2022 (6) TMI 565 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - Unexplained LTCG on share transactions - HELD THAT - As at the time of sale of shares, the price has increased astronomically by almost 1945%. Further, he found that as per investigation conducted by Investigation Wing of the department at various places, it was found that this company is a penny stock company. Thus, based on such information available on record, he called upon the assessee to explain, why the long term capital gain offered should not be treated as unexplained cash credit under section 68 - Though, the assessee offered some explanation to claim that the share transaction was genuine, however, the AO was unconvinced. Ultimately, he proceeded to complete the assessment by treating the long term capital gain as unexplained cash credit under section 68 of the Act. Further, he added back an amount as commission paid to avail the bogus long term capital gain. The additions so made by the AO were also confirmed by learned Commissioner (Appeals). On a careful reading of the orders passed by the departmental authorities, it is observed, as per the investigation conducted in relation to the shares of the company, on which, the assessee offered long term capital gain, it was found that it is a penny stock company. It was also found that due to price manipulation and rigging, there was astronomical increase in the price of the shares. As it appears from the facts on record, the assessee has not furnished any strong evidence before the departmental authorities to rebut the adverse materials brought on record by the department. Even before me, the factual position remains unaltered as the assessee neither appeared nor placed contrary materials for enabling me to disturb the finding of the departmental authorities. - Decided against assessee.

Summary

Issues:
Appeal against order of Commissioner of Income Tax (Appeals) for assessment year 2015-16 - Non-appearance of assessee during appeal hearings - Addition of unexplained cash credit under section 68 of the Act and commission paid for bogus long term capital gain.

Analysis:
The judgment pertains to an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2015-16. Despite multiple hearing dates and notices served, the assessee did not appear before the Tribunal, leading to the appeal being disposed of ex-parte. The grounds raised by the assessee related to the addition of Rs.29,18,507 under section 68 of the Act and Rs.30,689 under section 69C of the Act.

The assessee, a resident Hindu Undivided Family, had declared income of Rs.6,27,900 and claimed long term capital gain exempt under section 10(38) of the Act. However, the Assessing Officer discovered discrepancies in the sale of equity shares of a company, where the price had increased significantly. The company was identified as a penny stock company, raising suspicions about the genuineness of the transaction. Despite explanations from the assessee, the Assessing Officer treated the long term capital gain as unexplained cash credit under section 68 of the Act and added a commission amount to the income.

During the appeal hearing, the Departmental Representative presented the findings of the investigation, highlighting the price manipulation and rigging in the shares of the company. The Tribunal noted the lack of substantial evidence from the assessee to counter the adverse findings of the department. As the assessee failed to provide convincing evidence or appear before the authorities, the Tribunal upheld the decision of the departmental authorities and dismissed the appeal.

In conclusion, the Tribunal found no merit in the grounds raised by the assessee and dismissed the appeal, upholding the additions made by the Assessing Officer and confirmed by the Commissioner (Appeals) regarding the unexplained cash credit and commission paid for the long term capital gain. The judgment was pronounced in open court on 10th June 2022.