Rameshkumar Karsanbhai Patel Vs ITO (ITAT Surat)
The Income Tax Appellate Tribunal dismissed the assessee’s appeal challenging the order of the Commissioner of Income-tax (Appeals), NFAC, for Assessment Year 2015-16. The dispute related to denial of exemption under Section 10(38) of the Income-tax Act on alleged long-term capital gains (LTCG) earned from sale of shares of Sunrise Asian Ltd. and consequent addition under Section 68 as unexplained cash credit.
The assessee had filed a return declaring income of Rs. 6,78,620 and claimed exempt LTCG of Rs. 70,33,182 arising from sale of 15,000 equity shares of Sunrise Asian Ltd. The assessee explained that shares were originally purchased in Financial Year 2011-12 through banking channels as shares of Conart Traders Ltd. from Santoshima Tradelinks Ltd. Pursuant to a scheme of amalgamation sanctioned by the Bombay High Court, Conart Traders Ltd. merged with Sunrise Asian Ltd., and equivalent shares were allotted and later sold through recognized stock exchanges.
The Assessing Officer relied upon investigation reports relating to penny stock manipulation and observed that Sunrise Asian Ltd. was used for generating bogus LTCG entries. The Assessing Officer noted abnormal increase in share prices despite poor financial performance of the company, off-market purchase transactions, and absence of satisfactory documentary evidence regarding purchase and transfer of shares. Consequently, the entire sale proceeds of Rs. 70,33,182 were treated as unexplained cash credits under Section 68. An additional amount of Rs. 35,166 was also added under Section 69C towards alleged commission expenditure for obtaining accommodation entries.
