While upholding the disallowance u/s 68 of the Income Tax Act, the Mumbai Bench of the Income Tax Appellate Tribunal has held that long-term capital gain from the sale of shares of the bogus company.
The appellant, Zeeshan Azizmohmed Shaikh is an individual and is engaged in the business of trading in paper and filed its return of income declaring a total income of Rs. 10,57,900. AO noticed that assessee was one of the beneficiaries, who had earned long-term capital gains to the tune of Rs. 48,59,287 from the sale of shares of Kailash Auto Finance Limited, which is barred/suspended/blacklisted from trading at BSE, and disallowed the exemption claimed by the assessee under section 10(38) in respect of long-term capital gains and added the same as unexplained cash credit under section 68 of the Act. Also the commission of Rs. 24,713 paid by the assessee in respect of the aforesaid transaction was also disallowed and added to the total income of the assessee.
Aggrieved by the order of AO assessee preferred to appeal before CIT (A), which confirmed the order. Hence, the assessee is before ITAT against the impugned order.
The Tribunal observed that the promoter of Kailash Auto Finance Limited himself admitted before the investigating wing that Kailash Auto Finance Ltd is a penny stock company and has provided bogus long-term capital gains to various beneficiaries. The Tribunal further observed that SEBI also confirmed that Kailash Auto Finance Ltd has been barred suspended/blacklisted from trading at BSE and has also been penalized. Also informed by the SEBI that Kailash Auto Finance Ltd was indulging in the activities which were in contravention of the SEBI Act and Rules. The findings of two independent authorities corroborated the fact that Kailash Auto Finance Ltd was not a genuine company and was involved in activities to provide bogus long-term capital gains to various beneficiaries.
The Coram of Mr. Prashant Maharishi, Accountant Member, and Mr. Sandeep Singh Karhail, Judicial Member has held that “we find no infirmity in the order passed by the CIT(A), inter-alia, upholding the addition made by the Assessing Officer under section 68 of the Act in respect of the long term capital gains claimed as exempt by the assessee and also the commission of Rs. 24,713 paid by the assessee in respect of the said transaction”.
Mr. Hoshang B. Irani appeared on behalf of the revenue.
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