2023 (1) TMI 1408 - AT - Income Tax

Addition u/s. 68 - bogus Long Term Capital Gains - HELD THAT - We find the CIT(A) justified in holding the view of AO that the transactions between the assessee and paper companies are suspicious sale transactions in shares and Long Term Capital Gain as claimed by the assessee is not allowable u/s 10(38) of the Act. CIT(A) primarily relied on the decision of Hon ble High Court of Bombay at Nagpur Bench in the case of Sanjay Bimalchand Jain 2017 (5) TMI 983 - BOMBAY HIGH COURT in confirming the order of AO in making addition u/s. 68. We find that the CIT(A) discussed the transaction in detail the impugned order, wherein we completely agree with the reasoning recorded by the CIT(A) in holding the transaction entered by the assessee with paper companies a sham transaction and denial of exemption u/s. 10(38) of the Act is justified. We find no infirmity in the order of CIT(A) and it is justified. Thus, the grounds raised by the assessee are dismissed.

Summary

Issues:
Appeal against the common order by different assessees for A.Y. 2015-16. Consideration of addition made under section 68 of the Act for bogus Long Term Capital Gains.

Analysis:
The Appellate Tribunal ITAT Pune heard two appeals by different assessees against a common order by the Commissioner of Income Tax (Appeals)-2, Kolhapur for A.Y. 2015-16. The assessees sought adjournment, but it was rejected as the issues raised were deemed covered against them. The Tribunal decided to hear both appeals together for convenience.

In the first appeal, the main issue was whether the CIT(A) was justified in confirming the addition made by the AO under section 68 of the Act for bogus Long Term Capital Gains. The AO alleged that the shares were manipulated to generate bogus gains, involving a complex scheme of price rigging and transfer of unaccounted cash. Statements from individuals involved in the scheme supported the AO's findings. The CIT(A) upheld the addition, citing a similar case from the Hon'ble High Court of Bombay and concluding that the transactions were suspicious and not eligible for exemption under section 10(38) of the Act.

The Tribunal agreed with the CIT(A)'s decision, noting discrepancies in share prices, lack of explanation from the assessee, and admissions from individuals involved in providing bogus Long Term Capital Gains. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the appeal.

The second appeal had similar facts to the first, and the Tribunal applied the same reasoning in dismissing it as well. Both appeals were ultimately dismissed, upholding the addition of unexplained cash credits under section 68 of the Act.

In conclusion, the Tribunal upheld the decisions of the CIT(A) regarding the addition of bogus Long Term Capital Gains, based on evidence of price manipulation and suspicious transactions. The appeals were dismissed, affirming the addition of unexplained cash credits in both cases.