The Kolkata bench of Income Tax Appellate Tribunal (ITAT) held that Income received from the unexplained cash under Section 68 of the Income Tax, 1961 Act can’t be claimed as an exemption under Section 69C of the Income Tax Act, 1961.
The Assessee, Rohit Agarwal filed his return of income reporting total income of Rs.39,43,860/-. During the course of proceedings, the Assessing Officer (AO) noted that the assessee has purchased shares of Ashika Credit Capital Ltd. through broker Globe Capital Market Ltd.
The assessee made a significant gain within a span of a few months amounting to Rs.45,04,187/-. The Assessing Officer observed that and an extensive survey operation was carried out by the Director of Income-tax, Kolkata into some brokers of Kolkata.
Based on the Assessee’s book entry showing a capital of Rs. 46,97,718/- credited during the year, which was explained as proceeds from the sale of shares, the Assessing Officer (AO) deemed the explanation unsatisfactory. Consequently, the AO treated the amount of Rs. 46,97,718/- as unexplained cash credit and added it to the assessable income under Section 68 of the Income Tax Act.
Further the assessing officer made an addition of Rs.1,17,443/- being 2.5% of Rs.46,97,718/- towards commission for getting bogus short-term capital gain as unexplained expenditure under Section 69C of the Income Tax Act.
The Calcutta High Court with jurisdiction over the matter recently examined this issue in the case of Swati Bajaj & Others (2022) 139 taxmann.com 352 (Cal.). In several appeals, the assesses’ claims were rejected due to their involvement in transactions related to these shares. The Jurisdictional High Court deemed these transactions to be fraudulent, as they exhibited a common method of operation.
The two-member bench consisting of Rajpal Yadav (Vice President) and Girish Agrawal (Accountant Member) concluded that the Revenue Authorities were justified in rejecting the assessee’s claim and making the necessary additions. As a result, the appeal filed by the assessee was dismissed.
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