Tribunal upholds Assessing Officer's additions, dismissing appeal over suspicious penny stock transactions.

The tribunal upheld the additions made by the Assessing Officer and Commissioner of Income-Tax (Appeals), dismissing the appeal in its entirety. The disputed capital gain and brokerage cost were deemed non-genuine due to suspicious transactions involving penny stocks. The tribunal relied on precedents and affirmed the revenue authorities' decisions, emphasizing the lack of credibility in the transactions. Consequently, the appeal was dismissed on 01.12.2022.

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Issues Involved:
1. Opportunity of being heard before passing the order.
2. Addition of Rs. 69,78,526/- as bogus capital gain.
3. Addition of Rs. 1,39,568/- on account of estimated brokerage cost.

Detailed Analysis:

Ground No. 1: Opportunity of Being Heard
The assessee claimed that the Commissioner of Income-Tax (Appeals) [CIT(A)] erred by passing the order without giving the assessee an opportunity of being heard. The CIT(A) had scheduled multiple hearings, but the assessee either requested adjournments or failed to attend. Despite several opportunities, the assessee did not file any written submissions. Consequently, the CIT(A) decided the case on its merits. The tribunal found that the CIT(A) passed a detailed order after due consideration and dismissed Ground No. 1, stating that the claim was devoid of merit.

Ground No. 2 to 4: Additions of Rs. 69,78,526/- and Rs. 1,39,568/-
The assessee challenged the additions made by the Assessing Officer (AO) on two counts:
1. Addition of Rs. 69,78,526/- as bogus capital gain.
2. Addition of Rs. 1,39,568/- on account of estimated brokerage cost.

Details of Transactions:
The assessee purchased 15,000 shares of Turbotech Engineering Ltd. for Rs. 45,000/- and sold them for Rs. 70,23,526/-, claiming a capital gain of Rs. 69,78,526/-. The AO found the capital gain suspicious and treated it as a bogus receipt under Section 68 of the Income-tax Act, 1961. The AO also added Rs. 1,39,568/- as estimated brokerage cost from undisclosed sources.

Observations by AO:
1. The shares of Turbotech Engineering Ltd. were categorized as "Penny stock" by the Income-tax Department.
2. The department's investigations revealed syndicates manipulating market prices of penny stocks to provide exempted capital gain entries.
3. Turbotech Engineering Ltd. had weak financials, no business activity for the last five years, and suffered continuous losses.
4. The share price of Turbotech Engineering Ltd. was artificially rigged by about 15507% without any related growth in the company.
5. The AO issued summons to the assessee and notices to the buyers of the shares, but none responded, leading to the conclusion that the capital gain was not genuine.

CIT(A) Findings:
The CIT(A) upheld the AO's findings, stating that the assessee indulged in bogus long-term capital gain transactions through accommodation entries. The CIT(A) relied on various judicial precedents and observed that the transactions did not stand the test of human probability.

Tribunal's Decision:
The tribunal agreed with the findings of the AO and CIT(A). It noted that the issue of exempted capital gain from Turbotech Engineering Ltd. had been previously examined and concluded by the ITAT, Indore Bench in a similar case (Shri Abhishek Gupta Vs. ITO). The tribunal found no reason to deviate from the previous decision and upheld the additions made by the revenue authorities. Consequently, Grounds No. 2 to 4 were dismissed.

Conclusion:
The appeal was dismissed in its entirety, with the tribunal affirming the additions made by the AO and CIT(A). The order was pronounced on 01.12.2022.

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