ITAT Directs AO to delete Addition made u/s 68 of Income Tax Act based on Mere Suspicion [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer (AO) to delete the addition made under section 68 of the Income Tax Act,1961 based on mere suspicion. 

Abhishek Doshi, the appellant assessee was an individual who derives income from business, capital gains, and income from other sources. The assessee filed an appeal against the order passed by the Commissioner of Income Tax (Appeals) for confirming the addition made by the AO under section 68 of the Income Tax Act based on mere suspicion. 

Anil Sathe, the counsel for the assessee contended that Revenue has failed to prove with any cogent evidence on record that the assessee was involved in converting his unaccounted money into long-term capital gains and short-term capital gains by conniving with any entry operator/exit provider, who was involved in artificial price rigging of shares. 

It was also submitted that the AO merely based on suspicion rejected the claim of the assessee without establishing any link between the assessee with the entry operators/exit providers, who were allegedly involved in price rigging of shares artificially of the companies and made the addition. 

Pratap N. Sharma, the counsel for the revenue strongly supported the decisions of the lower authorities. It was also contended that the assessee resorted to a preconceived scheme to procure long-term capital gains and short-term capital gains by way of price differences in share transactions not supported by market factors. sande

It was further submitted that the associated brokers, entry operators, and the assessee had worked out an arrangement in which the shares were acquired by the assessee and the share prices were rigged, and then with the help of entry operators by routing the cash, shares were sold at a high price to arrive at tax-free long term capital gains and short-term capital gains at a reduced tax rate. 

The two-member bench comprising B.R Baskaran (Accountant) and Sandeep Singh Karhail (Judicial) held that the AO had not given any adverse comments or drawn adverse inferences on the documentary evidence submitted by the assessee and the addition made under section 68 of the Income Tax Act was merely on presumptions, suspicion, surmises, and conjectures disregarding the direct evidence placed on record and are liable to be deleted. 

While allowing the assessee's appeal, the bench further instructed the AO to remove the addition made in accordance with Section 68 of the Income Tax Act. 

To Read the full text of the Order CLICK HERE

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