Assessee’s Failure to Explain Investment Made in Shares of Paper Company with Exponential Increase of Share Value: ITAT upholds Application of Sec 68

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, upheld the application of section 68, on account of the assessee’s failure to explain investment made in the shares of paper company with exponential increase of share value. The aforesaid observation was made by the Delhi ITAT, when an appeal was filed before it by the assessee, for assessment year 2015-16, as against the order of the Commissioner of Income Tax (Appeals)Moradabad, dated December 2017. The ground of the assessee’s appeal being that the CIT(A) has erred in confirming the order of the AO and treating the sale consideration of Shares amounting to Rs.1,25,36,661/, as unexplained credits under Section 68 of the Income Tax Act, with total disregard to the facts and circumstances of the case, the brief facts pertaining to the issue were that, the AO had made an addition of Rs.1,25,36,661/- under Section 68 of the Income Tax Act. During the assessment proceedings, the AO noticed that the assessee had claimed exemption of Rs. 1,20,98,091/- being LTCG under Section 10(38). The assessee had purchased shares of M/s SMP Securities and M/s SS Corporate Security at a very low price and sold it off during the year under consideration at abnormally high price, thus having Long Term capital gains of Rs. 1,20,98,091/-. The AO stated that he had received an investigation report of Pr. DIT, Inv. Kolkata, which had carried out a detailed investigation into the LTCG racket carried out by the syndicate of operator throughout the country. He carried out his own independent inquiries and arrived at the conclusion that the assessee had routed his own unaccounted money through this channel and hence that the same was added in the hands of the assessee under Section 68 of the Income Tax Act. On appeal, the said order was confirmed by the CIT(A) vide order dated 14.08.2019, thus leaving the assessee aggrieved to prefer the instant appeal before the Tribunal. Hearing the contentions as submitted by Ms. Sangeeta Yadav, the Sr. D.R, on behalf of the Revenue, with no representation being made on behalf of the assessee, the ITAT observed: “We have heard the Learned DR, perused the material available on record and give our thoughtful consideration. On going through the order of AO as well as CIT(A) it is found that the Lower Authorities found that the assessee’s claim of LTCG of Rs.1,20,98,091/- on alleged sale of shares is basically ‘accommodation entry’ from the entry operator. The Ld. CIT(A) found that the shares in which assessee is invested belong to paper company, the financial position is extremely poor and do not seem to be carrying out any regular business, the exponential rise in its share price is nothing else but a manipulation by the syndicate of operators involved in the scam. The entire amount of the so-called receipt on sale of shares has been treated correctly is unexplained credit under Section 68 of the Act, as it has all the ingredients of attracting the rigours of the said section.” “Section 68 of the Act provides that where any sum is found credited in the books of the appellant maintained for any previous year and the appellant offers no explanation about the nature and source thereof or the explanation offered by her is not in the opinion of the AO satisfactory, the sum so credited may be charged to income tax as income of the appellant of that year. There is no economic or financial justification for the sale price of these shares. The fantastic sale price realization is not at all humanly probable, as there is no economic or financial basis that a share of little-known company would jump so high. The above findings of the CIT(A) are based on the material available on record and the Assessee has not appeared and produced any material before the CIT(A)”, the coram of Anil Chaturvedi, the Accountant Member, and Yogesh Kumar US, the Judicial Member added. Thus, the Delhi ITAT held: “After filing the present Appeal even after issuing several notices by registry of this Tribunal to the registered address of the Assessee, the assessee remained absent and in the absence of any material evidence contrary to the findings of the Lower Authorities, we do not find any fault with the findings and the conclusion of the CIT(A) and we do not find any error or infirmity in the findings of the Lower Authorities. Thus, we find no merit in the Grounds of the assessee, accordingly, the Grounds of the Assessee are dismissed. In the result, appeal of assessee is dismissed.” Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Assessee’s Failure to Explain Investment Made in Shares of Paper Company with Exponential Increase of Share Value: ITAT upholds Application of Sec 68

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