Shares Invested in Paper Companies: ITAT confirms Disallowance of LTCG [Read Order]

The Delhi Bench Income Tax Appellate Tribunal has confirmed the disallowance of long term capital gains (LTCG) u/s 68 of the Act since shares invested in paper companies.

The assessee, Sanjeev Kumar Agarwal (HUF) has filed its return of income electronically declaring total income of Rs.7,91,340/-. Subsequently, the case was selected for complete scrutiny under Computer Assisted Scrutiny Selection (CASS). AO noticed income from long term capital gains (LTCG) of Rs.22,76,598/-, had been claimed out of the sale of shares of Eco-Friendly Food Processing Park Ltd. and disallow the claim of exemption u/s 68. Aggrieved against this, the assessee preferred appeal before CIT(A), which confirmed the disallowance. Against the order of CIT (A) assessee preferred appeal before Tribunal.

The Coram of Kul Bharat, Judicial Member by relying the findings of the investigation wing has observed that the CIT(A) the shares in which he has invested belong to paper companies and their financial position is extremely poor, they do not seem to be carrying out a regular business. The exponential rise in their share price is nothing else but a manipulation by the syndicate of operators involved in the scam.

The Tribunal further observed that the CIT (A) rightly pointed out that the assessee is not a regular investor. However, he has invested in the scrip i.e., M/s Eco Friendly Food Processing Ltd and hit the jackpot in the same. This is quite abnormal in view of the test of human probabilities laid down by Apex Court in the case of Durga Prasad Mor and Sumati Dayal.

The single bench of Tribunal has held that “the above finding is not controverted by the assessee by placing any contrary material on record and rebutting the finding of the authorities below. In the absence of such evidence, I do not see any reason to interfere in the

finding of CIT(A), the same is hereby affirmed. Thus, grounds raised by the assessee are dismissed”.

To Read the full text of the Order CLICK HERE

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