2019 (1) TMI 1404 - AT - Income Tax

Bogus share transactions - Addition u/s. 68 r.w.s. 115BBE on account of sale of equity shares - assessee had declared Long Term Capital Gain on sale of shares which was claimed as exempt u/s. 10(38) - Held that - Nowhere there is any discussion or whisper that there is any material or information with the Department that assessee s name has appeared as a beneficiary of accommodation entry in any kind of inquiry or investigation conducted by the Department or assessee has routed his unaccounted money in the garb of Long Term Capital Gain. In this case, addition has been sought to be made u/s.68 which postulates that assessee has to prove the nature and source of credit appearing in his books of account. Here, from the perusal of the nature of credit, it is seen that the same has come through sales of shares which fact has also not been doubted by the Department. The source of money is through broker who has undertaken the transaction of the shares lying with the assessee purchased in the earlier years and same has been sold after paying due taxes in the form of STT. Thus, nature of the credit stands fully explained. If it is to be held that assessee has routed his own unaccounted money, then there has to be some material to provide live link nexus to show that the unaccounted money has been routed under the garb of transaction of purchase and sale of shares. If the availability of shares is not in doubt then the sale of the same also cannot be doubted in wake of the evidences as discussed above. - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing appeal
2. Addition of ?30,19,500 under section 68 r.w.s. 115BBE on account of sale of equity shares

Analysis:

Issue 1: Condonation of delay in filing appeal
The appeal was filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals), Ghaziabad for the Assessment Year 2014-15. The appeal was initially barred by a 12-day limitation. The Assessee explained the delay by stating that the Chartered Accountant initially handling the appeal expressed inability to proceed further. The Tribunal, after considering the reasons for the delay, found no fault on the Assessee's part and decided to condone the delay in the interest of natural justice, allowing the appeal for adjudication.

Issue 2: Addition of ?30,19,500 under section 68 r.w.s. 115BBE on account of sale of equity shares
The Assessing Officer made the addition under section 68 r.w.s. 115BBE on the Long Term Capital Gain shown by the Assessee, as the source of the amount remained unexplained and unsatisfactory. The first appeal enhanced the quantum of addition based on the lack of substantiation by the Assessee and the suspicious nature of the shares purchased. However, the Assessee argued that the shares were purchased through a recognized broker, and the sale proceeds were credited to the bank account from the sale of shares, with all transactions duly documented. The Assessee contended that there was no evidence of any unaccounted money or involvement in any fraudulent practices. The Tribunal found that the Assessee had adequately explained the nature and source of the credit in the bank account, and there was no material linking the Assessee to any fraudulent activities or accommodation entries. Therefore, the Tribunal directed the deletion of the addition made under section 68, as there was no substantiated reason to uphold the addition.

In conclusion, the Tribunal allowed the appeal of the Assessee, emphasizing that the nature of the credit from the sale of shares was adequately explained, and there was no evidence to support the addition under section 68.