Case Law Details
Randhir Singh Verma Vs ITO (ITAT Delhi)
Introduction: The Income Tax Appellate Tribunal (ITAT) Delhi bench ruled in the case of Randhir Singh Verma Vs ITO that mere transactions through a DMAT account or sales of shares on a stock exchange can’t be considered adequate evidence to rebut suspicious circumstances raised by the assessing officer under Section 68 of the Income Tax Act. The decision, pronounced on May 23, 2023, dismisses the appeal made by the assessee against the addition of INR 21,56,261 due to unexplained cash credit.
Analysis: In this case, the assessee challenged the addition of Rs. 21,56,261 under Section 68 of the Act for unexplained cash credit. The assessing officer found that the Long-Term Capital Gains (LTCG) on the sale of shares from Kappac Pharma Ltd. were not genuine transactions. The tax authorities’ scrutiny of the share acquisition mode, unusual price rise, and the cash trail in the entry providers’ accounts suggested these transactions were not governed by market factors.
The tribunal noted that the appellant failed to discharge his burden under Section 68 by not effectively rebutting the suspicious circumstances raised by the AO. The ITAT held that merely conducting transactions through a DMAT account or selling shares on the stock exchange does not provide sufficient proof to rebut the presumptions under Section 68 of the Income Tax Act.
Conclusion: This ruling emphasizes the need for the assessee to provide substantial evidence beyond merely using regulated channels for transactions. The assessee must convincingly address any suspicious circumstances raised by the tax authorities. The decision reaffirms the robustness of Section 68 in curbing unexplained cash credits and underlines the need for meticulous compliance with the Income Tax Act.
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