ITAT upholds addition made u/s 69C of Income Tax Act on Payment Received from sale of shares of paper company barred by SEBI [Read Order]

The Income Tax Appellate Tribunal (ITAT) Mumbai bench upheld the addition made under Section 69 of Income Tax Act on payment received from sale of shares of paper companies barred by Stock Exchange Board of India(SEBI).

Assessee , Meenu Ajay Pathakis an individual and during the year under consideration has shown income from other sources only in the form of interest. After filing the return of income, the assessor's case was selected for scrutiny .

It was observed that assessee has shown exempted long-term capital gain of Rs.86,03,271, in the return of income filed by her on the sale of scrips of M/s Sunrise Asian Ltd.

During the assessment proceedings, the Assessing Officerconsidered the information received from the Investigation Wing as well as the statement recorded, during the course of survey and search proceedings, of Mr. Vipul Vidur Bhatt, who has admitted to having controlled the affairs of M/s Sunrise Asian Ltd and also admitted to the fact that the scripts have been used for providing accommodation entries of bogus long term capital gain.

After verifying the statements and documents AO passed assessment order and held that M/s Sunrise Asian Ltd. to be merely a paper company rejected the claim of exemption of long term capital gains in transaction in scrips of the aforesaid company.Thereafter the AO made addition  Payment received from  sale of shares  of  M/s Sunrise Asian Ltd.

Aggrieved by the order, the assessee filed an appeal  before the Commissioner of Income Tax (Appeal)(CIT(A)) . who dismissed the appeal

Thereafter the assesee filed an appeal before the tribunal.

Jitendra Singh, Counsel for assessee submitted that  CIT(A), NFAC passed the order without providing an opportunity of being heard through physical/video conferencing to the assessee

Further argued that the assessee was not granted sufficient time to cross-examine Mr. Vipul Vidur Bhatt, on whose statement reliance has been placed by the AO.

Mahita Nair, Counsel for Revenue submitted that the assessee has not shown substantial trading activity or investment in shares of listed companies in her return of income. It was further argued  that the assessee has not traded in any other listed share other than M/s Sunrise Asian Ltd.

Counsel also found that the assessee did  not have any knowledge about the share market and she has never made any investments in any of the shares directly and her father-in-law has made investments in the shares on behalf.

Moreover After analyzing the investigation report of   DGIT  it was observed that M/s Sunrise Asian Ltd.,is a paper company which was barred by SEBI .

SEBI had barred Sunrise Asian Ltd and other entities to whom the assessee had sold the shares from accessing the securities market or buying, selling or otherwise dealing in the securities market, either directly or indirectly or be associated with the securities market in any manner for a period of 6 months to one year

 It was observed by the tribunal that all the transactions conducted by the assessee were bogus and not only Sunrise Asian Ltd but the exit providers were also found to be involved in manipulative trade practices by the SEBI.

Further the statement of Mr. Vipul Vidur Bhatt admitted and confirmed that all the entities controlled and managed by him are mere bogus paper companies and he is involved in providing accommodation entry on a commission basis.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Om Prakash Kant,(Accountant Member ) and Sandeep Singh Karhaill,(Judicial Member) held that upheld the addition made on the payment  payment received from sale of shares of paper companies barred by Stock Exchange Board of India.

To Read the full text of the Order CLICK HERE

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