Assessee denied LTCG exemption under section 10(38) for bogus share transactions with suspicious pricing (38)

ITAT Ahmedabad upheld denial of LTCG exemption u/s 10(38) for share transactions deemed bogus. Assessee purchased scrip at Rs. 20 when market price was Rs. 17.45, then sold at exorbitant prices following suspicious price increases. Revenue doubted genuineness of both purchase and sale transactions. Broker's credibility was questioned without adequate explanation from assessee. Relying on Delhi HC decision in Udit Kalra case treating similar scrips as non-genuine, tribunal confirmed AO and CIT(A) findings that LTCG claim was bogus despite Demat statement evidence. Appeal dismissed.

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Issues involved:
The appeal against the order passed by CIT(A) for the Assessment Year 2015-16 concerning the addition under Section 68 of the IT Act, 1961.

Summary:
1. The assessee claimed Long Term Capital Gain (LTCG) of Rs. 7,54,948/- on the sale of shares of Kappac Pharma Limited, which was exempt under Section 10(38) of the Act. The Assessing Officer observed discrepancies in the purchase and sale of shares, suspecting the transaction to be an accommodation entry. The Assessing Officer issued a show cause notice, but the assessee's explanations were deemed insufficient. The Assessing Officer concluded that the shares' sale was not genuine and added Rs. 7,54,948/- under Section 68 of the Act.

2. The assessee appealed to the CIT(A), arguing that no cross-examination was conducted, and the Assessing Officer did not provide specific evidence to support the allegation of bogus LTCG. The assessee claimed the purchase of Kappac Pharma Limited shares was legitimate. The CIT(A) dismissed the appeal based on the Assessing Officer's findings.

3. The Revenue contended that the purchase of Kappac Pharma Limited shares in cash indicated a sham transaction to evade taxes. The Revenue highlighted discrepancies in the share transfer process and the suspicious nature of the purchase. The Revenue emphasized that the Assessing Officer conducted an independent inquiry and gave ample opportunities to the assessee to present their case.

4. After hearing both parties, the Tribunal upheld the Assessing Officer's decision. The Tribunal found the purchase of Kappac Pharma Limited shares to be dubious, with inflated prices and involvement of dubious brokers. The Tribunal rejected the assessee's reliance on certain case laws, stating they did not align with the facts of the present case. Consequently, the appeal was dismissed, affirming the addition under Section 68 of the Act.

Conclusion:
The Tribunal upheld the addition of Rs. 7,54,948/- under Section 68 of the IT Act, 1961, on the grounds of suspicious share transactions involving Kappac Pharma Limited, dismissing the assessee's appeal.

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