Income Tax Exemption cannot be granted since Share Transactions found as Sham and Used as a Device to Make Undisclosed Income Accountable: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Pune Bench recently in an appeal held that income tax exemption cannot be granted since share transactions are found as sham and used as a device to make undisclosed Income accountable.

Assessee Abhishek Ashok Lohade earns Income from the execution of contracts. He filed the return of Income for the assessment year 2014-15 on 31.03.2015 disclosing total income of Rs.3,13,680/. Beyond the return, on 28.12.2016 the Assessing Officer passed an order under Section 143(3) of the Income Tax Act, 1961 at the total income of Rs.55,15,180.  But AO denied the claim for exemption of capital gains under Section 10(38) of the Income Tax Act amounting to Rs.50,49,171 and found that the transaction of share purchase was a bogus transaction.

After analysing the transactions made by the assessee, AO brought to tax the sale proceeds of the shares as unexplained cash credit and completed the assessment. Against the order of AO assessee filed an appeal before the Commissioner of Income Tax (Appeal). CIT (A) confirmed the action of the Assessing Officer. Thereafter against the order of the CIT (A) assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT).

When the appeal was taken up for hearing, no one appeared for assessee, hence the court considered the appeal with reference to the recent case PCIT vs. Swati Bajaj in the absence of assessee.

Ramnath P Murkunde, for the Department contented that during the assessment proceedings, the AO noticed that the assessee had indulged in “suspicious transaction relating to long term capital gains on sale of shares” and relating to claim of appellant for the exemption of Rs.51,32,174/- under Section  10(38) of the Income Tax Act. The Investigation Wing of the Income Tax Department, Calcutta had conducted search and seizure operations upon the entry provider of assessee and found that they had conducted so many fraudulent transactions on behalf of dummy companies.

After the hearing and perusal of material facts by the Division bench of the Pune ITAT,compraising Sri.  S. S. Viswanethra Ravi (Judicial Member) and Shri Inturi Rama Rao, (Accountant Member) the assessee’s appeal was dismissed and it was held that, “the transaction of purchase and sale of shares of SRK Industries under consideration before us is void ab-initio, this is nothing but sham, make believe and colourful device adopted with excellent paper work with intention bringing the undisclosed income into books of account.”

To Read the full text of the Order CLICK HERE

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