2014 (10) TMI 583 - HC - Income Tax

Addition u/s 68 Income already shown as income under capital gains Genuineness of transaction of sale and purchase of shares Held that - The Tribunal was rightly of the view that the assessee had manipulated the accounts - no sale or purchase of the shares was done by the assessee but only entries of the capital gains were given to the assessee on receipt of cash payment - since the assessee had only filed copy of sale and purchase bill and showed inability to produce the broker, the AO was right in conducting the enquiries on his own - the bogus capital gains have been generated by the assessee and, therefore, the quotations in a Gujarati Diary was of no help to the assessee - the assessee had not done any share business before financial year 2003-04 and after financial year 2004-05 in which he had earned capital gains of ₹ 51 lacs - the assessee had failed to prove the genuineness of the transaction of sale and purchase of shares - once the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee u/s 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained thus, the order of the Tribunal is upheld Decided against assessee.

Summary

Issues:
Identification of genuine transaction of sale of shares under Section 68 of the Income Tax Act, 1961.

Analysis:
The case involved an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal regarding the addition of a specific amount under Section 68 of the Act. The appellant declared income from long term capital gains on trading of shares, which was challenged by the Assessing Officer as a bogus transaction. The Assessing Officer treated the sale transaction of shares as false and concocted, leading to the addition of the amount in question. The Commissioner of Income Tax (Appeals) and the Tribunal upheld this decision, resulting in the present appeals.

The appellant argued that the capital gains on the sale of shares were genuine, citing a judgment from the Rajasthan High Court. However, the court did not find merit in this submission. The Assessing Officer concluded that the share transactions were sham, with the appellant introducing unexplained money as share profits. The CIT(A) and the Tribunal also affirmed these findings, stating that the appellant had manipulated accounts and failed to prove the genuineness of the transactions. The Tribunal highlighted discrepancies in the appellant's explanations and actions, leading to the dismissal of the appeals.

The court observed that the findings of fact by the authorities below were not erroneous or perverse, warranting no interference. Additionally, a judgment cited by the appellant was deemed inapplicable as it was based on different facts. The court ultimately dismissed the appeals, upholding the decisions of the lower authorities regarding the addition under Section 68 of the Income Tax Act, 1961.

In conclusion, the judgment emphasized the importance of substantiating the genuineness of transactions, especially in cases involving the addition of income under Section 68 of the Act. The court upheld the decisions of the Assessing Officer, CIT(A), and the Tribunal, underscoring the need for proper documentation and evidence to support claims of income and transactions to avoid adverse consequences.