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Facts
The assessee claimed Long Term Capital Gain of Rs. 27,61,665/- from the sale of shares of HPC Bio Sciences Ltd. and sought exemption under Section 10(38) of the Income Tax Act. The Assessing Officer, based on an investigation report, determined this to be a bogus Long Term Capital Gain accommodation entry and added Rs. 29,86,500/- as unexplained cash credit under Section 68 and Rs. 1,49,325/- as commission under Section 69C. The CIT(A) upheld these additions, changing the section for the LTCG addition from 68 to 69A.
Held
The Income Tax Appellate Tribunal found no valid reason to interfere with the order of the learned CIT(A). The ITAT sustained the additions made by the lower authorities, affirming that the assessee failed to substantiate the genuineness of the Long Term Capital Gain and the related exemption claim. Consequently, the grounds raised by the assessee were rejected.
Key Issues
1. Whether the addition of bogus Long Term Capital Gain under Section 68 (later 69A) r.w.s. 115BBE was justified. 2. Whether the rejection of exemption claim under Section 10(38) and addition of commission under Section 69C were valid. 3. Whether the assessment was invalid due to non-confrontation of adverse material, violating natural justice.
Sections Cited
10(38), 68, 115BBE, 69A, 133(6), 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI G.S. PANNU, VICE- & SHRI CHALLA NAGENDRA PRASAD
ORDER PER CHALLA NAGENDRA PRASAD, JM
This appeal is filed by the assessee against the order of the learned Commissioner of Income-Tax (Appeals)-12, New Delhi dated 08.03.2019 for the assessment year 2015-16. The assessee in his appeal raised the following grounds:
1. That the Ld. AO erred in law and on facts in making the addition of Rs.2986500/- u/s 68 r.w.s. 115BBE of the Income Tax Act, 1961 and Ld. CIT(A) erred in law and on facts in confirming the said addition in the facts and circumstances of the case.
2. That the Ld. AO erred in making and Ld. CIT(A) in confirming in law and addition of Rs.2986500/- u/s 68 r.w.s. 115BBE of the Income Tax Act 1961 without bring on record any cogent material/evidence to substantiate the addition in the facts and circumstances of the case.
3. That the Ld. AO erred in rejecting and Ld. CIT(A) in confirming the AO’s action in rejecting the claim of the assessee of exemption u/s 10(38) of the Income Tax Act at Rs 2761665/- being long term capital gain eligible for such exemption in the facts and circumstances of the case without bringing on record any cogent material/evidence to support the rejection and without considering relevant evidence furnished by the assessee.
4. That the Ld. AO erred in making and Ld. CIT(A) in confirming in law and on facts the addition of Rs.2986500/- u/s 68 r.w.s. 115BBE of the Income Tax Act, 1961 relying on the statements of parties and material unconnected with the transactions entered into by the assessee without confronting to the assessee any material/information/ report/statement adverse to him and without supplying copies of material/report/statements and without allowing cross examination of parties violating the cannons of natural justice in the facts and circumstances of the case.
5. That on the facts of the case and in law, the Ld. AO & CIT(A) erred in not confronting the appellant with the alleged evidence collected at the back of the appellant, assessment framed and the income assessed is illegal and bad in law. 6. That the Ld. AO erred in making in law and on facts the addition u/s 68 r.w.s 115BBE and CIT(A) erred in confirming the addition u/s 69A r.w.s. 15BBE ignoring and without rebutting the relevant material and evidence furnished by the assessee in the facts and circumstances of the case.
7. That the Ld. AO erred in making and Ld. CIT(A) in confirming in law and on facts the addition of Rs.149325/- u/s 69C of I.T. Act in the facts and circumstances of the case without bringing any evidence adverse to the assessee on record.
8. That the Ld. AO erred in making and Ld. CIT (A) in confirming in law and on facts the addition of Rs. 149325/- u/s 69C towards undisclosed expenditure on the basis of general perception”.
Inspite of issue of several notices, the assessee did not appear nor moved any adjournment petition. The notice issued fixing the date of hearing as 02.11.2023 returned un-served with the postal authorities endorsement that the addressee “left”. In the circumstances, this appeal is disposed of upon hearing the learned Departmental Representative.
Heard the learned Departmental Representative and perused the record before us. In the course of assessment proceedings, the Assessing Officer noticed that there is increase in capital of the assessee during the year under consideration to the extent of Rs.29,86,500/-. The Assessing Officer noticed that major portion of the capital introduced was through sale of shares of HPC Bio Sciences Ltd. against which capital gain amounting to Rs.27,61,665/- was shown and exemption under Section 10(38) was claimed. The Assessing Officer based on investigation report of Directorate of Investigation, Kolkata on accommodation entry of Long Term Capital Gain noticed that the assessee was indulged into accommodation entry for claiming bogus Long Term Capital Gain on shares. Based on the details as called for under Section 133(6) and submitted by the broker, the Assessing Officer came to the conclusion that there is no genuineness in the gain shown on account of long term capital gain on sale of penny stock M/s. HPC Bio Sciences Ltd. during the financial year 2014-15 by the assessee and accordingly an amount of Rs.29,86,500/- was treated as unexplained cash credit under Section 68 of the Act. The Assessing Officer also made addition of Rs.1,49,325/- towards commission @ 0.5% on the said amount under Section 69C of the Act.
On appeal, learned CIT (Appeals) sustained the addition made by the Assessing Officer by observing as under:
“7.30 The Appellant has failed to substantiate its arguments in the light of the detailed discussion in this regard in the foregoing paras wherein it has been established that the Assessee introduced his unaccounted money in the garb of Long Term Capital Gain. It is reiterated that what matters to decide a particular case is not the form but its real content. The Assessing Officer has successfully lifted the veil from the artful design of the transactions. Accordingly, the addition made by the Assessing Officer is confirmed. The Assessee is not entitled to deduction u/s 10(38) of the I.T. Act. The addition made by the Assessing Officer is confirmed. However, the section of the Income Tax Act is changed from 68 r.w.s. 115BBE to section 69A r.w.s. 115 BBE by the virtue of powers vested in CIT(Appeals), being co- extensive and co-terminus. The Assessing Officer has not pointed out a fact that the sums were credited in the books of account of the Assessee.
7.31 I confirm the addition of Rs.1,49,325/- being the commission paid to the brokers for getting the entry because that is based on the very logic of whole of the discussion. If it is once established that the Assessee converted its unaccounted money into Long Term Capital Gain by the said devices, the same is not possible unless commission is paid.”
The findings of the learned CIT (Appeals) have not been rebutted with evidences before us. On careful perusal of the order of the learned CIT (Appeals), we do not see any valid reason to interfere with. Thus, the order of the learned CIT (Appeals) is sustained.
Grounds raised by the assessee are rejected.