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2019 (10) TMI 462 - AT - Income TaxBogus LTCG - Unexplained credit u/s.68 - sham transaction of purchase and sale of bogus shares - HELD THAT - Since, the right to exemption must be established by those who seek it , the onus therefore lies on the respective assessee . In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion. In these cases, it is seen from the orders of the Ld.CIT(A), supra, that the respective assessee has not placed relevant material and proved the genuineness of the impugned transactions. Although, an appeal against the above orders have been filed before this tribunal, even before us also, the respective assessee has not challenged the findings recorded by the lower authorities with relevant material and hence we dismiss these appeals. - Decided against assessee.
Issues Involved:
1. Genuineness of Long Term Capital Gains (LTCG) from share transactions. 2. Legitimacy of purchase and sale of shares. 3. Validity of treating sale proceeds as unexplained credit under Section 68. 4. Onus of proof for claiming exemption under Section 10(38). Issue-wise Detailed Analysis: 1. Genuineness of Long Term Capital Gains (LTCG) from share transactions: The primary issue was whether the LTCG earned on the purchase and sale of shares of Essar India Ltd. (EIL) and claimed as exempt income under Section 10(38) were genuine. The Assessing Officer (AO) received a report from the Kolkata investigation wing indicating that the assessee was involved in bogus/non-genuine LTCG transactions through the manipulation of stock market prices of EIL, a penny stock company. The AO concluded that the transactions were sham and aimed at converting unaccounted money into accounted money under the guise of exempt capital gains. 2. Legitimacy of purchase and sale of shares: The AO scrutinized the transactions and found that the assessees purchased off-market shares of EIL at ?1 per share and sold them online at an average rate of ?227 per share, resulting in substantial gains. The AO noted that the initial purchase was not through recognized stock exchanges (BSE or NSE) but via off-market routes in paper form. The assessees failed to provide satisfactory explanations regarding the identity of the brokers or operators involved in the transactions or to substantiate similar purchases through the same route. The appellant could not justify the investment in EIL shares based on financial credentials or other investment criteria. 3. Validity of treating sale proceeds as unexplained credit under Section 68: The AO treated the entire sale proceeds as unexplained credit under Section 68, concluding that the transactions were deliberately entered into with full knowledge of their bogus nature. The substantial gains shown from the sale of penny stocks within a short period were deemed an attempt to convert unaccounted money into accounted money. The CIT(A) upheld the AO's decision, reinforcing the view that the transactions were manipulated and the LTCG claimed was bogus. 4. Onus of proof for claiming exemption under Section 10(38): The CIT(A) emphasized that the right to exemption must be established by those who seek it, placing the onus on the assessees to prove the genuineness of the transactions. The assessees failed to provide relevant material to substantiate their claims of exemption. The tribunal noted that despite filing appeals, the assessees did not challenge the findings of the lower authorities with relevant material, leading to the dismissal of the appeals. Conclusion: The tribunal dismissed the appeals filed by the assessees, concluding that the transactions involving the purchase and sale of EIL shares were manipulated and the LTCG claimed was bogus. The tribunal upheld the AO's decision to treat the sale proceeds as unexplained credit under Section 68, as the assessees failed to discharge their onus of proving the genuineness of the transactions and the right to exemption under Section 10(38).
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