Case Law Details
Hemil Subhashbhai Shah Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad confirms the addition of bogus long-term capital gains arising from a transaction involving a penny stock. The tribunal upholds the decision based on the failure of the assessee to prove the genuineness of the transaction despite submitting documentary evidence. The ruling cites a similar case in the Calcutta High Court that emphasizes the need to substantiate the price rise in shares with financials of the company, considering the involvement of entry operators and brokers in a large-scale scam.
Facts- The assessee is aggrieved by the long term capital gains returned by it to tax on sale of shares, being held to be bogus and mere accommodation entries by the Revenue authorities.
AO found the shares dealt with by the assessee i.e. KAPPAC PHARMA LTD to be such share identified as penny stock by the Investigation Wing, Kolkatta and as per the AO, the Investigation Wing revealed the assessee as one of the beneficiaries. Based on these facts thelong term capital gain returned by the assessee was treated as bogus and all documentary evidences filed by the assessee to prove genuineness of its claim were rejected, as not sufficient to discharge onus cast on the assessee.
Conclusion- Hon’ble Calcutta High Court in the case of Pr.CIT Vs. Swati Bajaj, where based on the similar investigation report of the Investigation Wing, Kolkatta and in identical set of facts, it was held that mere filing documentary evidences did not discharge onus cast on the assessee to prove genuineness of the transaction, more particularly, since the huge price rise in the shares sold was not shown to be supported by financials of the company, and there was no justification for the same, and considering large scale scam unearthed by the department, where entry operators and brokers involved had admitted to providing accommodation entries through bogus long term capital gain on sale of shares.
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