Taxpayer denied section 10(38) exemption for fraudulent long-term capital gains transactions found void ab initio

ITAT Pune denied exemption under section 10(38) for alleged bogus long-term capital gains. The tribunal relied on investigation reports from the Department's Investigation Wing and SEBI findings. Applying the principle that fraud vitiates everything, the tribunal confirmed the addition made by the Assessing Officer. The appellant deliberately withheld information from authorities to establish transaction genuineness. Following SC precedent in Friends Trading Co. vs. Union of India, the tribunal held that fraudulent transactions are void ab initio, natural justice principles don't apply, and the Department was justified in invoking extended limitation period. Appeal dismissed.

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Issues involved:
The judgment involves appeals by two different assessees against the orders of the Commissioner of Income Tax (Appeals) for the assessment year 2015-16, concerning the denial of exemption of capital gains under section 10(38) of the Income Tax Act.

Issue 1 - Denial of exemption of capital gains under section 10(38) of the Act:
The appellant, an individual deriving income from farming and house property, filed a return of income for the assessment year 2015-16. The Assessing Officer denied the claim for exemption of capital gains under section 10(38) amounting to Rs. 2,98,95,128, considering the transactions of purchase and sale of shares as bogus. The appellant failed to substantiate the genuineness of the transactions during the assessment proceedings. The ld. CIT(A) confirmed the addition invoking the doctrine of human probability. The appellant contended that the ld. CIT(A) should not have confirmed the addition without considering their submissions. The tribunal upheld the orders of the Assessing Officer and the ld. CIT(A), citing the principle that fraud vitiates everything and the transaction was void ab initio due to deliberate withholding of information by the appellant.

Separate Judgment:
No separate judgment was delivered by the judges in this case.

This summary provides a detailed overview of the issues involved in the judgment, focusing on the denial of exemption of capital gains under section 10(38) of the Income Tax Act for the assessment year 2015-16.

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