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2022 (7) TMI 1410 - HC - Income TaxBogus LTCG - unexplained cash credits u/s 68 - HELD THAT - The questions of law raised by the revenue in this appeal were considered in the case of PCIT Kolkata v/s Swati Bajaj and Ors. 2022 (6) TMI 670 - CALCUTTA HIGH COURT wherein the appeals filed by the revenue were allowed. The present appeal filed by the assessee is for the assessment year 2014-15 and there was no other connected appeal of the very same assessee 2019 (6) TMI 1698 - ITAT KOLKATA and the appeal filed by the revenue has been allowed. Decided in favour of the revenue.
Issues:
1. Interpretation of unexplained Long Term Capital Gains under Section 68 of the Income Tax Act, 1961. 2. Deletion of addition of undisclosed income related to organized tax evasion. 3. Quashing of addition of cases without detailed investigation. 4. Legal obligation of the Assessee to prove receipt of share capital/premium. 5. Disallowance of Long Term Capital Gain transactions. Analysis: 1. The first issue raised in the appeal concerns the interpretation of unexplained Long Term Capital Gains (LTCG) under Section 68 of the Income Tax Act, 1961. The Revenue contended that LTCG falls under unexplained cash-credits under Section 68, and suspicious transactions in shares cannot be exempted under Section 10(38) of the Act. The Court considered the arguments and concluded that the Learned Tribunal erred in not admitting this interpretation, thereby ruling in favor of the Revenue. 2. The second issue revolves around the deletion of the addition of undisclosed income, allegedly ignoring a larger scam of organized tax evasion through bogus capital gains in penny stocks. The Court examined the facts and found that the Learned Tribunal had erred in deleting the addition without considering the broader context of organized tax evasion. Consequently, the Court sided with the Revenue on this issue. 3. The third issue pertains to the quashing of additions in cases without detailed investigation. The Court noted that the Learned Tribunal had only considered one lead case and quashed additions in other cases without delving into specific details from the Investigating Wing or SEBI reports. This approach was deemed as severe perversity, leading the Court to rule in favor of the Revenue. 4. The fourth issue involves the legal obligation of the Assessee to prove the receipt of share capital/premium to the satisfaction of the Assessing Officer. The Court analyzed the arguments and found that the Learned Tribunal had erred in not holding the Assessee accountable to prove the receipt of share capital/premium, which could justify the addition of the said amount to the Assessee's income. Consequently, the Court favored the Revenue on this issue. 5. The final issue concerns the disallowance of Long Term Capital Gain transactions. The Court observed that the Learned Tribunal had deleted the disallowances of Long Term Capital Gain, overlooking the fact that the transactions were stage-managed to facilitate the Assessee to plough back unaccounted income as fictitious Long Term Capital Gain. This led the Court to side with the Revenue on this matter as well. In conclusion, the Court allowed the appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961, for the assessment year 2014-15. The substantial questions of law raised by the Revenue were answered in their favor, based on the detailed analysis and interpretation provided by the Court.
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