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11-01-2019, NITIN AGARWAL (HUF), Section 68,115BBE, Tribunal Delhi

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2 months 5 days ago #8358 by amit
Section - 68,115BBE
Order Date - 11-01-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - NITIN AGARWAL (HUF)
Respondent - ITO
Justice - H.S. SIDHU JM
Citation - 119Taxpundit154
Appeal No. - ITA No. 7309/Del/2018
Asstt. Year - 2014-15

Order

PER : H.S. SIDHU

These three appeals filed by the separate Assessees are directed against the respective Orders of the Ld. CIT(A)-10, New Delhi relevant to assessment year 2014-15. Since the issues involved in these appeals are common and identical, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience, by dealing with ITA No. 7309/Del/2018 (AY 2014-15) – Nitin Agarwal (HUF) vs. ITO. In all the three appeals assessee has raised as many as 11 grounds, but argued the only one common ground no. 8 in all the appeals, except the difference in figure. Therefore, I am reproducing the common ground no. 8 as under:-

..”8. That on the facts and in the circumstances of the case and in law Ld. CIT(A) erred in sustaining the action of AO in mak ng addition of Rs. 22,13,779/- without appreciating that section 68 is not applicable to sale of shares as mentioned in the impugned assessment order.”

2. I will first take up the appeal in the case of Nitin Agarwal (HUF) vs. ITO being ITA No. 7309/Del/2018 (AY 2014-15) and my finding given therein will apply mutatis mutandis in other appeals, since similar facts and findings are permeating in other appeals also.

3. The b ief facts of the case are that assessee filed e-return of income on 30.7.2014 declaring an income of Rs. 5,72,720/-. Subsequently, the case of the assessee was selected for the scrutiny under CASS. Accordingly, notice u/s. 143(2) of the I.T. Act, 1961 dated 18.9.2015 was issued. Subsequently, questionnaire u/s. 142(1) of the Act dated 6.6.2016 was also issued to the assessee. In response to the notice issued, the AR of the assessee attended the proceedings from time to time and furnished the requisite details. AO observed that assessee by filing the return has shown income from business, capital gain and other sources and vide Schedule EI has not disclosed any long term capital gain. However, during the course of assessment proceedings, when the
assessee was asked about purchase and sale of shares of M/s Kailash Auto Finance, the assessee filed a revised computation of income declared longer capital gain amounting to Rs. 20,94,300/-, which was claimed as exempt. AO further observed that the shares of the penny stock is controlled by a group of people viz. promoter / ope ator/ brokers. All purchases of shares were arranged by them on assurance of booking bogus LTCG in favour of the assessee. It is fact and evidence from the statement of several persons recorded u/s 131 of the Act that they have not only sale of shares to the assessee but also arranged for sales of shares through their entities and by paying certain amount of commission to them. The entity from whom share was purchased is a entry operator and controlled by a group of entry operator. Therefore, generation of LTCG through the process from purchase to receipt of cheque is totally arranged and actually no capital gain arose, but assessee’s own cash has been routed through different entities and ultimately reached to his hand by cheque in the disguise of sale proceeds of listed security. Therefore, the AO concluded that the transactions were sham and aimed only to bring unaccounted money in the semblance of exempted long term capital gains and paper work has been got up and done merely to give a colour of authenticity to the transaction and by creating a facade of legitimate transactions. Hence, he denied the exemption claimed u/s. 10(38) of the Act and treated the entire receipt of Rs. 21,49,300/- as income of the assessee and added back to his hand u/s. 68 of the Act read with section 115BBE of the Act and also made addition being commission @3% amounting to Rs. 64,479/- paid by the assessee from undisclosed sources vide order dated 26.12.2016 passed u/s. 143(3) of the Act. Against the said assessment, assessee appealed before the Ld.CIT(A), who vide his impugned order dated 17.9.2018 has dismissed the appeal of the assessee. Aggrieved with the impugned order, the assessee is in appeal before the Tribuna .

4. At the time of hearing, Ld. counsel for the assessee has only argued the ground no. 8 by stating that exactly the similar issue to the ground no. 8 in the present appeal has been recently adjudicated and decided by the ITAT, Delhi ‘B’ Bench order dated 05.12.2018 in ITA No. 1931/Del/2016 (AY 2010-11) in the case of Inder Singh vs. ITO, Ward 43(3), New Delhi. He further stated that Section 68 is not applicable to the sale of shares as mentioned in the impugned order. He draw my attention towards para no. 6 of the order wherein it was stated that AO has invoked the section 68 of the Act, on cash deposit found in bank accounts and admittedly assessee is not maintaining any books of account and therefore, any addition u/s. 68 is untenable in law as section is applicable only where credits are found in books of account maintained by assessee. Therefore, the Assessee is neither required by law nor is maintaining books of accounts and therefore, addition u/s. 68 of the Act is bad in law; and without prejudice the deposit in bank account cannot be

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