Tribunal upholds AO's findings on bogus LTCG, deems section 68 justified. Third-party evidence key.

The Tribunal dismissed the appeal, upholding the AO's findings that the Long Term Capital Gains (LTCG) claimed were part of a bogus transaction to evade taxes. The addition under section 68 was deemed justified due to lack of genuine transactions backing the credits. The Tribunal found reliance on third-party statements appropriate, based on substantial evidence showing the transaction's sham nature. The assessee's failure to prove transaction genuineness led to the Tribunal upholding section 68's applicability. The stay application was also dismissed as infructuous.

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Issues Involved:
1. Whether the Long Term Capital Gains (LTCG) claimed by the assessee under section 10(38) of the Income-tax Act, 1961, were genuine or bogus.
2. Whether the addition made under section 68 read with section 115BBE(1) of the Income-tax Act, 1961, was justified.
3. Whether the assessee was denied the opportunity to cross-examine witnesses whose statements were relied upon by the Assessing Officer (AO).
4. Whether the AO's reliance on third-party statements without individual verification was appropriate.
5. Whether the AO's determination of the transaction as a sham was based on substantial evidence.
6. Whether section 68 of the Income-tax Act, 1961, was applicable in this case.

Issue-wise Detailed Analysis:

1. Whether the Long Term Capital Gains (LTCG) claimed by the assessee under section 10(38) of the Income-tax Act, 1961, were genuine or bogus:
The assessee declared LTCG of Rs. 1,21,69,408/- from the sale of shares of M/s. Cressanda Solution Ltd. and claimed it as exempt under section 10(38) of the Act. The AO, after thorough investigation, concluded that the transaction was a sham, noting that the shares were purchased at a nominal price and sold at an astronomical price, which was improbable in the ordinary course of business. The AO found that the transaction was part of a racket to generate bogus LTCG entries to evade taxes. The Tribunal upheld the AO's findings, noting that the company's trading was suspended and later revoked, indicating irregularities.

2. Whether the addition made under section 68 read with section 115BBE(1) of the Income-tax Act, 1961, was justified:
The AO made an addition of Rs. 1,21,69,408/- under section 68, treating the LTCG as unexplained cash credits. The Tribunal agreed with the AO, stating that the entire transaction was bogus and that section 68 was applicable since the amount was credited in the assessee's books without a genuine transaction backing it.

3. Whether the assessee was denied the opportunity to cross-examine witnesses whose statements were relied upon by the Assessing Officer (AO):
The assessee argued that he was not given an opportunity to cross-examine the individuals whose statements were used against him. However, the Tribunal found this contention untenable, stating that the AO had conducted further investigations and confronted the assessee with all the evidence collected. The Tribunal noted that the DRI had thoroughly investigated and shared findings with SEBI, which confirmed the bogus nature of the transactions.

4. Whether the AO's reliance on third-party statements without individual verification was appropriate:
The Tribunal held that the AO's reliance on the statements of third parties, including brokers and directors of the companies involved in the racket, was justified. The AO had corroborated these statements with independent investigations and evidence, making the reliance appropriate.

5. Whether the AO's determination of the transaction as a sham was based on substantial evidence:
The AO's determination was based on a detailed investigation, including information from the Bombay Stock Exchange and the DRI. The Tribunal found that the AO had substantial evidence to conclude that the transactions were sham and part of a scheme to evade taxes. The Tribunal emphasized the improbability of the share price appreciation and the lack of genuine business activity by Cressanda Solution Ltd.

6. Whether section 68 of the Income-tax Act, 1961, was applicable in this case:
The Tribunal upheld the applicability of section 68, stating that the assessee failed to prove the genuineness of the transactions. The Tribunal noted that the assessee could not provide any substantial evidence to discredit the findings of the AO and the DRI, thereby justifying the addition under section 68.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the findings of the AO and the CIT(A). The Tribunal concluded that the LTCG claimed by the assessee was part of a bogus transaction to evade taxes, and the addition made under section 68 was justified. The Tribunal also dismissed the stay application as infructuous. The order was pronounced in open court on June 14, 2019.

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