investing in companies with poor financial prospects for someone actively trading in shares.

The CIT (A) upheld the addition of the Short Term Capital Gain as bogus. However, the ITAT Delhi, after considering the facts, noted that the assessee had a history of legitimate investments in shares, with no doubts raised about the purchase or sale transactions. The tribunal found no evidence of an unjustified rise in share prices or any dubious nature in the gain. The AO's reliance on the investigation in Kolkata was deemed insufficient to prove the assessee's involvement in any fraudulent activities.

The tribunal observed that the companies in question had substantial sales turnover, indicating genuine business operations. The assessee's overall investment portfolio, including losses incurred in other transactions, further supported the legitimacy of the declared Short Term Capital Gain. Consequently, the tribunal allowed the appeal, ruling in favor of the assessee.

In conclusion, the ITAT Delhi found no substantial evidence to support treating the Short Term Capital Gain as bogus and overturned the decision, emphasizing the lack of concrete proof linking the assessee to any fraudulent activities or money laundering.