Unaccounted money returned via a banking channel in the form of a sale consideration is taxed under Section 115BBE
Fact and issue of the case
The present appeals filed by the captioned assessee’s are directed against the respective orders passed by the Commissioner of Income-Tax (Appeals)-1, Raipur dated 06.07.2018, which in turn arises from the orders passed by the A.O in their cases under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 27.12.2017 and 26.12.2017 for the assessment year 2015-16. As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order.
I shall first take up the appeal marked as ITA No.190/RPR/2018 for assessment year 2015-16, and the order therein passed shall apply mutatis-mutandis for the purpose of disposing off the remaining appeals. The assessee has assailed the impugned order on the following grounds of appeal
Ld. C1T (Appeals) erred in confirming the addition of Rs.5,40,000/- made by the AO as undisclosed income, holding the transaction of sale of shares to be bogus. The addition of Rs.5,40,000/- made by AO and confirmed by CIT (A) is not justified. The AO erred in rejecting the claim of appellant that the amount disclosed in return represented capital gain on sale of shares.
CIT(A) erred in confirming the addition of Rs. 5,40,000/-made by the AO disregarding the evidences filed and without bringing any material on record to controvert the claim of appellant.
Without prejudice to above grounds the AO, erred in taxing the amount of Rs. 5,40,000/-added by him u/s 115BBE.
The appellant reserves the right to add, amend or alter any ground or ground/s of appeal.
Succinctly stated, the assessee-HUF had e-filed its return of income for A.Y.2015-16 on 18.08.2015, declaring an income of Rs.17,96,730/-. Subsequently, the case of the assessee was selected for “complete scrutiny” under CASS for examination of “suspicious sale transaction in shares (Penny Stock tab in ITS), and notice u/s.143(2) of the Act was issued.
During the course of assessment proceedings, it was observed by the A.O that the assessee had claimed to have earned a profit of Rs. 2,81,049/- on account of Short-Term Capital Gain (STCG) by transacting in shares of CCL International Ltd., as under
| Scrip Involved | Sale date | Quantity x Rate | Sale price | Purchase date | Purchase Price (in Rs) |
| CCL International | 12/05/2014 | 3000*180 | 540000 | 26/07/2013 | 255000 |
Observation of the court
I shall now advert to the statement of Shri Rahul Gupta, Karta of HUF that was recorded by the A.O u/s.131 of the Act on 26.12.2017. I find that Shri Rahul Gupta, a well educated graduate, who had appeared on behalf of the assessee HUF as well as his other family members, had admitted that he had no knowledge of share trading and share market. Strangely, I find that Shri Rahul Gupta (supra) on being queried as per Question No.20 of the statement as to whether shares in question were purchased by him online or offline, had expressed his unawareness about the same. Although Shri Rahul Gupta (supra) was aware about the brokers through whom he had carried out the purchase/sale of the aforesaid 3000 shares of CCL International Ltd., but had stated that he was unaware that the said company was a penny stock company. Also, Shri Rahul Gupta in reply to Question No.6 about the mode of payment of the purchase consideration of 3000 shares of CCL International Ltd., had stated that the entire purchase consideration was made vide banking channel. The aforesaid reply of the assessee is found to be incorrect. As observed by me hereinabove, the assessee as per the brokers confirmation/ledger account had stated to have made part payment of Rs.9000/- (out of purchase consideration of Rs.2.55 lac) on 26.07.2013 to the broker, viz. Invova Commotrade Pvt. Ltd. in cash. Also, the fact that Shri Rahul Gupta (supra) who had claimed that he had carried out entire transaction of purchase/sale of 3000 shares of CCL International Ltd., i.e. both on behalf of the assessee HUF and also for the other family members was absolutely unaware about the company in which he had invested, and had rather claimed of having made the said investment only as per advice of his friends and brokers. Adopting a holistic approach, the facts that had unfolded in the statement of Shri. Rahul Gupta (supra) further fortifies the view taken by the A.O that the assessee had not entered into any genuine transaction of purchase/sale of shares of CCL International Ltd.
