INCOME TAX ACT, 1961

Section 68 Section 10(38)

Income from undisclosed sources - Addition under section 68 - Alleged bogus LTCG on sale of scrip of M/s. KAFL - Restrictions imposed by SEBI withdrawn subsequently

Assessee an individual had purchased 1,10,000 equity shares of M/s. Panchshul Marketing Ltd. on 16-8-2012 from M/s. Shivsakti Exports Pvt. Ltd. M/s. Panchshul Marketing Ltd. was merged with M/s. KAFL and there was change of management and control of M/s. KAFL Ltd. pursuant to scheme to arrangement sanctioned by the High Court at Allahabad. It was noted that the purchase of aforesaid 1,10,000 equity of M/s. Panchshul Marketing Ltd. was made by account payee cheque of Dena Bank. Shares of M/s. KAFL were allotted to the assessee upon merger of M/s. Panchshul Marketing Ltd. with M/s. KAFL pursuant to sanction of scheme of arrangement by the Allahabad High Court and 1,10000 equity shares were allotted to the assessee in lieu of shareholding in Panchshul Marketing Ltd. The AO was influenced by an interim order of SEBI dated 29-3-2016, which the SEBI had withdrawn by later Order, dated 21-9-2017 by virtue of it all the restrictions imposed upon by the earlier Order, dated 29-3-2016 had been withdrawn, since SEBI could not find any infirmity in the scrips of M/s. KAFL. Assessee contended that scrips of KAFL were not bogus and the LTCG claim of the assessee needs to be allowed. Held: KAFL were sold by the assessee through recognized broker in a recognized Stock Exchange. The details of such sale and contract note have been submitted before AO/ CIT(A). When the transactions happened in the Stock exchange, the seller who sells his shares on the stock exchange does not know who purchases shares. It was noted that the shares were sold and bought in an electronic mode on the computers on-line by the brokers and there was also no direct contact at any level even between the brokers. This was how the SEBI keeps a strict control over the transactions taken place in recognized stock exchanges. Unless there was a evidence to show that there was a breach in the aforesaid process which fact had been unearthed by meticulous investigation. In the absence of any evidence it cannot be held that the assessee had introduced his own unaccounted money by way of bogus long-term capital gain. So, assessee had explained the nature and source of the money with supporting documents and thus had discharged the onus casted upon him by producing the relevant documents accordingly, the question of treating the said gain as unexplained cash credit under section 68 cannot arise unless the AO was able to find fault/infirmity with the same. The co-ordinate bench of the Tribunal had deleted the addition in the case of Shri Manish Baid in respect of sale of shares of M/s. KAFL. therefore, respectfully following the same and the facts in the instant case as taken note supra and discussions, this Tribunal inclined to set aside the order of CIT(A) and the AO was directed not to treat the long-term capital on sale of shares of M/s. KAFL as bogus and the consequential addition was deleted.

Followed:Manish Kumar Baid v. Asstt. CIT ITA No. 1236-1237/K/17, Order, dated 18-8-2017 : 2017 TaxPub(DT) 4463 (Kol-Trib).Relied: Manish Kumar Baid v. Asstt. CIT ITA No. 1236-1237/K/17, Order, dated 18-8-2017 : 2017 TaxPub(DT) 4463 (Kol-Trib), Rukmini Devi Manpria v. Dy.CIT, ITA. No. 1724/Kol/2017, dated 24-10-2018 : 2018 TaxPub(DT) 7633 (Kol-Trib), Jagmohan Agarwal v. Asstt. CIT, ITA. No. 604/Kol/2018, dated 5-9-2018 : 2018 TaxPub(DT) 5883 (Kol-Trib), CIT v. Smt. Jamnadevi Agrawal & Ors., dated 23-9-2010 (2010) 328 ITR 656 (Bom-HC) : 2010 TaxPub(DT) 2265 (Bom-HC), Anupam Kapoor (2008) 299 ITR 179 (P&H-HC) : 2008 TaxPub(DT) 500 (P&H-HC), Smt. Sunita Jalan v. ITO ITA. Nos. 501 & 502/Ahd/2016, dated 9-3-2017 : 2017 TaxPub(DT) 1244 (Ahd-Trib) and Meenu Goel v. ITO, (2018) 94 taxmann.com 158 (Del.-Trib) : 2018 TaxPub(DT) 1851 (Del-Trib).Distinguished: Ratnakar M. Pujari v. ITO ITA No. 995/Mum/2012, Order, dt. 3-8-2016 : 2016 TaxPub(DT) 4414 (Mum-Trib) [Assessment Year 2006-07] - ITAT Mumbai, Ritu Sanjay Mantry v. ITO ITA. No. 2003/Mum/2017, Order, dt. 9-2-2018 ITAT Mumbai, ITO v. Shamim M. Bharwani (2016) 69 Taxmann.com (Mum-Trib) Order, dt. 27-3-2015 : 2015 TaxPub(DT) 1489 (Mum-Trib), Vidya Reddy ITA. No. 126/Chny/2017-Chennai ITAT, M.K. Rajeshwari v. ITO (2018) 99 Taxmann.com 339 (Bang-Trib), Abhimanyu Soin 2018-TIOL-733-ITAT-CHD, Balbir Chand Maini v. CIT (2011) 12 Taxmann.com 276 (P&H-HC) : 2012 TaxPub(DT) 657 (P&H-HC), Chandan Gupta v. CIT (2015) 54 Taxmann.com 10 (P&H), Mahendra Kumar Bhandari v. ITO [Order, dt. 6-4-2018], Aravind Kumar, Chennai v. ITO [Order, dt. 8-11-2018], Vikram Dughar, Chennai v. ITO [Order, dt. 13-11-2018], Sadhana, Bangalore v. ITO [Order, dt. 26-5-2017], Arun Kumar Bhaiya, New Delhi v. ITO [Order, dt. 30-8-2018], Natti Singh HUF, Jaipur v. Asstt. CIT [Order, dt. 31-10-2018], Vinod J. Sharma, Thane [Order, dt. 28-10-2015], Prem Jain v. ITO [ITAT, Delhi, Order, dt. 22-3-2018] : 2018 TaxPub(DT) 1530 (Del-Trib), Sanjay Bimalchand Jain v. PCIT (2018) 89 Taxmann.com 196 (Bom), Asstt. CIT v. Madhuri Sunil Kotecha [ITAT, Pune, Order, dt. 28-3-2018], Charu Agarwal, Meerut v. ITO [ITAT, Delhi, Order, dt. 10-9-2018], Dayaram Khandelwal v. Pr. CIT [MP High Court, Order, dt. 1-3-2018] : 2018 TaxPub(DT) 1233 (MP-HC) and Sourabh Khandelwal v. Pr. CIT [MP High Court, Order, dt. 1-3-2018].

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