Alleged exempt share-sale long-term capital gains without any book credit or bank receipt evidence; s.68 addition deleted
The dominant issue was whether an addition under s.68 could be sustained on an alleged exempt long-term capital gain under s.10(38) from share transactions when no corresponding credit appeared in the assessee's records. The ITAT held that s.68 requires a sum credited in the books, and in the absence of any entry in the assessee's books of account or any corroborating bank transaction evidencing receipt, there was no material to establish any money received from the alleged share transaction. Since no such credit or evidence existed to trigger s.68, the addition was held unsustainable and was deleted; the appeal was allowed.
1. ISSUES PRESENTED AND CONSIDERED
(i) Whether the delay of 52 days in filing the appeal before the Tribunal was liable to be condoned on the facts stated in the affidavit.
(ii) Whether the addition of Rs. 4,74,000/- as unexplained cash credit under section 68, alleged to be linked to bogus long-term capital gain from shares, could be sustained when no such share transaction or credit was reflected in the assessee's books of account or bank statements for the relevant year.
2. ISSUE-WISE DETAILED ANALYSIS
Issue (i): Condonation of 52-day delay in filing appeal
Legal framework: The Tribunal examined whether the assessee was "prevented" from filing the appeal within the stipulated time, based on the explanation placed on record.
Interpretation and reasoning: The Tribunal considered the affidavit stating that the assessee, being a non-resident living abroad, did not track the appellate order on the portal due to oversight, and upon becoming aware, promptly approached counsel to file the appeal. On the facts and circumstances, the Tribunal accepted that the assessee was prevented by sufficient cause from filing within time.
Conclusion: The delay of 52 days was condoned and the appeal was admitted for decision on merits.
Issue (ii): Sustainability of addition under section 68 for alleged bogus share-related credit
Legal framework: The Tribunal applied the requirement implicit in section 68 that there must be a credit/entry in the assessee's books (and corresponding evidentiary material) capable of being treated as unexplained cash credit.
Interpretation and reasoning: On appraisal of the record, the Tribunal treated it as an admitted factual position that (a) no transaction in the shares in question was recorded in the assessee's books of account, and (b) there was no corresponding bank transaction of Rs. 4,74,000/-. The Tribunal also noted the assessee's submission that the return filed did not contain any such claim of long-term capital gain exemption. In the absence of evidence showing receipt of money or any credit from the alleged share transaction, and with no reflection of such entries in the books or bank statements for the relevant year, the Tribunal held that the factual precondition to attract section 68 was not met.
Conclusion: The addition of Rs. 4,74,000/- under section 68 was held to be not legal and was deleted; the grounds on merits were allowed, and other issues were treated as academic.
TaxTMI 
AI Drafter ✕
TaxTMI 
