Case Law Details
Shri Badresh Mansukhlal Dodhia Vs ACIT (ITAT Mumbai)
Without evidence LTCG on sale of Shares through Recognized Stock Exchange cannot be treated as Accommodation Entries
The main issue under consideration in this appeal is the claim of deduction u/s 10(38) of the Act, the relevant facts are, during the year assessee had earned LTCG of Rs. 99,55,347/- on sale of shares of the scrip M/s Parag Shilpa Investments Ltd (later name changed to M/s PS IT Infra and Service Ltd). The details of the transaction are, assessee purchased 12,500 shares (face value of Rs.10/-) at cost of Rs. 500,000/- and later the face value of the shares were split into Re.1/- per share. The total number shares of the assessee were increased to 125000 shares. All the above shares were sold by the assessee during this assessment year thru the stock exchange. The sales consideration received by the assessee was many fold. The AO suspected the transaction were prearranged move to get entry of exempted Long Term Capital Gains. AO relying on the investigation made by the Investigation wing in the similar cases and gave incidences of method adopted to increase the share prices in the short period of time in his order.
AO recorded the facts in this case that assessee purchased the shares in advise of a person Mr. Eknath of M/s Bushit Trading Pvt Ltd, whom he has not met before. The assessee has not made any other investment in shares of unknown company while he made a windfall gains in this share which has a very dubious financials. Assessee has no knowledge of its directors, nature of business, turnover or profit as stated in his statement of oath. Further AO analyzed the financials of the PS IT Infra in his order. He observed that the share prices of this company were jacked up without any strength in its financials and analyzed the movement in the share prices from May’12 to Jan’16 in his report. AO asked the assessee to submit the transactions in demat account and based on the details, notices u/s 133(6) were issued to the purchasers of these shares. The identity or credit worthiness of these purchasers were not submitted and the assessee took a plea that these transactions were executed through stock exchange.
The statement of the assessee were recorded u/s 131 of the Act by the AO in order to appreciate the facts and AO analyzed the statement and observed in his order that the notice issues to Bushit Trading Pvt Ltd returned unserved and the details of this company given by the assessee are not proper and as per the statement given by shri Jagdish Purohit under oath that Shri Eknath Mandavkar director of Bushit Trading is an entry operator. Therefore, AO came to the conclusion that assessee is having acquaintance with the entry provider. He observed tat another company involved in the transaction is Compass Distributor and assessee purchased the shares off the market by paying to the unknown company. Not only the assessee invested in the above share, his other family members also purchased the same.
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