2023 (3) TMI 671 - AT - Income Tax

Addition u/s 68 - Bogus LTCG - addition to the income, treating the transaction as an accommodation entry with a particular broker in relation to the equity share of a particular company, merely because the investigation was done by income-tax department or the SEBI against brokers or the companies or their promoters - HELD THAT - We note that the assessee was engaged in penny stock transactions wherein phenomenal return of 17,960% was obtained in a short time period and this is only possible through a colorable device. The orders of AO and ld. CIT (A) are quite speaking and elaborate and we do not find any infirmity in the same. Hence, we uphold the order of the ld. CIT (A). Assessee s appeal stands dismissed.

Summary

Issues involved:
The judgment involves the assessment of Long Term Capital Gains (LTCG) claimed by the assessee under section 10(38) for the Assessment Year 2015-16. The main issues revolve around the genuineness of the share transactions, the applicability of section 68 for undisclosed income, and the addition of LTCG as unexplained income.

Genuineness of Share Transactions:
The assessee claimed LTCG from the sale of equity shares of a company, showing a phenomenal return of 17,960% in a short period. The Assessing Officer (AO) treated the LTCG as not genuine based on reports regarding penny stock companies used for providing LTCG. The ld. CIT (A) referred to case laws and concluded that the share transactions were sham transactions to evade tax. The AO's addition of the amount as unexplained income was upheld, along with the quantification of unexplained expenditure for commission. The Tribunal upheld the orders of the AO and ld. CIT (A), noting the suspicious nature of the transactions and the lack of appearance by the assessee.

Applicability of Section 68 for Undisclosed Income:
The authorities found that the assessee engaged in dubious share transactions to account for undisclosed income as LTCG. The AO added the LTCG as unexplained credit under section 68, considering the lack of evidence to explain the significant increase in share value. The ld. CIT (A) upheld the AO's decision, citing legal precedents and the segregation of apparent from real transactions. The Tribunal affirmed the addition of LTCG as unexplained income and the quantification of unexplained expenditure for commission.

Dismissal of Appeal:
Despite the absence of the assessee during the appeal, the Tribunal carefully considered the facts and upheld the orders of the AO and ld. CIT (A). Given the extraordinary return on the share transactions and the suspicions raised regarding the genuineness of the transactions, the Tribunal dismissed the assessee's appeal, affirming the addition of LTCG as unexplained income.

Separate Judgement:
No separate judgment was delivered by the judges in this case.