Radha Goel, New Delhi V. ITO, Ward- 2(2), Ghaziabad

ITA 3437/DEL/2019

AI Insights

The case involves Radha Goel, the appellant, who contested the additions made to her income by the Income Tax Officer (ITO) under sections 68 and 69C of the Income Tax Act, 1961, for unexplained Long-Term Capital Gains and alleged commission paid, respectively. The ITO's actions were based on findings that the appellant had engaged in transactions involving penny stocks, which were suspected to be part of a scheme to convert black money into white by showing unaccounted income as Long-Term Capital Gains. The Commissioner of Income Tax (Appeals) upheld the ITO's decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, after considering the submissions and the material on record, dismissed the appeal, agreeing with the lower authorities' findings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113917 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 19-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 21-04-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Revised return; Bogus
• Section: 68; 69C; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘F’ : NEW DELHI) SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA No.3437/Del./2019 (ASSESSMENT YEAR : 2015-16) Radha Goel, vs. ITO, Ward 2 (2), C/o Malhotra Rajesh & Associates, CAs Ghaziabad. 506, Mercantile House, 15, K.G. Marg, New Delhi – 110 001. (PAN : AORPG9975R) (APPELLANT) (RESPONDENT) ASSESSEE BY : None REVENUE BY : Ms. Beenu, Sr. DR Date of Hearing : 20.06.2023 Date of Order : 11.07.2023 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : This appeal filed by the assessee is directed against the order of ld. CIT (Appeals), Ghaziabad dated 28.02.2019 pertaining to Assessment Year 2015-16. 2. The grounds of appeal taken by the assessee read as under :- “1. On the facts and in the circumstances of the case and in law the authorities below have not followed the proper procedure prescribed by the law before imposing tax on assessee. The action of authorities below is wrong, illegal, bad ITA No.3437/Del./2019 2 at law, misconceived and unjustified therefore it should be quashed. 2. On the facts and in the circumstances of the case and in law, the authorities below have erred in confirming the addition of Rs.60,56,777/- u/ s 68 of the Act, being unexplained Long- Term Capital Gains on sale of shares, earned by Assessee. Therefore, the action of authorities below is wrong, illegal, bad at law misconceived and unjustified, therefore it should be quashed. 3. On the facts and in the circumstances of the case and in law, the authorities below have erred in confirming the of Rs.1,81,703/- u/s 69C of the Act, alleging commission paid. Therefore, the action of authorities below is wrong, illegal, bad at law, misconceived and unjustified, therefore it should be quashed. 4. On the facts and in the circumstances of the case and in law, the authorities below have erred in invoking the provision of Section 115BBE and applying the tax rate 30 percent on the assessee. Therefore, the action of authorities below is wrong, illegal, bad at law, misconceived and unjustified, therefore it should be quashed. 5. On the facts and in the circumstances of the case and in law the authorities below have erred in imposing the interest u/s 234A, 234B and 234C of the Income Tax Act. The action of authorities below is wrong, illegal, bad at law, misconceived and unjustified therefore it should be quashed.” 3. Brief facts of the case are that the assessee is an individual whose main source of income during the year under consideration was under the head salary income and income from other sources. In the return of income filed by the assessee she had not disclosed any sale of shares or income derived from such sale of shares or any exempt income u/s 10(38) on account of long term capital gain from sale of shares. As the case was ITA No.3437/Del./2019 3 selected for scrutiny on basis of reasons - suspicious transactions in penny stock, it was only from the information available in the ITS data pertaining to the assessee on the departmental AST/ITBA system from where it was found that the assessee had sold significant number of shares of M/s HPC Biosciences Ltd. (HPC BIO Scrip Code-52217) and earned abnormally high profit in form of long term capital gain (LTCG). 4. After due enquiry and examination, the AO came to the following conclusion :- “ In view of the discussion made above and considering the facts and circumstances of the case, the following points become manifestly clear.- (i) That some unscrupulous operators in the capital market were running a syndicate of providing accommodation entries of LTCG in lieu of cash for a commission. (ii) The financial result of the Penny Stock (in this case EFFTXT) used for the purpose clearly indicate that the abnormal rise in its share prices was the result of rigging (iii) The above-mentioned facts have been independently investigated into by SEBI leading 10 suspension of trading of shares of EFFTXT w.e.f 07.01.2015. (iv) That such schemes are prevalent for converting black money into white is common knowledge, independently confirmed by SEBI v) That a large number individuals/entities availed of the benefits of the scheme and took entries of L TCG amounting to 100s of crores. vi) Many such individuals have voluntarily, without any enquiry by any authority, withdrawn