2009 (1) TMI 318 - AT - Income Tax

Capital gain - Undisclosed income - assessee has shown sale proceeds of shares at Rs. 7, 34, 206 and has worked out long-term capital gain of Rs. 7, 09, 740 after deducting expenses of Rs. 1466 and cost of shares at Rs. 23, 000 and worked out a capital gain at Rs. 7, 09, 740 - Assessing Officer asked the assessee to furnish original sale of the purchase bill of shares and copy of D-Mat account to ascertain the genuineness of the transaction - If the shares are delivered in physical form generally the bill of the seller/broker should contain the descriptive numbers of the shares delivered to the buyer i.e. the assessee in the present case - there is no detail given regarding this investment shown in the balance sheet such as name of the company number of shares etc. - it can be seen that on 3-7-2003 10500 shares were traded and such credit is on account of market receipt from the same client ID No. 14528754 and the same were debited on 5-7-2003 and the client ID is same i.e. 14528754 - Decided against the assessee

Summary

Issues:
Assessment of income as undisclosed source instead of long-term capital gain on sale of shares.

Detailed Analysis:
The appeal was against the order of the Ld. CIT(A) for the assessment year 2004-05, where the authorities rejected the claim of the assessee regarding long-term capital gain of Rs. 7,09,740 arising from the sale of shares and assessed the entire sale proceeds of Rs. 7,34,206 as income from undisclosed sources. The Assessing Officer requested original purchase bills, D-Mat account details, and evidence of stock exchange transactions. The assessee claimed the shares were purchased at Rs. 2.10 per share and sold at Rs. 70 per share. However, the MP Stock Exchange confirmed no trading of the shares during the relevant periods. The Assessing Officer concluded that the shares were not traded through any stock exchange and treated the entire sale proceeds as undisclosed income.

The assessee argued that all evidence was submitted before the authorities, including the purchase contract note, D-Mat account details, stockbroker bills, and circulars supporting the claim. The D-Mat account showed the shares credited and debited on specific dates, indicating physical delivery. However, discrepancies were noted in the cost of shares, ledger entries, and balance sheet details. The circulars cited by the assessee were found inapplicable due to unexplained credits in the D-Mat account and lack of evidence regarding actual delivery of shares.

The tribunal analyzed the facts, noting the absence of evidence supporting the claim of share purchase and sale. The D-Mat account entries did not align with the alleged purchase date, indicating inconsistencies in the transaction details. The tribunal concluded that the circulars cited by the assessee did not apply due to unexplained credits in the D-Mat account, leading to the rejection of the assessee's grounds. The tribunal upheld the authorities' decision to treat the entire sale proceeds as income from undisclosed sources based on the lack of substantiated evidence supporting the capital gain claim.

The tribunal dismissed the appeal, emphasizing the importance of providing concrete evidence to substantiate claims, especially in transactions involving shares and capital gains. The decision highlighted the significance of maintaining accurate documentation and adhering to regulatory requirements to establish the legitimacy of financial transactions and income sources.