DCIT Vs Smt. Denisha Rajendra Keshwani (ITAT Ahmedabad)
ITAT Ahmedabad held that addition under section 68 of the Income Tax Act unsustainable since revenue/ department failed to establish that LTCG earned is non-genuine. Accordingly, appeal of revenue dismissed.
Facts- During the scrutiny proceedings, AO observed that the assessee had declared Long Term Capital Gain (LTCG) of 1,40,06,685/-, arising from investments in various shares, including Kappac Pharma Ltd. (KPL). AO conducted a detailed examination of the transactions involving Kappac Pharma Ltd. (KL) shares and concluded that penny stock frauds operate as an ecosystem and treated the LTCG of Rs.1,17,78,534/- as bogus. The LTCG was treated as unexplained cash credit u/s. 68 and added to the total income of the assessee.
CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Hon’ble Gujarat High Court in the case of CIT v. Himani M. Vakil [2014] 41 taxmann.com 425 and Pr. CIT v. Maheshchandra G. Vakil [2013] 40 taxmann. com 326 has held that unless there is specific material to prove that the transaction is a sham, mere reliance on the Investigation Wing’s report or abnormal price fluctuations cannot justify an addition under Section 68.
In the present case, the assessee has duly discharged the onus by producing all necessary evidence, and the Revenue has failed to rebut them with substantive material. The AO has neither examined the counterparty to establish collusion nor provided any direct evidence of price rigging. The addition, therefore, appears to be made on the basis of suspicion and generalization rather than concrete facts.
