Tax authorities upheld additions under section 68, rejecting assessee's claim of exempt LTCG due to bogus trades

ITAT upheld AO and CIT(A) additions under s.68, rejecting the assessee's claim of exempt LTCG. The tribunal found transactions bogus and surrounding circumstances-off-market purchases, holding in broker's pool account, inordinate delay and last-minute dematerialization-were unexplained and documentary proof was insufficient. The assessee failed to discharge the burden to prove genuineness; adverse material collected by Revenue showed synchronized/manipulative deals rather than genuine market trades. Addition confined to the credited LTCG was confirmed. Appeal decided against the assessee.

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Issues Involved:

1. Addition of Rs. 73,29,100/- on account of investment in shares.
2. Non-provision of inquiry papers and notice u/s 133(6).
3. Purchase of shares from regular income and acceptance of books of accounts.
4. Consideration of various submissions and case laws.

Summary:

Issue 1: Addition of Rs. 73,29,100/- on account of investment in shares

The assessee claimed Long Term Capital Gain (LTCG) of Rs. 73,29,100/- as exempt u/s 10(38) of the Income Tax Act, 1961. The Assessing Officer (AO) added this amount u/s 68, questioning the genuineness of the transactions. The AO found that the shares were purchased in cash, despite the assessee having an operational bank account, and the companies involved were identified as penny stock companies with manipulated share prices. The AO concluded that the LTCG was a colorable device to introduce unaccounted money into the books without paying tax.

Issue 2: Non-provision of inquiry papers and notice u/s 133(6)

The assessee argued that the AO did not provide inquiry papers and notice u/s 133(6) and did not allow cross-examination of individuals whose statements were used against the assessee. The Tribunal noted that the statements did not specifically implicate the assessee, and the right to cross-examine was not a necessity in this context, as per legal precedents.

Issue 3: Purchase of shares from regular income and acceptance of books of accounts

The assessee contended that the shares were purchased from regular income, and the books of accounts were accepted without invoking Section 145. The Tribunal found that the purchase transactions in cash, the delay in dematerializing the shares, and the off-market purchase raised doubts about the genuineness of the transactions. The Tribunal emphasized that the genuineness of both purchase and sale transactions must be examined.

Issue 4: Consideration of various submissions and case laws

The assessee cited various judicial pronouncements to support the claim. However, the Tribunal held that each case rests on its own facts and circumstances. The Tribunal relied on the principle of preponderance of human probability and surrounding circumstances, as established by the Supreme Court in cases like Smt. Sumati Dayal vs. CIT and CIT vs. Durga Prasad More. The Tribunal found that the assessee failed to discharge the onus of proving the genuineness of the transactions.

Conclusion:

The Tribunal upheld the addition of Rs. 73,29,100/- made by the AO, dismissing the appeal of the assessee. The Tribunal concluded that the transactions were not genuine, and the LTCG claim was a facade to conceal the true nature of the credit entry. The order of the CIT(A) was confirmed.

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