Addition u/s. 68 purely based on assumption is unsustainable in law

Himanshu Botadara Vs ITO (ITAT Indore)

ITAT Indore held that addition u/s. 68 on account of bogus long term capital gains unsustainable as the alleged transaction is not found recorded in the books of accounts including the Dmat account of the assessee. Hence, addition on the basis of assumption unsustainable.

Facts- The assessee HUF and Proprietor of Anjay Coal Company is engaged in the business of reporting and monitoring as agencies as well as deriving income from purchase and sale of share and securities.

AO reopened the assessment by issuing a notice u/s 148, for assessing the income escaped assessment on account of bogus transaction of purchase and sale of shares of M/s. Twenty First Century India Limited. In response to notice u/s 148, the assessee filed return of income on 18.4.2018, declaring the same income as it was declared in the original return of income. The AO completed the assessment u/s 147 r.w.s. 144 of the Act on 24th December, 2018, whereby an addition u/s 68 of the Act was made to the tune of Rs. 2,09,239/- being bogus long term capital gains.

CIT(A) rejected the contention of assessee and confirmed the addition made by the AO. Being aggrieved, the present appeal is filed.

Conclusion- Held that once the assessee has denied the alleged transaction and it is also not found recorded in the books of accounts including the Dmat account of the assessee maintained by the Banks then the addition made by the AO is purely on the basis of assumption as reported in the communication received from the Kolkata Investigation Wing is not sustainable in law and liable to be deleted. We order accordingly.

FULL TEXT OF THE ORDER OF ITAT INDORE