Aarti Singal Vs DCIT (ITAT Chandigarh)
Apparent is Real: Suspicion Can’t Replace Proof- Tribunal Slams Suspicion-Based Additions- Upholds Genuine Share Transactions
Chandigarh Tribunal dealt with a batch of appeals filed by assesses against orders of CIT(A), Gurgaon, for AYs 2015-16 & 2016-17. The common issue was treatment of Long-Term Capital Gains (LTCG) on listed shares as “bogus accommodation entries” & consequential additions u/s 68 (unexplained credits) & u/s 69C (commission expenditure).
Background
Assessees had reported substantial LTCG from sale of shares of certain companies (Maa Jagdambe Trade Links Ltd, PS Infrastructure Services Ltd, Grandma Trading & Agencies Ltd, Goenka Business & Finance Ltd, Ram Mineral & Chemicals Ltd, Surbhi Chemical Investments, Greencrest Financial Services Ltd, etc.) acquired through preferential allotments & held in Demat form. All sales were through recognized stock exchange with STT paid, supported by contract notes, bank statements & Demat accounts.
AO, however, treated these gains as sham on basis of statements of alleged entry operators (R.K. Kedia, Shrish Chandrakant Shah, Manish Arora) recorded in earlier search cases. AO concluded that Assessees had routed unaccounted money in guise of exempt LTCG, taxed entire sale proceeds u/s 68, & further estimated commission @ 6.5% u/s 69C.
CIT(A) upheld AO’s action, holding that transactions were penny stock manipulations lacking commercial substance, relying on “preponderance of probabilities” & human conduct tests.
