The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that adverse inference can’t be drawn against the assessee based on misuse of the share market to bogus capital gain by some persons(Portfolio Manager).
The revenue challenged the order of the Commissioner of Income Tax (Appeals)-57, Delhi dated 16.02.2022 which was in favour of Ronak Iqbal Lakhani, the assessee.
The assessee is an individual who is a Canadian Citizen of Indian Origin, and had filed his/her return of income on 31.07.2012 declaring total income at Rs.41,850/-. The return was processed u/s 143(1) of the Act whereby the return of income was accepted on 09.02.213. Thereafter, the AO issued notice u/s 148 of the Act vide notice dated 31.03.2019 (time barring the last date of six (6) years).
On re-opening of assessment, the AO noted that the assessee has traded in the scrip of M/s. VAS and has sold 12474 shares during the year for a sale consideration of Rs.11,55,812/- andearned Short Term Capital Gain (STCG) of Rs.93,597/- (Rs.11,44,812/- minus Rs. 10,62,215/-).
Further observed that the investments/trading are carried out by the portfolio manager on behalf of the assessee and as such assessee did not know this company M/s. VAS and therefore has no intention of doing the alleged money laundering. The AO added the entire sale consideration from this scrip to the tune of Rs.11,59,966/- u/s 68 of the Act.
The CIT(A) observed that the assessee’s investments were handled by Professional Investment Advisor and Portfolio Manager namely M/s. Wealth Strartz Consultants Pvt. Ltd. and trading has been done through broker Shri Kantilal Chhaganlal Securities Pvt. Ltd. which is registered with BSE and ESE and filed all the documents to prove that the assessee had purchased shares of M/s. which was sold on various dates. The CIT(A) deleted the addition.
A Coram Comprising of Shri Aby T Varkey, JM and Shri M Balaganesh, AM observed that the AO relying merely on the DDIT(Inv.) report and taking note of the modus- operandi resorted by certain persons indulging in converting their black money through LTCG.
It was observed that the assessee has not indulged in any nefarious activity as alleged in the DDIT information of persons who traded in the shares of M/s. VAS. It was presumed that the assessee was an innocent/gullible regular investor in the share market and has burned her fingers and made a modest gain of Rs.93,597/- which has been taxed. Further, the Tribunal held that “merely because some person misused the share market to rig certain shares in the share market for a nefarious purpose, cannot be ground to draw adverse view against innocent regular investors like assessee.” The Tribunal upheld the order of CIT(A) since the addition was made by the AO without an iota of evidence against the assessee and without being part of any wrongdoing.
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