Pankaj Agarwal & Sons (HUF) Vs ITO (ITAT Chennai)
The ITAT Chennai disposed of eight connected appeals involving identical issues for Assessment Year 2014-15 arising from orders passed by the Commissioner of Income Tax (Appeals). The principal dispute related to the denial of exemption under Section 10(38) of the Income-tax Act on long-term capital gains arising from the purchase and sale of equity shares of M/s. SRK Industries Ltd. The Assessing Officer had treated the transactions as sham and added the gains as unexplained cash credits under Section 68. The appeals also involved issues relating to computation of total income, incorrect computation of sale consideration in certain cases, denial of set-off of losses in one appeal, and levy of interest under Sections 234B and 234C. The Tribunal heard all appeals together and disposed of them by a common order.
The Assessing Officer, while completing the assessments under Section 143(3), concluded that the transactions in the shares of M/s. SRK Industries Ltd. were not genuine. The assessment relied upon findings of the Investigation Wing and SEBI, according to which the company lacked credibility, trading in its shares was manipulated through a syndicate of brokers and broking entities, and beneficiaries sold the shares after the prices had been artificially increased to claim exemption under Section 10(38). The Assessing Officer further recorded that brokers facilitating such transactions generally received commission in cash and that the price manipulation enabled beneficiaries to convert unaccounted money into exempt long-term capital gains. Relying on these findings and judicial precedents, the Assessing Officer rejected the exemption claimed under Section 10(38) and treated the gains as unexplained cash credits under Section 68.
