Bogus long-term capital gains scheme exposed: Section 68 addition upheld, Section 10(38) exemption denied for fraudulent accommodation entries

ITAT Panaji dismissed the appeal challenging addition under section 68 and denial of capital gains exemption under section 10(38). The tribunal found the appellant obtained bogus long-term capital gains through fraudulent accommodation entries from Calcutta-based providers, deliberately withholding information from authorities. The share purchase and sale transactions were held void ab-initio, constituting sham arrangements designed to convert undisclosed income into legitimate book entries. The tribunal confirmed the Assessing Officer and CIT(A) orders, ruling against the assessee.

---

---

Issues involved:
The judgment involves multiple appeals by different assessees challenging the denial of exemption of capital gains under section 10(38) of the Income Tax Act, 1961, based on alleged bogus transactions of purchase and sale of shares.

IT(SS)A No.02/PAN/2019, A.Y. 2013-14:
The appellant, an individual, filed a return of income for the assessment year 2013-14, disclosing total income. The Assessing Officer completed the assessment, denying the claim for exemption of capital gains under section 10(38) due to alleged bogus transactions of purchase and sale of shares. The appellant failed to substantiate the genuineness of the transactions, leading to the addition of sale proceeds as unexplained cash credit. The CIT(A) upheld this decision invoking the doctrine of human probability. The appellant's challenge contended that the transactions were genuine, but the tribunal, citing judicial precedents, confirmed the Assessing Officer's action even in the absence of the appellant.

Rationale for decision:
The tribunal noted that the appellant engaged in suspicious transactions related to capital gains on the sale of shares, benefiting from accommodation entries provided by an entry provider. Despite ample opportunity, the appellant failed to rebut the findings of the Assessing Officer. Citing legal principles, including the doctrine that fraud vitiates everything, the tribunal confirmed the addition made by the Assessing Officer. The tribunal held that the transaction was void ab initio, a sham with the intention of bringing undisclosed income into the books of account. The tribunal dismissed the appeal, finding no merit in the appellant's contentions.

IT(SS)A Nos.03, 04, 05, 08, 09 & 11/PAN/2019, A.Ys. 2013-14 & 2014-15:
The tribunal applied the decision in IT(SS)A No.02/PAN/2019 mutatis mutandis to these appeals, as the facts and issues were identical. Consequently, the appeals of the different assessees for the assessment years 2013-14 and 2014-15 were also dismissed.

In conclusion, the tribunal dismissed all seven appeals by different assessees challenging the denial of exemption of capital gains under section 10(38) of the Income Tax Act, 1961, due to alleged bogus transactions of purchase and sale of shares. The tribunal upheld the Assessing Officer's decision, citing legal principles and judicial precedents, and found no merit in the appellants' contentions.

---