Case Law Details
Harish Kumar HUF Vs ITO (ITAT Chennai)
In this case, the assessee had purchased the shares of penny stocks companies at lesser amount and within a year sold such shares at much higher amount and the assessee had not tendered cogent evidence to explain as to how shares in an unknown company had jumped on higher amount in no time and also failed to provide details of persons who purchased the said shares, as the said transactions were attempt to hedge undisclosed income as long term capital gains. In this connection, in the case of Sanjay Bimalchand Jain v. PCIT, in ITA No. 18/2017, the Nagpur Bench of the Hon’ble High Court of Judicature at Bombay has laid down the law that if the assessee has not tendered cogent evidence to explain as to how the shares in an unknown company had jumped to such an higher amount in no time when the fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise and if the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain, such gain has to be assessed as undisclosed credit under section 68 of the Act. In view of the law laid down by the Hon’ble High Court of Bombay, we find that the Assessing Officer has rightly withdrawn the amount of ₹.20,45,457/- which has been claimed by the assessee as exempt under section 10(38) of the Act and assessed the entire sale consideration of ₹.21 ,58,650/- under section 68 of the Act.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 5, Chennai, dated 28.09.2018 relevant to the assessment year 2013-14. The only effective ground raised in the appeal of the assessee is that the ld. CIT(A) has erred in confirming the addition made under section 68 of the Income Tax Act, 1961 [“Act” in short].
2. Brief facts of the case are that the assessee has filed return of income for the assessment year 2013-14 on 19.03.2014 declaring income of ₹. 4,96,580/-. The assessee has long term capital gain and has shown the same under Schedule E1 during the previous year and has shown security transaction tax claiming exemption under section 10(38) of the Act of ₹. 20,45,457/-. The return filed by the assessee was processed under section 143(1) of the Act. As per investigation carried out by the Investigation Wing of the Department in certain cases, it has come to light that large scale manipulation has been done in market price of shares of certain companies listed on the Bombay Stock Exchange by a group of persons acting as a syndicate for the purpose of providing entries of tax exempt bogus long term capital gains to large number of persons (beneficiaries) in lieu of unaccounted cash in order to convert black money into white without payment of income tax. On going through the details given by the investigation wing, the Assessing Officer noticed that the name of Harish Kumar HUF with PAN AADHH6741J is also mentioned in the statement list of clients to whom bogus long term capital gain has been facilitated for the sale of shares of scrip Blue Circle of M/s. Blue Circle Services Ltd. for ₹.21,58,650/- for the financial year 2012-13. Accordingly, the return income filed by the assessee was reopened under section 147 of the Act and notice under section 148 of the Act dated 09.09.2016 was issued and served on the assessee. The case was reopened with the reason that the income of ₹.20,45,457/- for the assessment year 2013-14 has escaped assessment as assessee was one of the beneficiaries who was provided bogus long term capital gains through Private Limited Shell companies/listed penny stock companies. Accordingly, notices under sections 143(2) and 142(1) of the Act were duly served on the assessee. After considering the submissions of the assessee, the report of the Investigation Wing of the Department, confession given on oath under section 131 of the Act by the brokers/promoters/ operators, SEBI’s direction to BSE to suspend trading 331 shell companies stocks, the Assessing Officer concluded that the assessee has been facilitated accommodation entries to bring in his own unaccounted money in the guise of long term gain and thus, the amount of ₹.20,45,457/- claimed as exempt under section 10(38) of the Act has been withdrawn and the entire sale consideration of ₹.21 ,58,650/- was assessed under section 68 of the Act under the head “income from other sources”. On appeal, by following various case law, the ld. CIT(A) confirmed the unexplained income under section 68 of the Act.
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