LTCG Exemption Claim Rejected as Share Purchase Found Unsupported and Backed by Fabricated Records: ITAT Upholds ₹29.69L Income Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has upheld an addition of ₹29.69 lakh after rejecting an assessee claim for exemption under Section 10(38) of the Income Tax Act, 1961 and held that the purchase of shares giving rise to the alleged long-term capital gains (LTCG) was not genuine and was supported by fabricated documents.

The assessee Dinesh Kumar had claimed exempt LTCG of ₹28.59 lakh arising from the sale of 8,600 shares of CCL International Ltd. According to the assessee 12,500 shares had been purchased in physical form in August 2011 for ₹1.25 lakh and subsequently sold through the stock exchange during the relevant assessment year for ₹29.69 lakh.

During scrutiny proceedings, the Assessing Officer (AO) questioned the genuineness of the transactions. The AO noted that the shares were allegedly purchased in cash through an offline transaction and that the broker Narayan Securities could not be located at the address provided. Further investigation revealed an abnormal rise in the share price without corresponding financial fundamentals, leading the AO to conclude that the transaction formed part of a penny stock accommodation entry scheme designed to generate bogus LTCG.

The assessee argued that all relevant documents, including share certificates, demat statements, contract notes and bank records had been furnished. It was further contended that no adverse material had been confronted to the assessee and that several judicial precedents supported the claim for exemption.

The Tribunal found significant discrepancies in the documentary evidence. It noted that the alleged sellers themselves received the share certificates after the date on which the assessee purportedly purchased the shares. The Tribunal also observed that identical sale notes and payment receipts existed in the names of different persons indicating manipulation and fabrication of records. The broker was found to be non-existent and the purchase consideration had been paid in cash.

The Bench comprising Satbeer Singh Godara (Judicial Member) and Naveen Chandra, (Accountant Member) held that the assessee failed to discharge the burden of proving the genuineness of the share transactions.

The Tribunal remanded the separate issue concerning addition of unsecured loans of ₹40 lakh to the CIT(A) for fresh adjudication after considering additional evidence furnished by the assessee.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates