Santhosh Devi Agarwal, Bangalore Vs Income Tax Officer, Ward- 3(2)(1), Bangalore

This Income Tax Appellate Tribunal case involves multiple appeals concerning the assessment year 2015-2016. The core issue is whether the Commissioner of Income Tax (Appeals) correctly upheld the Assessing Officer's decision to treat the consideration received from the sale of shares as a bogus transaction. The Assessing Officer rejected the claim for deduction under Section 10(38) of the Income Tax Act and made an addition under Section 68, deeming the capital gains artificial.

IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCHES “SMC-C”, BANGALORE

Before Shri George George K, Judicial Member

ITA No.1584/Bang/2019 : Asst.Year 2015-2016

Snehlatha Agarwal H-803, ETA Garden Apartments Opp : Binny Mills, Magadi Road Bangalore – 560 023.PAN : AAJPA5577B.
(Appellant) 

vs.

The Income Tax Officer Ward 3(2)(1) Bengaluru.
(Respondent)

ITA No.1585/Bang/2019 : Asst.Year 2015-2016

Santosh Devi Agarwal H-803, ETA Garden Apartments Opp : Binny Mills, Magadi Road Bangalore – 560 023.PAN : ABIPA0545P.
(Appellant) 

vs.
The Income Tax Officer Ward 3(2)(1) Bengaluru.
(Respondent)

ITA No.1586/Bang/2019 : Asst.Year 2015-2016

Anil Kumar Agarwal (HUF) H-803, ETA Garden Apartments Opp : Binny Mills, Magadi Road Bangalore – 560 023.PAN : AAFHA6615J.
(Appellant) 

vs.

The Income Tax Officer Ward 3(2)(1) Bengaluru.
(Respondent)

Appellant by : --- None ---
Respondent by : Sri.Ganesh R.Ghale,
Standing Counsel for Department

Date of Hearing : 17.11.2020
Date of : Pronouncement : 18.11.2020

O R D E R

These appeals at the instance of various assessee’s are directed against three orders of the CIT(A), all dated 15.05.2019. The relevant assessment year is 2015-2016.Common issue is raised in these appeals, hence they wereheard together and are being disposed of by this consolidated order.

2. The solitary issue that is raised in these appeals is whether the CIT(A) has erred in confirming the AssessingOfficer’s order, wherein the consideration received for sale of shares was treated as bogus transaction and addition was made u/s 68 of the I.T.Act, by rejecting the claim of deduction u/s 10(38) of the I.T.Act.

3. Facts are identical in these cases, except for variance in figures, hence, the facts pertaining to ITA No.1584/Bang/2019 are narrated and the decision rendered therein would apply mutatis mutandis to the other appeals also.

4. The brief facts of the case are as follow: The assessee, an individual, had filed return of income on 29.09.2015 declaring total income of Rs.7,16,950. In the returnof Income, the assessee had declared Long Term Capital Gains (LTCG) of Rs.19,99,260 and claimed the same as exempt u/s 10(38) of the I.T.Act. During the course of assessmentproceedings, the A.O. noted, the assessee’s declaration of LTCG from sale of shares of a company named Kailash Auto Finance Limited (KAFL) and claim of exemption u/s 10(38) of the I.T.Act. The assessee had purchased 50,000 shares ofPanchshul Marketing Limited (PML) in physical form at anaverage price of Rs.2 per share. This company later on gotmerged with KAFL and the assessee got 50,000 shares of KAFL. The assessee sold 50,000 shares of KAFL in May 2014 at anaverage price of Rs.41.98 per share. The Assessing Officer carried out investigation by examining BSE data, financials of KAFL, Investigation Wing report and the findings of the SEBI.The A.O. held that KAFL was one of the companies which were investigated by the Directorate of Investigation, Kolkata in relation to bogus LTCG and Short Term Capital Losses (STCL) entries being provided to various persons by accommodation entry operators. The A.O. discussed in detail the modus operandi of providing accommodation entry by the entry operators as well as the findings of the Investigation Wing in relation to KAFL scrip price rigging. The Assessing Officer concluded that the assessee had entered into engineered transaction to generate artificial long term capital gains. Accordingly, the A.O. held that the sale consideration of Rs.20,99,260 (the entire sale consideration) was to be treated as unexplained credit u/s 68 of the I.T.Act. Therefore, the assessee’s claim of exemption u/s 10(38) of the I.T.Act was rejected. Further, the A.O. held that the unexplained cash credit of the assessee amounting to Rs.20,99,260 is to be brought to tax at the rate of 30% as per section 68 r.w.s.115BBE of the I.T.Act.

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