The Delhi High Court has held that bogus Long Term Capital Gain claimed as exempt income is not allowable and is chargeable to tax.
Vikas Jain, the petitioner was initially served with a notice dated 12th April 2021, issued under Section 148 of the Act, without following the mandatory procedure of newly inserted Section 148A of the Income Tax Act, which was introduced vide Finance Act, 2021.
Concerning the allegation of earning fictitious Long Term Capital Gain (‘LTCG’), the Assessee stated that it has never traded in any scrip rigged by Mr Naresh Manakchand Jain during the relevant year nor the Assessee has any transaction with Mr Naresh Manakchand Jain.
Mr Vishal Aggarwal and Mr Rishabh Ostwal, the counsel for the Petitioner stated that the profit i.e. LTCG earned by the Assessee from the sale of shares had been duly declared in his Return of Income and the sale of shares was made through the online portal of a recognized stock exchange which was duly recorded in the Assessee’s books of accounts.
Mr Kunal Sharma, the counsel for the respondent, has relied upon the copy of the report along with a brief note about the case of Sh. Naresh Manakchand Jain states a search and survey action was conducted on 19th March 2019, on a syndicate of persons led by Sh. Naresh Manakchand Jain.
It further states that it was discovered that the petitioner, Assessee has been enlisted as a beneficiary of LTCG for a sum of Rs. 2,58,14,582/- on account of the sale of shares undertaken in Nyssa Corporation Limited.
It was observed that the Assessee has not provided any documentary evidence such as its Demat Account, Broker’s note, etc along with his reply and the AO passed its impugned order dated 20th July 2022, under Section 148A(d) of the Income Tax Act and consequently issued a notice dated 20th July 2022, under Section 148 of the Act.
A Coram of Justice Manmohan and Justice Manmeet Pritam Singh observed that the petitioner, in this petition as well has not placed on record any documents evidencing its purchase of the shares and the Demat Account for the relevant period.
The AO concluded that the said bogus LTCG is an income chargeable to tax which has escaped assessment and the Court didn’t find any ground to interfere with the impugned order dated 20th July 2022, passed under Section 148A(d) of the Income Tax Act and the re-assessment proceedings.
The writ petition was dismissed by allowing liberty to the petitioner to raise all its contentions before the AO and directed the AO to provide the petitioner with all the relevant information about the petitioner’s transaction with Nyssa Corporation Limited available with the AO.
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