Tribunal confirms income addition under Section 68 for unexplained sources. Appeal dismissed.

The tribunal upheld the CIT(A)'s decision, confirming the addition of Rs. 9,63,950/- as income from unexplained sources under Section 68 of the Income Tax Act. The tribunal found the transaction involving the sale of shares to be a colorable device to evade tax, as the assessee failed to provide credible evidence of the transaction's genuineness. The appeal was dismissed, and the order was pronounced on 17.01.2020.

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Issues Involved:
1. Applicability of Section 68 of the Income Tax Act.
2. Genuineness of the transaction related to the sale of shares.
3. Adequacy of evidence provided by the assessee.
4. Compliance with procedural requirements by the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)].
5. Allegations of the transaction being a colorable device to evade tax.

Detailed Analysis:

1. Applicability of Section 68 of the Income Tax Act:
The primary issue revolves around whether Section 68, which deals with unexplained cash credits, applies to the assessee who does not maintain any books of accounts. The tribunal upheld the AO's decision to invoke Section 68, emphasizing that the assessee failed to substantiate the source of Rs. 9,63,950/- claimed as long-term capital gain from the sale of shares. The tribunal noted that despite multiple opportunities, the assessee did not provide sufficient evidence to prove the transaction's genuineness.

2. Genuineness of the Transaction Related to the Sale of Shares:
The AO and CIT(A) questioned the legitimacy of the sale of 10,000 shares of M/s Supreme Agro Products Ltd. The AO found discrepancies in the dates of the contract note and the actual receipt of payment. Additionally, the Delhi Stock Exchange confirmed that no such transaction occurred on the specified date. The tribunal agreed with the lower authorities that the transaction appeared to be a paper transaction designed to evade taxes.

3. Adequacy of Evidence Provided by the Assessee:
The assessee submitted various documents, including a contract note, photocopies of cheques, and newspaper cuttings, to substantiate the claim. However, the AO and CIT(A) found these documents insufficient. The tribunal noted that M/s Supreme Agro Products Ltd. did not confirm the allotment of shares or provide necessary supporting documents such as share certificates or transfer deeds. The tribunal observed that the assessee failed to produce the broker or directors of the company to verify the transaction, further casting doubt on its authenticity.

4. Compliance with Procedural Requirements by the AO and CIT(A):
The tribunal reviewed the procedural compliance by the AO and CIT(A). The AO conducted inquiries and issued notices under Sections 131 and 133(6) to verify the transaction. The CIT(A) also issued notices and attempted to gather information from M/s Supreme Agro Products Ltd. and its directors. Despite these efforts, the required information was not furnished. The tribunal found that the authorities followed due process and provided ample opportunities to the assessee to substantiate the claim.

5. Allegations of the Transaction Being a Colorable Device to Evade Tax:
The tribunal concluded that the transaction was a colorable device intended to convert unaccounted money into long-term capital gains, which are taxed at a concessional rate. The tribunal referenced the Supreme Court's decision in CIT vs. McDowell Ltd. to support this conclusion. The tribunal emphasized that the company in question was running at a loss and had not declared any dividends, making the sale price of Rs. 96.50 per share highly suspicious.

Conclusion:
The tribunal upheld the CIT(A)'s order, confirming the addition of Rs. 9,63,950/- as income from unexplained sources under Section 68. The tribunal found that the assessee failed to provide credible evidence to substantiate the transaction and that the authorities followed due process in their investigation. The appeal filed by the assessee was dismissed, and the order was pronounced on 17.01.2020.

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