After deliberating at length on the issue in hand, I am of the considered view that though the financials of the aforementioned company, viz. CCL International Ltd. and the movement of the price of its shares over a short period is found to be abrupt, unrealistic and not based upon any realistic parameters, which in itself does not inspire any confidence, and in fact justifies raising of serious doubts, but the said fact does not on such standalone basis weigh with me for concluding that the assessee had not entered into any genuine transaction of purchase/sale of 3000 shares of CCL International Ltd. The Ld. AR had pressed into service certain orders of the Tribunal at Pages 42 to 86 of APB, wherein drawing of adverse inferences as regards the LTCG on sale of share of CCL International Ltd. by the A.O’s had been vacated by the Tribunal; and also, it has been held that a mere spike in the stock/shares price a/w. pre-existing statements recorded by the Investigation Wing cannot be a sole criteria for drawing of adverse inferences as regards the authenticity of the transaction of purchase/sale of shares by the assessee. I am though principally in agreement with the aforesaid view taken by the co-ordinate Benches, but cannot remain oblivion of the other material facts which I had come across in the present case, i.e. serious infirmities in the transaction of purchase of shares, wherein it is irrefutably proved that the assessee had attempted to relate back the purchase transaction; infirmities in the sale transaction; and shortcomings in the statement recorded u/s.131 of the Act of Shri Rahul Gupta, Karta of HUF. On a cumulative perusal of the aforesaid material aspects, which when tested against the touchstone of principle of preponderance of human probabilities unearths beyond doubt the ingenuineness of the transactions of purchase/sale of 3000 shares of CCL International Ltd. I am of the considered view that no infirmity arises from the very well-reasoned order of the A.O, who on the basis of her exhaustive deliberations and verification of the various facets of the purchase/sale transaction under consideration, had rightly concluded that the assessee had not carried out any genuine transaction of purchase/sale of 3000 shares of CCL International Ltd. Before parting, I may herein observe that the contention of the ld. A.R that the A.O had herself stated in the assessment order that it could be conclusively said that the assessee had purchased the shares in the month of March or April itself for which the payment was made on 19.03.2014, would not in any way assist the case of the assessee before us. I, say so, for the reason that it had never been the case of the assessee either before the lower authorities or before us that it had purchased the 3000 shares of CCL International Ltd. in the month of March or April, 2014. In my considered view once the claim of the assessee of having purchased the 3000 shares of CCL International Ltd. on the basis of documents relied upon by it fails, then, the solitary logical view that can be arrived at is that it had not carried out any genuine transaction of purchase/sale of shares, and considering the totality of the facts involved in the case can safely be held to have only obtained an accommodation entry of bogus LTCG.
I, thus, in terms of my aforesaid observations concur with the view taken by the lower authorities and uphold the addition of Rs.5.40 lac (supra) made by the A.O, on the ground that the same was the undisclosed fund of the assessee that was routed back in the garb of the aforesaid transaction of purchase/sale of shares. Thus, the Grounds of appeal Nos. 1 & 2 raised by the assessee being devoid and bereft of any merit are dismissed in terms of my aforesaid observations.
As regards the contention of the Ld. AR that the amount of Rs.5.40 lac (supra) could not have been brought to tax u/s.115BBE of the Act, I am unable to concur with the same. As the A.O had in clear and unequivocal terms observed that the sale consideration of 3000 shares of CCL international Ltd. of Rs.5.40 lac, was infact the routing back of the undisclosed fund of the assessee through the medium of transaction of sale of shares, therefore, it can safely; or in fact inescapably be concluded that the same was the assessee’s unexplained money u/s.69A of the Act, which it had received back through banking channel in the form of sale consideration of the said shares. Thus, the Ground of appeal No.3 raised by the assessee being devoid and bereft of any merit is dismissed in terms of my aforesaid observations.
In the result, appeal of the assessee in ITA No.190/RPR/2018 for A.Y.2015-16 is dismissed in terms of my aforesaid observations. ITA Nos.191, 192 & 193/RPR/2018 A.Y. 2015-16 20. As the facts and issue involved in the captioned appeals remains the same as were there before me in the appeal in ITA No.190/RPR/2018 for A.Y.2015-16, therefore, my findings recorded while disposing off the appeal in ITA No. 190/RPR/2018 for A.Y.2015-16 shall mutatis-mutandis apply for disposing off the captioned appeals, i.e. ITA Nos. 191, 192 & 193/RPR/2018 for A.Y 2015-16. Accordingly, in these cases also, I uphold the view taken by the lower authorities on the respective issues on the same terms as were recorded in ITA No.190/RPR/2018 for A.Y.2015-16.
In the result, appeals of the assessee in ITA Nos. 191, 192 & 193/RPR/2021 for A.Y. 2015-16 are dismissed in terms of my aforesaid observations.
In the combined result, appeals of the captioned assessee’s are dismissed in terms of my aforesaid observations.
Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board on 12th day of May, 2023
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Rahul-Gupta-HUF-Vs-ACIT-ITAT-Raipur-2-1
