The Income Tax Appellate Tribunal ( ITAT ), Mumbai bench ruled that no addition should be made under Section 68 of the income Tax Act , 1961 on the basis of statement of third party with respect to sale of shares carried through proper banking channel.
The assessee, Jitendra Udaylal Jain after filing the return of the income for assessment year 2012-13 Based on the information from Director of General of Income tax ( Inv ) Pune on Bogus Long term capital gain manipulation in market prices of shares of certain companies listed on Bombay Stock Exchange, assessee was identified as one of the beneficiary who obtained through above said manipulation of prices of shares to the extent of ₹.1,10,80,500/-.
Accordingly assessee assessment was reopened by issue of notice under section 148 of the Income Tax Act. During the proceedings the AO assessee earned Long Term Capital Gain during the year and claimed it as exempt under section 10(38) of the Act and he considered this transaction as suspicions because of a huge claim of capital gains earned by the assessee.
Before the assessing officer the assessee has submitted a letter dated 26.12.2016 in which assessee has submitted that all the purchases and sales of the above said shares were through Demat Account and payments were through banking channels and filed documents of broker note.
Thereafter After considering the submissions of the assessee, the Assessing Officer rejected the submission of the assessee and confirmed the addition by adding the sale proceeds of shares under section 68 of the Act to the extent of ₹.1,10,52,724/.
Aggrieved, the assessee filed further appeal before the CIT( A ) who confirmed the addition made by the assessing officer. Thereafter the assessee filed a second appeal before the tribunal.
Vimal Punmiya ,Counsel for assesee argued that addition made on basis of statement of third party Shri Amar Chand Rander which was thereafter retracted cannot be made the basis for addition. Further the assessment was made on the basis of material supplied by the Investigation Wing in respect of the survey under the Income Tax Act carried out on M/s Rander Corporation Pvt Ltd and third person .
Confirmatory statements of Other beneficiaries recorded on various occasions Based on the statement the Assessing Officer has added the sale consideration of ₹.1,10,52,724/- as undisclosed income under section 68 of the Act.
It was also argued by the assessee counsel that Assessee had sold the shares at the online platform of the stock exchange through his share broker and was not at all concerned as to who was buying the shares.
Ujjawal Kumar Chavan, Counsel for Revenue, supported the order of the lower authorities
The tribunal observed that the assessee has not made the above disputed investments but his mother who bought the initial shares through preferential allotment and at the demise of his mother, he got those shares by “will”. The assessee has sold those shares through his regular broker in the BSE. all the shares were purchased and sold through the proper banking channel.
Further the Assessing Officer has proceeded to make the addition based on the various statements of the operators. At the same time, he has not brought on record how the assessee is involved in the above transaction except trading in the stock exchange. After reviewing the facts and records, the two-member bench Of S. Rifaur Rahman ( Accountant member ) and Narender Kumar Choudhry,( Judicial Member ) held that no addition should be made under Section 68 of the income Tax Act , 1961 on the basis of statement of third party with respect to sale of shares carried through proper banking channel.
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