ACIT Vs Arihant Kumar Jain (ITAT Delhi)
Genuineness of transaction is to be proved by person who substantially asserts the same
Facts- Assessee claimed capital gain of INR 2,72,85,500 as exempt under section 10(38). During search AO reached the conclusion that the entire funds have been received by assessee from the sale of penny stock and the actual source of credit was unaccounted cash of the assessee as held by investigation and thereby treated the credit in the bank account of the assessee as unexplained income u/s 68 of the Act and thereby added total amount of Rs.2,77,46,000/- to the income of the assessee u/s 68 of the Act and thereby framed the total assessment at Rs.3,27,82,030/-under section 143 (3) of the Act.
Conclusion- We are of the considered view that the entire transaction as to purchasing and selling of 40,000 shares of M/s. Kappac Pharma Limited is a colourable device to convert unaccounted money into fictitious exempt LTCG to evade taxes
A transaction needs to be proved to be genuine by the person who substantially asserts the same. Once the assessee has been called upon to prove the genuineness of the trading of the shares leading to LTCG gain, the onus lies upon him which he fails to discharge in the present matter.
FULL TEXT OF THE ORDER OF ITAT DELHI
Appellant, ACIT, Circle 8 (1), New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeal sought to set aside the impugned order dated 28.05.2018 passed by the Commissioner of Income – tax (Appeals)-3, New Delhi qua the assessment year 2014-15 on the grounds inter alia that:-
“Ld. Commissioner of Income Tax (Appeals) erred on law and on the facts of the case in deleting the addition of Rs.2,77,46,000/- made by the AO u/s 68 of the I.T. Act, 1961 for the bogus LTCG claimed not eligible for exemption u/s 10(38) of the Act.”
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee who is an individual taxpayer claimed “income from business & profession” and “income from other sources” i.e. interest income from bank, house property, capital gains & income from other sources. Assessee filed return of income declaring total income of Rs.50,36,026/-. During scrutiny proceedings, Assessing Officer (AO) noticed that the assessee has claimed “capital gains” of Rs.2,72,85,500/- as exempt under section 10(38) of the Income-tax Act, 1961 (for short ‘the Act’) from the sale of scrip of M/s. Kappac Pharma Limited.
3. Apart from the investigation conducted by the AO, he has taken note of country-wide investigation carried out by the Directorate of Investigation, Income-tax, Kolkata to unearth the organized racket for generating bogus entries of Long Term Capital Gains (LTCG) to be claimed as exempt from tax. Numerous cases have been unearthed and individuals have been identified who were beneficiaries of such bogus entries of LTCG amounting to several crores from 2010 to 2014.
4. AO noticed that assessee being the beneficiary of such bogus entries purchased and sold the shares of M/s. Kappac Pharma Limited, detailed as under :-
