The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition under Section 69C of the Income Tax Act, 1961, and held that the share transaction cannot be treated as bogus just by the statement of the broker to have provided accommodation entries.
The assessee is an individual and promoter of Shreepati Group Builders and Developers, who had filed her return of income at Rs.63,51,310/-. Thereafter, the assessee’s case was reopened under Section 147 of the Income Tax Act on the ground that information has been received from the Directorate of Investigation Wing of Kolkata that the assessee availed Long-term Capital Gain (LTCG) by showing investment in a penny stock company in the scrip of M/s. Shreenath Commercial & Finance Ltd.
The assessee had purchased 4,97,500 shares of Shreenath Commercial and Finance Limited at a face value of Rs. 20/- per share in the open market on the Online Trading Portal of the Stock Exchange, through a registered Broker, M/s RBK Share Broking Limited. There was a bonus issue in the ratio of 1:1.
The assessee thus held 9,95,000 shares of the said company in her demat account. These 9,95,000 shares were sold after almost 2 years for an aggregate consideration of Rs. 8,29,88,876/-, on which the assessee had earned a LTCG of Rs. 7,29,88,736/- claimed as exempt under Section10(38) of the Income Tax Act in the return of income for the year under consideration.
The Assessing Officer after a detailed discussion has treated the entire LTCG of Rs.8,29,88,876/- as bogus and added under Section 68 of the Income Tax Act. He has referred to the information received from the Investigation wing that the assessee has taken accommodation entry in the form of bogus LTCG and the sudden rise of the scrip in a short period without any financial credibility shows that it was a penny stock.
It was further stated that certain share brokers were investigated by the Director of Investigation and few of them have admitted that, besides other scrips, they have also provided accommodation entry of bogus capital gain in the shares of M/s. Shree Nath Commercial & Finance Ltd. The details and the statements of these brokers have been discussed in detail by the Assessing Officer. Finally, after a detailed discussion, he treated the entire quantum of sale as bogus credit and added it as income under Section 68 of the Income Tax Act. The Commissioner of Income Tax (Appeal) [CIT(A)] also confirmed the addition.
The Two-member bench comprising of Amit Shukla (Judicial member) and Amarjit Singh (Accountant member) held that where the transactions have been made both purchases and sales online and there was no adverse material or information except with some brokers stated in their statement that they have provided accommodation entry in various scrips in one such scrip involved, that does not lead to drawing any adverse inference to treat the share transactions as bogus done through stock exchange.
Once on the same set of facts the Co-ordinate Bench has deleted the said addition, then in the case of the assessee, no different view can be taken. Respectfully following the same, the addition made by the Assessing Officer was deleted including the addition of the alleged commission made under Section 69C of the Income Tax Act was deleted. Thus, the appeal of the assessee was allowed.
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