The Delhi High Court has recently set aside a notice issued to the assessee, M/s Rajat Finvest, in lieu of alleged unaccounted income in its books in the guise of bogus Long Term Capital Gains and held that the said transaction cannot be said to be “bogus” when the shares traded are on stock-exchange after Securities Transaction Taxes (STT) were paid and the money was received through banking channels.
The respondent/assessee is in the business of trading and investing in scrips. The shares of REI Agro Group and REI Six Ten Ltd, listed companies, whose shares were transacted on the stock exchange, were bought and sold through brokers, on instructions of one of their clients.
The Assessing Officer had relied upon the details gathered by the Investigation Wing, to conclude that the respondent/assessee had introduced its unaccounted income to purchase and sell shares of REI Agro Group and REI Six Ten Ltd.
The assessee took the matter to the CIT(A) against the reopening of Assessment by AO, which was ruled partly in favour of the assessee. The aggrieved revenue approached the Tribunal to address their grievance, wherein the facts were examined in detail and the decision taken by the CIT(A) was confirmed.
The Assessing Officer concluded on the basis of information provided by the investigation wing, that “that the entire set of transactions was a ‘sham’, and that the same had been configured to give the sale and purchase of shares by the respondent/assessee a legal framework.”
The Division Bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju observed that, the respondent/assessee traded in shares and the respondent had converted a part of its stock-in-trade as investment.
It was further decided by the Delhi High Court from the fact that shares were traded on stock exchange after paying securities transaction tax, and that money had been received through banking channels only, that they were not bogus transactions.
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