The Chennai Income Tax Appellate Tribunal (ITAT) has recently held that capital gain from sale of shares could not be treated as bogus solely on the basis of a report of the Income Tax Department.
After completing the assessment procedure of the assessee Mukesh Agarwal under section 143(3) read with section 153A of the Income Tax Act, 1961 the case was again reopened.
Reasons recorded as per which information received by the Assessing Officer shows that, the assessee is one of the beneficiary of bogus long term capital gains derived from sale of certain shares through M/s. Onkar Supply Pvt Ltd.
The assessment has been completed under section 143(3) read with section 147 of the Act on 02.12.2019 and assessed total income of Rs. 53,58,860/-.
Thereafter the case was revised under section 263 of the Income Tax Act 1961 by the Principal Commissioner of Income Tax PCIT and found that the order passed by the AO was erroneous and prejudicial to the interest of revenue.
D. Anand, Advocate counsel for the assessee submit that PCIT erred in setting aside the assessment order in exercise of his powers conferred under section 263 of the Income Tax Act 1961 without appreciating fact that while invoking power under revisionary jurisdiction, the PCIT must satisfy himself about erroneous order passed by the AO which caused prejudice to the interests of the revenue.
S. Senthil Kumaran, counsel for the revenue submits that, assessee is one of the beneficiaries of accommodation entries in the form of long term capital gains through various companies.
“The PCIT, had also discussed the issue in light of modes of operating employed by entry providers and also linked bogus long term capital gains declared by the assessee to said operations, and thus rightly held that assessment order passed by the AO is erroneous in so far it is prejudicial to the interests of the revenue.”
After considering the contentions of the both parties the division bench of the ITAT comprising V. Durga Rao (Judicial Member) and Manjunatha. G (Accountant Member) allowed the Appeal filed by the assessee and observed that,
The long term capital gains declared under section 10(38) of the Income Tax Act 1961 has nothing to do with the survey conducted in the case of M/s. Onkar Supply Pvt Ltd and statement recorded from Ashok Kumar Kayan.
Therefore, the capital gains declared by the assessee from sale of certain shares could not be considered as bogus only on the basis of a report of the Income-tax Department.
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