2022 (6) TMI 1485 - AT - Income Tax

Addition u/s 68 - bogus LTCG - denying section 10(38) - HELD THAT - This tribunal s recent co-ordinate bench decision in Ravi Bhaskar Wattamwar 2020 (1) TMI 690 - ITAT PUNE held it is crystal clear that PS IT I SL is a penny stock company and the assessee obtained only accommodation entries in the garb of long term capital gain from transfer of its shares, for which an appropriate addition has rightly been made and upheld by the authorities below - The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. It was held that the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain was accordingly held to be rightly assessed as undisclosed income. Similar view has been taken by the Hon ble Delhi High Court in Suman Poddar 2019 (9) TMI 1089 - DELHI HIGH COURT We adopt the foregoing detailed reasoning mutatis mutandis to uphold the learned lower authorities action making the impugned disallowance/addition in very terms. The assessee fails in his sole substantive grievance.

Summary

Issues Involved:
The judgment involves the denial of section 10(38) long term capital gains exemption by the lower authorities, leading to the addition of the sum as unexplained cash credits u/s 68 of the Income Tax Act, 1961.

Details of the Judgment:

Issue 1: Denial of Section 10(38) Exemption
The Assessing Officer declined the assessee's exemption gain on the sale of shares, deeming it as bogus due to abnormal price movement in the stock market and lack of genuine evidence. The lower authorities upheld the addition of Rs. 1,15,53,749 under section 68 of the Act, based on the sham transaction, as per the judgments in Sumati Dayal vs. CIT (1995) and CIT vs. Durga Prasad More (1971). The assessee argued for the exemption, citing the use of banking channels and registered brokers. However, the tribunal found no merit in the arguments, supporting the lower authorities' decision based on the lack of genuineness in the share market transactions.

Issue 2: Consistency in Disallowance/Addition
The tribunal referred to a recent co-ordinate bench decision to support the Revenue's stand on disallowance of exemption claimed u/s 10(38). The case involved suspicious sale transactions in shares, leading to the conclusion that the long term capital gain declared by the assessee was non-genuine. The tribunal upheld the addition of Rs. 19.32 lakh based on factors such as price increase without a financial basis, identification as a shell company, and involvement in providing accommodation entries. Citing legal precedents, the tribunal emphasized the need to consider surrounding circumstances and human probabilities to determine the reality of transactions.

In conclusion, the tribunal dismissed the assessee's appeal and upheld the lower authorities' decisions regarding the denial of section 10(38) exemption and the addition of unexplained cash credits under section 68 of the Income Tax Act, 1961.

(Order pronounced on 28th June, 2022)