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2022 (8) TMI 130 - AT - Income TaxBogus LTCG on sale of shares - Penny stock purchases - HELD THAT - We note that issue is squarely covered against the assessee by judgment of the Hon ble Calcutta High Court in the case of Swati Bajaj and Others 2022 (6) TMI 670 - CALCUTTA HIGH COURT Unexplained cash deposits in bank account - HELD THAT - CIT(A) noted that there is no cash deposit found in the bank account of the creditor prior to the date on which cheques were issued to the assessee. Even, no cash withdrawal was found from the bank account of the creditor repaid. The assessee was subjected to search survey on 19.02.2011 03.09.2015 i.e. before after the date of survey on GCSL, no document indicating any cash payment for obtaining accommodation entries or receiving of cash on repayment of loan was found. It is undisputed fact that no documentary evidence was found anywhere (at the premises of third party i.e. GCSL or at the premises of the assessee), which even remotely suggests that the assessee paid any cash for there transactions with GCSL. We do not agree with the sweeping allegation of the AO that Transactions were accommodation entries . This statement is totally unfounded and not based on any cogent evidence to back such high-voltage statement apparently based on conjectures and surmises. Based on these facts and circumstances, we are of the view that there is no any infirmity in the order passed by ld CIT(A). That being so, we decline to interfere in the order passed by ld CIT(A), his order on this issue is upheld and grounds of appeal raised by the Revenue is dismissed.
Issues Involved:
1. Addition on account of Long Term Capital Gains (LTCG) from sale of shares of Bakra Pratisthan Ltd. 2. Addition on account of unexplained cash credits under Section 68 of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Addition on account of Long Term Capital Gains (LTCG) from sale of shares of Bakra Pratisthan Ltd.: During the assessment proceedings, the Assessing Officer (AO) observed that the assessee claimed an exempted income of Rs. 2,49,54,750/- under Section 10(38) of the Income Tax Act from the sale of shares of Bakra Pratisthan Ltd. The AO noted that the shares were traded through a broker, Shri Ashok Kumar Kayan, who was found to be engaged in providing bogus LTCG entries by rigging share prices. The AO issued a show-cause notice to the assessee, questioning the legitimacy of the LTCG claim. In response, the assessee argued that the shares were initially purchased from other parties and later amalgamated with Bakra Pratisthan Ltd. The assessee claimed that the transactions were genuine, conducted through registered brokers, and subject to Security Transaction Tax (STT). However, the AO rejected these contentions, citing statements from Shri Ashok Kumar Kayan and his son, who admitted to providing bogus LTCG entries. The CIT(A) upheld the AO's decision, relying on the Supreme Court judgment in the case of Suman Poddar. The assessee appealed further, submitting that the transactions were genuine and supported by documentary evidence, including demat accounts and bank statements. The Tribunal examined the facts and found that the issue was covered against the assessee by the judgment of the Calcutta High Court in the case of Swati Bajaj and Others, which held that transactions involving penny stocks and entry operators were not genuine. Consequently, the Tribunal upheld the CIT(A)'s order, dismissing the assessee's appeal. 2. Addition on account of unexplained cash credits under Section 68 of the Income Tax Act: The AO made an addition of Rs. 12,14,13,015/- (after rectification) to the assessee's income, treating the loan received from Gujarat Computer Software Ltd. (GCSL) as unexplained cash credits. This decision was based on the statement of Shri Tamal Roy, a director of GCSL, who admitted during a survey that he provided accommodation entries for loans and advances by issuing cheques in exchange for cash. The assessee contested the addition, arguing that the loans were received through regular banking channels, interest was paid, and TDS was deducted. The assessee also provided documentary evidence, including confirmations from the creditor, bank statements, and tax returns. The CIT(A) deleted the addition, noting that the assessee had proved the identity, genuineness, and creditworthiness of the creditor. The Revenue appealed against the CIT(A)'s decision, arguing that the statement of Shri Tamal Roy was sufficient to discredit the transactions. However, the Tribunal found that the AO had not provided the assessee an opportunity to cross-examine Shri Tamal Roy, which violated the principles of natural justice. The Tribunal also noted that the transactions were conducted through regular banking channels and were supported by documentary evidence. Additionally, the Tribunal referenced judgments from the Gujarat High Court, which held that transactions confirmed by creditors and conducted through banking channels should not be treated as unexplained cash credits. Based on these findings, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. Conclusion: In summary, the Tribunal dismissed both the assessee's cross-objection regarding the addition on account of LTCG from the sale of shares of Bakra Pratisthan Ltd. and the Revenue's appeal regarding the addition on account of unexplained cash credits under Section 68. The Tribunal's decisions were based on the principles of natural justice, documentary evidence, and relevant judicial precedents.
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