2022 (5) TMI 154 - AT - Income Tax

Tribunal dismisses appeal on deduction disallowance under Income Tax Act, citing lack of evidence

Smt. Shweta Puneet Kulthia Versus ITO-20 (1), New Delhi

The Tribunal upheld the disallowance of the deduction under section 10(38) of the Income Tax Act due to insufficient evidence supporting the substantial ... Denial of benefit of exemption u/s 10(38) - LTCG - assessee failed to substantiate with evidence to his satisfaction regarding sale of shares of M/s Lifeline Drugs & Pharma Ltd. which increased from Rs.6 to Rs.186.84 in just 18 months - According to him, hike in price of the scrip is not supported by the fundamental of the company and the assessee could not substantiate with any supporting evidence to justify the transaction - HELD THAT:-. We find the ld. CIT(A) in his elaborate order has decided the issue and dismissed the appeal filed by the assessee on the ground that the AO has clearly given the modus operandi of money laundering by the stock broker of the agents and the beneficiaries are interested in having their money laundered. He has given detailed reasoning as to how the assessee has introduced her unaccounted money in the garb of Long Term Capital Gain. Nothing has been brought by the assessee before us to take a contrary view than the view taken by the ld. CIT(A) on this issue. We, therefore, uphold the order of the Ld. CIT(A) and the ground raised by the assessee is dismissed. Issues:Challenge to disallowance of deduction u/s 10(38) of the Act.Analysis:The appeal was filed against the order confirming the addition of Rs.52,31,521/- disallowed by the AO under section 10(38) of the Income Tax Act. The AO disallowed the claim as the company's shares were considered penny stocks vulnerable to price manipulation. The AO observed suspicious activities of brokers and lack of fundamental support for the significant price increase in a short period. The CIT(A) upheld the AO's decision, emphasizing the lack of evidence to justify the transaction and suggesting money laundering through stock brokers. The Tribunal found no evidence presented by the assessee to challenge the CIT(A)'s decision, upholding the disallowance and dismissing the appeal.The AO rejected the deduction claim due to insufficient evidence supporting the substantial price increase of shares in a short period. The CIT(A) and Tribunal concurred with the AO's decision, highlighting the lack of substantiation by the assessee and the suspicion of money laundering through stock brokers. The Tribunal upheld the CIT(A)'s order, emphasizing the detailed reasoning provided regarding the introduction of unaccounted money as Long Term Capital Gain, leading to the dismissal of the appeal.The assessee failed to provide satisfactory evidence to support the claim of deduction under section 10(38) of the Act. The AO, CIT(A), and Tribunal all agreed on the lack of substantiation and potential money laundering involvement through stock brokers. The decision to disallow the deduction was upheld by the Tribunal based on the detailed reasoning provided by the lower authorities and the absence of contrary evidence presented by the assessee.Overall, the Tribunal upheld the disallowance of the deduction under section 10(38) of the Act, emphasizing the lack of evidence to justify the significant price increase in shares and the suspicion of money laundering activities involving stock brokers. The appeal was dismissed, affirming the decision of the lower authorities based on the detailed analysis and reasoning provided in the case.