Anraj Hiralal Shah (HUF) Vs ITO (ITAT Mumbai)
The assessee appealed against the order dated 04.05.2018 passed by the Commissioner of Income Tax (Appeals)-51, Mumbai for Assessment Year 2014-15, challenging the partial confirmation of additions relating to the sale of shares after rejection of the claim of long-term capital gains.
The assessee had filed the return declaring capital gains and income from other sources. It claimed exempt long-term capital gain of ₹8,40,497 under Section 10(38) arising from the sale of 2,200 shares of M/s Sunrise Asian Ltd. (formerly Santoshi Maa Tradelinks Ltd. before amalgamation). The shares were purchased in April 2012 for ₹1,33,430 and sold in May 2013 for ₹9,73,927.
The Assessing Officer reopened the assessment after receiving information from the Investigation Wing that trading in the shares of Sunrise Asian Ltd. was linked to suspicious long-term capital gains. The Assessing Officer also referred to the statement of one of the directors of Sunrise Asian Ltd., who had admitted that the prices of the company’s shares had been rigged. After discussing the alleged modus operandi adopted for generating exempt long-term capital gains through manipulated share prices, the Assessing Officer held that the assessee’s purchase and sale transactions were not genuine. Although the assessee explained that the shares had been purchased using speculation profits earned in the preceding financial year, the Assessing Officer disbelieved the contract notes relating to the speculation profits. Holding that the sale transactions were also doubtful due to the sharp rise in share prices, the Assessing Officer rejected the claim of capital gains, assessed the entire sale consideration of ₹9,73,927 as unexplained cash credit under Section 68, and further added 2% of the sale consideration as alleged expenditure incurred for obtaining accommodation entries.
