Case Law Details
Yuvraj Ahuja Vs DCIT (ITAT Delhi)
ITAT Delhi held that addition of unexplained credit u/s 68 of the Income Tax Act sustained as the appellant failed to provide any explanation with regard to the nature and source of the credit.
Facts- The AO made addition of Rs. 1,25,36,661/- u/s. 68 of the Act. During the assessment proceedings, the AO noticed that the assessee had claimed exemption of Rs. 1,20,98,091/- being LTCG u/s 10(38). The assessee had purchased shares of M/s SMP Securities and M/s SS Corporate Security at a very low price and sold it off during the year under consideration at abnormally high price thus having Long Term capital gains of Rs. 1,20,98,091/-. The AO stated that he had received an investigation report of Pr. DIT, mn v. Kolkata, which had carried out a detailed investigation into the LTCG racket carried out by the syndicate of operator throughout the country. He carried out his own independent inquiries and arrived at the conclusion that the assessee had routed his own unaccounted money through this channel and hence the same was added in the hands of the assessee u/s 68 of the Act.
The said order of the above has been confirmed by the CIT(A)
Conclusion- Section 68 of the Act provides that where any sum is found credited in the books of the appellant maintained for any previous year and the appellant offers no explanation about the nature and source thereof or the explanation offered by her is not in the opinion of the AO satisfactory, the sum so credited may be charged to income tax as income of the appellant of that year. There is no economic or financial justification for the sale price of these shares. The fantastic sale price realization is not at all humanly probable, as there is no economic or financial basis that a share of little known company would jump so high. In these circumstances, I do not find any infirmity in the order of the AO. In view of the facts discussed in earlier paras, I am of the considered view that the AO was justified to disallow the claim of long term capital gain of Rs. 1,20,98,091/- and to treat the total sale consideration of Rs. 1,25,36,661/- as income from undisclosed sources.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee for assessment year 2015-16 against the order of the Learned Commissioner of Income Tax (Appeals)-Moradabad dated December 2017.
2. The assessee has raised the following grounds of appeal:-
“1. The Learned CIT(A) has erred in confirming the order of the AO and treating the sale consideration of Shares amounting to Rs.1,25,36,661/- as unexplained credits u/s 68 of the Act, with total disregard to the facts and circumstances of the case.
2. The Learned CIT(A) has confirmed the action of the Ld AO Officer without bringing a single evidence on record to establish that sale of shares was a colourable device to convert assessee,s unaccounted moneys.
3. The Ld CIT(A) has further erred in passing the appellate order without affording the reasonable opportunity of being heard to the assessee.
4. The entire order passed is arbitrary, illegal and against the facts of the case.”
3. Brief facts of the case are that, the AO made addition of Rs. 1,25,36,661/- under Section 68 of the Act. During the assessment proceedings, the AO noticed that the assessee had claimed exemption of Rs. 1,20,98,091/- being LTCG u/s 10(38). The assessee had purchased shares of M/s SMP Securities and M/s SS Corporate Security at a very low price and sold it off during the year under consideration at abnormally high price thus having Long Term capital gains of Rs. 1,20,98,091/-. The AO stated that he had received an investigation report of Pr. DIT, mn v. Kolkata, which had carried out a detailed investigation into the LTCG racket carried out by the syndicate of operator throughout the country. He carried out his own independent inquiries and arrived at the conclusion that the assessee had routed his own unaccounted money through this channel and hence the same was added in the hands of the assessee u/s 68 of the Act.
4. The said order of the above has been confirmed by the CIT(A) ide order dated 14.08.20 19 in following manner:
7.13 In view of the above facts, it is clear that the claim of LTCG of Rs. 1,20,98,091/- on the alleged sale of shares is basically accommodation entry from the entry operator. The appellant is involved in the scam of accommodation entry. The shares in which he has invested belong to paper company. Its financial position is extremely poor and do not seem to be carrying out a regular business. The exponential rise in its share price is nothing else but a manipulation by the syndicate of operators involved in the scam. The entire amount of the so called receipt on sale of shares has been treated correctly as unexplained credit u/s 68 of the Act, as it has all the ingredients of attracting the rigours of the said section. Section 68 of the Act provides that where any sum is found credited in the books of the appellant maintained for any previous year and the appellant offers no explanation about the nature and source thereof or the explanation offered by her is not in the opinion of the AO satisfactory, the sum so credited may be charged to income tax as income of the appellant of that year. There is no economic or financial justification for the sale price of these shares. The fantastic sale price realization is not at all humanly probable, as there is no economic or financial basis that a share of little known company would jump so high. In these circumstances, I do not find any infirmity in the order of the AO. In view of the facts discussed in earlier paras, I am of the considered view that the AO was justified to disallow the claim of long term capital gain of Rs. 1,20,98,091/- and to treat the total sale consideration of Rs. 1,25,36,661/- as income from undisclosed sources.
5. None appeared for the assessee, the notices sent to the registered address of the assessee returned with endorsement “addressee not found”. It is found that, even before the CIT(A), assessee has not appeared and not cooperated with the appellate proceedings before the CIT(A). By looking into the facts and circumstances of the case and considering the conduct of the assessee we deem it fit to decide the above appeal after hearing the Ld. DR and verifying the material on record.
6. We have head the Learned DR, perused the material available on record and give our thoughtful consideration. On going through the order of AO as well as CIT(A) it is found that the Lower Authorities found that the assessee’s claim of LTCG of Rs.1,20,98,091/- on alleged sale of shares is basically ‘accommodation entry’ from the entry operator. The Ld. CIT(A) found that the shares in which assessee is invested belong to paper company, the financial position is extremely poor and do not seem to be carrying out any regular business, the exponential rise in its share price is nothing else but a manipulation by the syndicate of operators involved in the scam. The entire amount of the so called receipt on sale of shares has been treated correctly is unexplained credit u/s 68 of the Act, as it has all the ingredients of attracting the rigours of the said section. Section 68 of the Act provides that where any sum is found credited in the books of the appellant maintained for any previous year and the appellant offers no explanation about the nature and source thereof or the explanation offered by her is not in the opinion of the AO satisfactory,the sum so credited may be charged to income tax as income of the appellant of that year. There is no economic or financial justification for the sale price of these shares. The fantastic sale price realization is not at all humanly probable, as there is no economic or financial basis that a share of little known company would jump so high. The above findings of the CIT(A) is based on the material available on record and the Assessee has not appeared and produced any material before the CIT(A). After filing the present Appeal even after issuing several notices by registry of this Tribunal to the registered address of the Assessee, the assessee remained absent and in the absence of any material evidence contrary to the findings of the Lower Authorities, we do not find any fault with the findings and the conclusion of the CIT(A) and we do not find any error or infirmity in the findings of the Lower Authorities. Thus, we find no merit in the Grounds No. 1 to 5 of the assessee, accordingly, the Ground No. 1 to 5 of the Assessee are dismissed.
7. In the result, appeal of assessee is dismissed.
Order pronounced 1n the open court on 29.03.2023
Author Bio
