The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) dismissed the appeal due to the failure to prove the genuineness of the share purchase transaction claim and the creditworthiness of the invested company.
Shanno Mohammed Yusuf Warsi, an individual, filed its return of income for the year under consideration on 30/07/2013 declaring total income at Rs.400. Subsequently, on receipt of information that assessee obtained accommodation entries of bogus long the Assessing Officer recorded reasons to believe that income escaped assessment and issued notice under Section 148 of the Income Tax Act Rs 2,30,01,500/- as unexplained cash credit under Section 68 of the Income Tax Act, and of Rs.5,75,037/- unexplained expenditure under Section 69C of the Income Tax Act, 1961.
The Assessing Officer asked the assessee to justify sale consideration of ₹2,30,01,500/-received on sale of shares of “Essar ( India ) Ltd’ as genuine. The Assessing Officer referred to the investigation carried out by the Directorate of Income-tax ( Investigation ), Kolkata, in the cases of some of the brokers, who were dealing in providing accommodation entry of long-term capital gain under Section 10(38) of the Income Tax Act including in the scrip of Essar India Ltd’. The investigation revealed different steps of entire process of providing accommodation entry of long- term capital gain/short-term capital loss.
Mr. Pankaj Soni representing the assessee relied on the decision of the coordinate bench of Tribunal in the case of Dheeraj Babulal Shahin but in the said case the assessee was one of the promoter of M/s Essar ( India ) Ltd, and therefore the transaction of purchase of the shares, not held to be doubtful or no genuine. But in the instant case the purchase through preferential allotment has not been established to be genuine one.
The bench noted the High Court of Calcutta in the case of Swati bajaj observed that the department established the artificial price rise of the shares by adopting manipulative practices and consequently whatever resultant benefits which accrued from such manipulative practices were to be treated as tainted.
The High Court further observed that the assessee had opportunity to prove that there was no manipulation at the other end and whatever gains the assessee reaped was not tained, however the assessee failed to prove or establish so, and therefore the Assessing Officer was justified in coming to a conclusion that so-called explanation offered by the assessee was not to their satisfaction and the assessee having not proved the genuineness of the claim, the creditworthiness of the companies in which they had invested and the identity of the person to whom the transactions are done, have to necessarily fail.
Further, following the finding of the Calcutta High Court in the case of Swati bajaj ( supra ), the two member bench of the tribunal comprising Sandeep Singh Karhail ( Judicial member ) and Om Prakash Kant ( Accountant member ) uphold the finding of the CIT (A) on the issue in dispute. The grounds raised by the assessee on the merit of the addition are dismissed.
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