| The Tax Publishers2020 TaxPub(DT) 3177 (Del-HC) : (2020) 427 ITR 0063 : (2020) 316 CTR 0337 : (2020) 274 TAXMAN 0301 INCOME TAX ACT, 1961
Section 68 read with Section 70
Addition made by AO on the ground that unaccounted money was converted into accounted money in the guise of capital loss by providing bogus accommodation entries of penny stocks, was justified on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities.
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Income from undisclosed sources - Addition under section 68 - Alleged bogus short-term capital loss from penny stocks -
Assessee had set off STCL relating to sale of shares of three companies in its income tax return. AO disallowed the same by relying upon the report of the Deputy Director of Income Tax (Investigation), Unit-2(3), Kolkata wherein the general practice followed by the companies, brokers and operators for providing LTCG/STCL to beneficiaries had been explained. AO concluded that assessee had entered into a sham transaction with full knowledge so as to convert unaccounted money into accounted money in the guise of capital loss. Further, the evidence in the nature of testimonies of person in-charge with the management and control of the aforenoted Penny Stock companies were also taken into account. This evidence forms the basis for AO to conclude that the STCL claimed by assessee was not genuine or market driven but was a pre-arranged transaction noted in the accounts of the assessee in lieu of unaccounted cash. AO, therefore, framed the assessment under section 143(3) making an addition under section 68 read with section 115BBE disallowing the STCL claimed as set off under section 70, in the computation of income on the ground that it was bogus. Held: In instant case, addition in dispute was not solely on the basis of the statement of the persons and AO had relied on other materials. The statements of the persons who controlled the business of providing accommodation entry had been corroborated with the material, surrounding circumstances and preponderance of probability. Therefore, the addition made by AO was justified.
REFERRED : Andaman Timber Industries v. CCE 2015 (324) ELT 641 (SC) : 2017 (50) STR 93 (SC) : 2016 (15) SCC 785 : 2015 TaxPub(EX) 2155 (SC); Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) : 1995 TaxPub(DT) 1173 (SC); Suman Poddar v. ITO [ITA No. 841/2019] : 2019 TaxPub(DT) 6695 (Del-HC); Udit Kalra v. ITO [ITA No. 220/2019] : 2019 TaxPub(DT) 3068 (Del-HC); Sanjay Bimalchand Jain v. Pr. CIT & Anr. (2017) 89 taxmann.com 196 (Bom) : 2017 TaxPub(DT) 5257 (Bom-HC); CIT v. Smt. Jasvinder Kaur (2013) 357 ITR 638 (Gau) : 2013 TaxPub(DT) 1876 (Gau-HC); Sanjay Kaul v. ITO 2020 TaxPub(DT) 1190 (Del-Trib); Ram Niwas Gupta v. DCIT [ITA No. 4881 to 4883/Del/2016, dt. 6-2-2019]; Udit Kalra v. ITO [ITA No. 6717/Del/2017 for assessment year 2014-15] : 2019 TaxPub(DT) 2566 (Del-Trib); Smt. M.K. Rajeshwari v. ITO [ITA No. 1723/Bang/2018, Order, dated 12-10-2018]; Shri Abhimanyu Soin v. Asstt. CIT [ITA No. 951 1/Chd/2016, Order, dated 18-4-2018]; Disha N. Lalwani v. ITO [ITA No. 6398/Mum/2012, Order, dated 22-3-2017]; Dineshkumar Khandelwal, HUF v. ITO [ITA No. 58 & 59/Nag/2015, Order, dated 24-8-2016]; Ratnakar M. Pujari v. ITO [ITA No. 995/Mum/2012, Order, dated 3-8-2016] : 2016 TaxPub(DT) 4414 (Mum-Trib); ITO v. Shamim M. Bharwani Noor-E-Rehmant (2016) 69 taxmann.com 65 (Mum) : 2015 TaxPub(DT) 1489 (Mum-Trib); Usha Chandresh Shah v. ITO [ITA No. 6858/Mum/2011, Order, dated 26-9-2014] : 2012 TaxPub(DT) 3408 (Mum-Trib)
FAVOUR : Against the assessee
A.Y. : 2015-16
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