| The Tax Publishers2020 TaxPub(DT) 0468 (Del-Trib) INCOME TAX ACT, 1961
Section 68
Where assessee failed to substantiate his claim of long-term capital gain on sale of shares by filing valid documentary evidences, it was rightly concluded that the said transaction was to make the unaccounted money as a long-term capital gain and accordingly, the addition made under section 68 would be sustainable.
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Income from undisclosed sources - Addition under section 68 - Bogus claim of long-term capital gain - Assessee failed to file valid documentary evidences
Assessee showed long-term capital gain on sale of shares of a company 'S'. AO asked the assessee about the genuineness of the sale and purchase of the said shares, but the assessee could not prove the same. AO also issued notices to the broker as well as to the company to prove the genuineness of the said transaction, but all notices were received back unserved with the remarks “Leftâ€. Further, the assessee also failed to file relevant documentary evidences for substantiating his claim. Accordingly, the AO concluded that the sale and purchase of shares was only a paper transaction and not an actual one, which was shown only to evade the legitimate tax and made addition under section 68 on account of bogus claim of long-term capital gain. Held: Assessee could not substantiate his claim as required under section 68 by way of filing valid documentary evidences as required by Revenue. Further, despite of the various notices issued to the assessee, company 'S' as well its directors, however, they did not respond to the queries raised by the Revenue. Further, 'S' claimed to have received application for preferential allotment of shares to the assessee, but it could not file any documentary evidences to establish that any shares were actual allotted to the assessee. Further, the 'S' also failed to provide the copy of transfer deed and details of specific shares showing purchase as well as sale of the shares. Moreover, it was found that the 'S' was running in huge losses and did not declare any dividend for several years which showed that the said transaction in dispute was to make the unaccounted money as a long-term capital gain. Accordingly, the addition made under section 68 on account of bogus transaction was upheld.
REFERRED : McDowell & Co. Ltd. v. Commercial Tax Officer (1985) 154 ITR 148 (SC) : 1985 TaxPub(DT) 1186 (SC)
FAVOUR : Against the assessee
A.Y. :
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