Vishala Hitesh Loonia Vs ACIT | ITA No. 1668/Ahd/2019

 

Vishala Hitesh Loonia Vs ACIT

ITA No. 1668/Ahd/2019

Whether merely based on report of Investigation Wing, without specific material/information addition can be made for unexplained expenditure u/s 69 of Income Tax Act - YES : ITAT

- Assessee's appeal allowed: AHMEDABAD ITAT

The assessee Smt. Hitesh Loonia had filed her return of income for relevant AY claiming deduction under Chapter VIA of Rs. 92,433. 

During assessment, AO found that the assessee purchased 6000 shares of GCM Securities Ltd. off line from one Mr. Chrag Shah for Rs. 3,90,000. 

Thereafter, Mr. Shah transferred these shares to the DPID of the assessee. The assessee after holding these shares for little more than one year sold 8800 shares for a consideration of Rs. 38,30,904. 

As regards the scrip, the assessee dealt with, was a scrip identified by the DIT (Investigation), where large scale rigging was done to allow benefit of bogus LTCG entities to thousands of beneficiaries. 

The assessee despite of having DMAT account indulged in buying the equities offline through a third person and selling them immediately on completion of holding them for just one year and little more so as to match her booking amount. 

The AO observed that a prudent investor will always consider the financial performance of a company before investing in the company. 

The P & L account of GCM Securities Ltd. for immediately five preceding financial years shows that the profitability, distribution of dividend were not at all encouraging for any prudent investor to invest in such company. 

Accordingly, the AO observed that it was apparent that the alleged company GCM Securities Ltd. did not make any profit in consecutive five financial years nor distributed any dividend. 

Thus, it was clear that assessee in collusion with the entry operators, purchased shares of GCM Securities Ltd. through an intermediary skipping the normal trading through her regular DP/Broker for particular scrip. 

Again, the sale trail shows that all the shares were purchased by only those Kolkata based companies managed by a single person. 

This was possible only when the trade time and price was predetermined between groups of brokers/entry operators. 

In the instant facts, the onus was therefore on the assessee to prove that either there was no such scheme and even if there was one, the benefit to the asseseee was as a result of genuine transaction. 

The assessee miserably failed to discharge onus and therefore the only inescapable conclusion was that like many other individuals, the assessee had also taken entry of LTCG by paying cash. 

The total sale proceeds out of this particular scrip amounting to Rs. 38,30,904 was added to the income of the assessee under the head income from other sources. 

Further, a sum of Rs. 1,91,545/- being commission @ 5% of the LTCG was also added as unexplained expenditure under section 69 of the Act. In appeal, CIT (A) confirmed the addition.

On appeal, the Tribunal held that,

Whether merely based on report of Investigation Wing, without specific material/information addition can be made for unexplained expenditure u/s 69 of Act - YES : ITAT

in the case of Smt. Aparna Misra, 2019-TIOL-1541-ITAT-KOL, the ITAT Kolkata has given relief to the assessee in respect of the same shares in which the assessee has sold during the impugned assessment year.

Again, Kolkata ITAT in the case of Smt. Rachna Agarwal 2022-TIOL-507-ITAT-KOL has given relief to the assessee in respect of the same shares (GCM Securities Ltd) and in respect of similar set of facts, which the assessee has sold during the impugned assessment year. 

It was noted that the facts of the assessee and the cases mentioned are similar. 

The assessee has sold the shares of GCM securities Ltd, which were the shares of the same company in respect of which the decisions have been rendered in favour of the assessee on similar set of facts. 

No specific allegation has been made by any of the entry operators alleging that the assessee has engaged in sham/bogus transaction on sale of the above shares. 

Nothing has been brought on record to substantiate that the assessee's own unaccounted money was used to purchase the shares on which capital gains has been earned by the assessee. 

The entire case of the Revenue is based on the report of the Investigation Wing, however, no specific material/information has been found specifically implicating the assessee and the addition is based on the general modus operandi in connection with sale of shares to earn bogus capital gains. 

The assessee, admittedly has carried out or transactions through banking channels/DMAT account. 

The only allegation of the Revenue is that the scrip which the assessee sold was identified by the Directorate of Income Tax (Investigation), Kolkata in which large scale rigging was done to allow benefit of bogus LTCG entities to several beneficiaries. 

Therefore, respectfully following the decision in the case of Smt. Aparna Misra 2019-TIOL-1541-ITAT-KOL and Smt. Rachna Agarwal 2022-TIOL-507-ITAT-KOL, which have been rendered on similar set of facts, it was held that CIT(A) has erred in facts and in law in in allowing the assessee's appeal.

ITA No. 1668/Ahd/2019

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