their claim and filed revised return offering such LTCG for taxation. ITA No.3437/Del./2019 4 vii) In the statements recorded of brokers, entry operators, directors of paper companies that has bought these shares, directors of Penny stock companies all confess to such a scheme with detailed modus operandi which tallies with actual transactions viii) The assessee is one such beneficiary who has taken entry of L TCG amounting to Rs.59,60,776/-. ix) As the trading in these shares was done. at a pre- determined time between pre- determined brokers at a pre-determined price; there is virtually no scope of any genuine trader in share to buy or sell these shares . (x) Thus, whosoever has benefitted from transaction in these shares have transacted in accordance with the scheme and has by, compulsive inference, converted his unaccounted cash equal to the sale proceeds of share into accounted for receipt in the guise of LTCG exempt under section 10(38) of the Income Tax Act, 1961. (xi) With the above described circumstantial evidence cumulatively along with direct evidence against the assessee, the onus was on assessee to prove that her transactions were genuine and that he had not availed benefit of the aforementioned scheme to convert black money into white. (xii) Finally, given the very nature of this scheme the assessee has structured her transactions in a manner that they fall within the letter and the four comers of the law but violate the substance or spirit of law. To any person of normal prudence it is instinctively and logically evident that something about the situation is not quite ‘right'. 11. In the instant case the assessee has credit of Rs.60,56,777/- in her bank account as sale proceeds from sale of shares of HPC 810. The assessee was asked to explain the source of this credit. The explanation offered was that it is sale proceeds of listed shares (HPC BTO) which, in the light of above discussed evidences and legal principles was not only found to be not satisfactory but also false. The assessee has ITA No.3437/Del./2019 5 been confronted with all the evidence (circumstantial and direct) gathered through inquiry. The explanation of the assessee - that since the transaction is through Stock Exchange with due payment of SIT (Securities Transaction tax) and the payments have been received by cheque, the transactions should be treated as genuine -was general in nature. The background of the scheme given in the beginning of the order clearly shows that both the requirements are in-built in the scheme and does not ipso facto prove genuineness of the share transaction and the eventual LTCG. The SEBI after thorough investigation has held that such transactions are rigged and are carried out to convert unaccounted (black) money into accounted (white) money. That being so, the credit in the bank account of the assessee cannot be treated as explained and is, therefore, liable to be added under section 68 of the ACT. Each of the circumstantial and direct evidence (individually and, more importantly, cumulatively) as discussed above has to be evaluated in the background of what the Hon’ble Supreme Court referred to as the test of preponderance of human probability judged on the basis of surrounding circumstances. That there was a scheme is not in doubt and that the assessee is a beneficiary is also an admitted fact. 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 assessee was not a result of such scheme but from genuine transaction. The assessee has failed to discharge this onus and therefore, the only inescapable conclusion is that like numerous other individuals, assessee has also taken entry of LTCG by paying her unaccounted cash. The credit in the bank: account amounting to Rs.60,56,777/- is, therefore added under section 68 read with 115BBE of the Income tax Act, 1961. Further such accommodation entry is taken by payment of certain percentage of commission in cash as also admitted and explained by various entry operators who provided such entries. Hence, 3% towards commission charged for providing the bogus long term capital gain of Rs.60,56,777/- i.e. Rs.1,81,703/- is also being added u/s 69C. As the assessee has deliberately and willfully concealed her unaccounted income and also furnished inaccurate particulars of her income, a conclusion which is obvious from the discussion made in the order, penalty under section 271 (1)(c) is also initiated.” ITA No.3437/Del./2019 6 5. Against the above order, assessee appealed before the ld. CIT(A) who confirmed the same. 6. Against the above order of ld. CIT (A), assessee came up in appeal before us. Despite several notices, nobody appeared on behalf of the assessee. Hence, we are going to adjudicate the appeal after hearing the ld. DR for the Revenue and perusing the material on record. 7. On careful analysis of the orders of the authorities below, we are of the considered opinion that authorities below have passed reasonable order which does not suffer from any infirmity, hence we uphold the same and dismiss the appeal filed by the assessee. 8. In the result, the assessee’s appeal stands dismissed. Order pronounced in the open court on this 11 th day of July, 2023. SD/- SD/- (YOGESH KUMAR US) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated the 11 TH day of July, 2023 TS Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT (A) 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.