Tribunal denies capital gain exemption, deems gain bogus, adds unexplained expenditure. Appeal dismissed.

The Tribunal upheld the disallowance of the claim of exemption under section 10(38) for Long Term Capital Gain arising from the sale of shares, considering market manipulation and deeming the gain as bogus. Additionally, an amount was added under section 69C for unexplained expenditure towards payment of brokerage. The Tribunal affirmed the decisions of the lower authorities, dismissing the assessee's appeal and upholding the assessment order passed under section 143(3) of the Act.

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Issues:
1. Disallowance of claim of exemption u/s 10(38) in respect of Long Term Capital Gain arising from the sale of shares.
2. Addition u/s 69C of the Act alleging commission paid towards payment of brokerage.

Issue 1: Disallowance of claim of exemption u/s 10(38) in respect of Long Term Capital Gain arising from the sale of shares:

The case involved an appeal by the assessee against the order of the Ld. Commissioner of Income Tax(Appeals) for the AY 2015-16. The assessee had shown income from Long Term Capital Gain from the sale of shares of a company and claimed exemption u/s 10(38) of the Act. The Assessing Officer added the entire amount of the gain in the hands of the assessee as unexplained cash credit u/s 68 of the Act, suspecting the transaction's motive to defraud the revenue. Additionally, an amount was added as unexplained expenditure towards payment of brokerage under the head 'Income from Other Sources'. The assessee's appeal before the Ld. CIT(A) was dismissed, leading to the present appeal before the Tribunal.

The Tribunal, after considering the facts and material available on record, observed a drastic and sharp increase in the share price of the company without sufficient reason, in line with findings from the Directorate of Income Tax (Investigation) uncovering market manipulation. Citing a precedent case, the Tribunal found the long term capital gain from the sale of such shares as bogus, confirming the additions made by the Assessing Officer. The Tribunal dismissed the appeal, upholding the orders of the authorities below and the assessment order passed u/s 143(3) of the Act.

Issue 2: Addition u/s 69C of the Act alleging commission paid towards payment of brokerage:

Apart from the disallowance of the claim of exemption u/s 10(38), an amount was added under u/s 69C of the Act as unexplained expenditure towards payment of brokerage under the head 'Income from Other Sources'. The Ld. CIT(A) affirmed this addition, and the assessee's failure to counter the findings led the Tribunal to find no infirmity in the decision. Consequently, the Tribunal dismissed the appeal filed by the assessee on this issue as well.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the decisions of the authorities below regarding both the disallowance of exemption u/s 10(38) and the addition u/s 69C of the Act. The judgment was pronounced on 10th November 2022.

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