INCOME TAX ACT, 1961

Section 147

Re-assessment - Notice under section 148 - Addition under section 68 on account of bogus profit on sale of shares -

Assessee filed return of income declaring total income of Rs. 13,92,790. Return of income was processed under section 143 (1). Pursuant to information received from Directorate of Investigation that assessee was a beneficiary of an organised racket of generating bogus entries of long term capital gains in penny stocks, notice under section 148 was issued initiating reassessment proceedings in case of assessee. AO passed order under section 143(3) read with section 147 after, inter-alia, referring to information gathered and collected from investigation wing pertaining to survey action conducted in case of company, i.e. FFSL, in whose shares assessee had transacted, statement recorded of other beneficiaries, findings of Securities and Exchange Board of India (“SEBI”) vide various interim orders in case of FFSL, statement of assessee recorded pursuant to summons issued under section 131 came to conclusion that sale price received by assessee was an accommodation entry, which had been laundered in form of bogus profit on sale of shares. Accordingly, sum of Rs. 84,45,050 being long term capital gains claimed by assessee was treated as unexplained investment made by assessee in cash to obtain equivalent amount as bogus profit on sale of shares and was added to total income of assessee. Further, AO made an addition of Rs. 22,712, being commission charged by brokers @ 0.25% for providing accommodation entry, on basis that payment would have been made in cash by the assessee over and above total sale value of Rs. 90,85,050. CIT(A) dismissed appeal filed by assessee. Being aggrieved, assessee filed this appeal. Held: Despite interim Order, dt. 6-9-2017 passed by SEBI being specifically mentioned by assessee in her objections before AO as well as in her submission before CIT(A), impugned addition was sustained. Since, very transaction of assessee in scrips of FFSL, which resulted in long-term capital gains to assessee, had been found to be not violative of provisions of relevant Act and Rules by SEBI upon necessary investigation and even initial restraint order was revoked vide interim Order, dt. 6-9-2017, therefore, no basis found in sustaining impugned addition made by AO by treating said transaction to be a penny stock transaction resulting in bogus long term capital gains. Accordingly, AO was directed to delete impugned addition of Rs. 84,45,050. Further, since other addition of Rs. 22,712 made by AO was also consequent to aforesaid impugned addition, therefore, said addition was also directed to be deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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