2024 (3) TMI 607 - AT - Income Tax

Addition u/s 68 - Exemption of capital gains u/s 10(38) denied - bogus LTCG - case of the Assessing Officer is that the appellant is a beneficiary of accommodation entries or long term capital gains from Calcutta Entry Provider - machinations of fraudulent, manipulative and deceptive dealings and how the stock exchanges system was misused to generate bogus LTCG - HELD THAT - The appellant deliberately withheld the information from the Assessing Officer as well as the ld. CIT(A) which is within exclusive knowledge of appellant to establish the genuineness of transactions of purchase of shares of that company. It is nothing but a fraud played by the appellant against the Assessing Officer as well as the ld. CIT(A) who are quasi judicial authorities employed for execution of the provisions of the Income Tax Act. Therefore, the principle of fraud can be squarely applied to the facts of the present case and principles of natural justice have no application. Applying the said doctrine, we have no hesitation to hold that the transaction of purchase and sale of shares of M/s. Corporate Commodity Broker Pvt. Ltd. under consideration before us is void ab-initio, this is nothing but sham, make believe and colourful device adopted with excellent paper work with intention bringing the undisclosed income into books of account. Accordingly, we confirm the orders of the Assessing Officer as well as the ld. CIT(A) and find no merits in the appeal preferred by the assessee before us. Decided against assessee.

Summary

Issues involved:
The judgment involves multiple appeals by different assessees challenging the denial of exemption of capital gains under section 10(38) of the Income Tax Act, 1961, based on alleged bogus transactions of purchase and sale of shares.

IT(SS)A No.02/PAN/2019, A.Y. 2013-14:
The appellant, an individual, filed a return of income for the assessment year 2013-14, disclosing total income. The Assessing Officer completed the assessment, denying the claim for exemption of capital gains under section 10(38) due to alleged bogus transactions of purchase and sale of shares. The appellant failed to substantiate the genuineness of the transactions, leading to the addition of sale proceeds as unexplained cash credit. The CIT(A) upheld this decision invoking the doctrine of human probability. The appellant's challenge contended that the transactions were genuine, but the tribunal, citing judicial precedents, confirmed the Assessing Officer's action even in the absence of the appellant.

Rationale for decision:
The tribunal noted that the appellant engaged in suspicious transactions related to capital gains on the sale of shares, benefiting from accommodation entries provided by an entry provider. Despite ample opportunity, the appellant failed to rebut the findings of the Assessing Officer. Citing legal principles, including the doctrine that fraud vitiates everything, the tribunal confirmed the addition made by the Assessing Officer. The tribunal held that the transaction was void ab initio, a sham with the intention of bringing undisclosed income into the books of account. The tribunal dismissed the appeal, finding no merit in the appellant's contentions.

IT(SS)A Nos.03, 04, 05, 08, 09 & 11/PAN/2019, A.Ys. 2013-14 & 2014-15:
The tribunal applied the decision in IT(SS)A No.02/PAN/2019 mutatis mutandis to these appeals, as the facts and issues were identical. Consequently, the appeals of the different assessees for the assessment years 2013-14 and 2014-15 were also dismissed.

In conclusion, the tribunal dismissed all seven appeals by different assessees challenging the denial of exemption of capital gains under section 10(38) of the Income Tax Act, 1961, due to alleged bogus transactions of purchase and sale of shares. The tribunal upheld the Assessing Officer's decision, citing legal principles and judicial precedents, and found no merit in the appellants' contentions.