Accommodation Entry Share Sale Treated as Unexplained Income u/s 69: ITAT Deletes Addition, Finds Actual Profit Only Rs. 842 [Read Order]
The assessee showed that the broker ledger reflected a debit of Rs. 4,92,747, leaving a net profit of Rs. 842, and submitted a certificate confirming all transactions were intraday on the BSE, requiring no actual payments.
The Nagpur Bench of Income Tax AppellateTribunal ( ITAT ) deleted an addition under section 69 of Income Tax Act,1961 in an alleged accommodation entry share sale, finding that the actual profit was only Rs. 842.
Bhivraj Mohanlal Jain,appellant-assessee, had declared a total income of Rs. 2,02,100 in his original return filed on 29.03.2014, which was processed under section 143(1) of the Act. Later, the Assessing Officer (AO) received information that he benefited from accommodation entries of M/s. Priti Mercantile & Co., involving stock market manipulation, and sold shares worth Rs. 4,93,589 without fully disclosing material facts for AY 2013-14.
The AO reopened the assessment under section148 by issuing a notice on 22.03.2021. As the appellant did not respond to the notices, the AO added Rs. 4,93,589 as unexplained income under section 69, observing that the appellant participated in artificial stock price rigging and the sale proceeds represented unexplained investment for F.Y. 2012-13.
The assessee’s appeal before the Commissioner was dismissed, as the broker’s statement did not refute the findings of artificial price manipulation. Aggrieved, the assessee appealed before the ITAT.
A single member bench of Narendra Kumar Choudhry (Judicial Member) considered the facts of the case and the arguments of both parties. It noted that a search had been conducted on Shri Rajkumar Modi, Director of M/s. Fincop Group, on 11.10.2018.
Based on information received, the AO reopened the assessee’s case, alleging that the assessee benefited from accommodation entries of M/s. Priti Mercantile & Co. and sold shares worth Rs. 4,93,589/-, resulting in an addition under section 69 of the Act.
The assessee showed that the broker ledger reflected a credit of Rs. 4,93,589/- and a debit of Rs. 4,92,747/-, leaving a net profit of Rs. 842/-. The authorities had considered only the sale price, ignoring the purchase cost. The assessee also submitted a certificate from Joinder Capital Services Ltd., confirming that all transactions between 05.02.2013 and 22.03.2013 were intraday on the BSE platform, requiring no payments or banking transactions.
The appellate tribunal found the assessee’s claim genuine, as no direct evidence supported allegations of share manipulation. Since the actual profit was only Rs. 842/-, the addition made by the AO and upheld by the Commissioner was unsustainable. The tribunal deleted the addition.
Accordingly the appeal was allowed.
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