2020 (1) TMI 354 - AT - Income Tax

Bogus LTCG - unexplained cash credit u/s 68 r.w.s. 115 BBE - HELD THAT - After going through the facts and circumstances of the present case and the judgment of the Hon ble Delhi High Court in the case of Udit Kalra vs. ITO 2019 (4) TMI 834 - DELHI HIGH COURT wherein has declared M/s Kappac Pharma as bogus company who made only accommodation entries in which the assessee is a beneficiary. Therefore no other option except to follow the decision of the Hon ble Delhi High Court because no other contrary judgment has been produced by the Ld. Counsel for the assesee. Accordingly following the aforesaid precedent uphold the well reasoned order of the Ld. CIT(A) and decide the issue in dispute against the Assessee by dismissing the appeal of the assessee.

Issues Involved:
1. Legality of the CIT(A) order under Section 250 of the Income Tax Act.
2. Confirmation of addition made by AO on account of long-term capital gain treated as bogus and taxable under Section 68 read with Section 115BBE.
3. Alleged manipulation of transactions to earn long-term capital gain.
4. Reliance on investigations by the Income Tax Department, NSE, SEBI, and SIT.
5. Inclusion of assessee's name in the list of beneficiaries by the Kolkata Investigation Wing.
6. Consideration of evidence submitted by the assessee.
7. Collection of evidence without confronting the assessee.
8. Allegations based on statements of unrelated persons.
9. Treatment of the assessee as not a regular investor.
10. Conversion of unaccounted money through exempt capital gains.
11. Relevance of modus operandi adopted by unrelated concerns/persons.
12. Observations on penny stocks.
13. Consideration of judgments relied upon by the assessee.
14. Applicability of judgments cited by CIT(A)/AO.
15. Connection of the assessee with the broker and investigation.
16. Treatment of sale transactions as ingenuine.
17. Addition on alleged commission paid.
18. Charging of interest under Sections 234B and 234C.
19. Penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Legality of the CIT(A) Order:
The assessee contended that the CIT(A) order under Section 250 was bad in law and on facts. However, the Tribunal upheld the CIT(A) order, finding no legal infirmity.

2. Addition on Long-Term Capital Gain:
The CIT(A) confirmed the AO's addition of Rs. 21,05,853/- and Rs. 24,22,448/- on account of long-term capital gain on shares of M/s Kappac Pharma Ltd., treating it as unexplained cash credit under Section 68 read with Section 115BBE. The Tribunal referenced the case of Udit Kalra vs. ITO, where shares of M/s Kappac Pharma Ltd. were declared bogus and upheld by the Delhi High Court.

3. Alleged Manipulation of Transactions:
The assessee argued that the CIT(A) and AO erred in holding that transactions were manipulated. The Tribunal found that the shares of M/s Kappac Pharma Ltd. were already declared bogus, thus supporting the AO's findings.

4. Reliance on Investigations:
The CIT(A) and AO relied on investigations by the Income Tax Department, NSE, SEBI, and SIT. The Tribunal upheld this reliance, noting that the findings were based on substantial evidence.

5. Inclusion in Beneficiary List:
The assessee's name appeared in the list of beneficiaries investigated by the Kolkata Investigation Wing. The Tribunal found no merit in the assessee's challenge to this inclusion.

6. Consideration of Evidence:
The assessee claimed that the CIT(A) and AO ignored the evidence submitted. The Tribunal, however, found that the evidence was considered but found insufficient to counter the findings of the investigation.

7. Collection of Evidence:
The assessee argued that evidence was collected without confrontation. The Tribunal noted that the investigation's findings were sufficient and did not require further confrontation.

8. Allegations Based on Statements:
The additions were based on statements of persons unrelated to the assessee. The Tribunal found these statements relevant and upheld the additions.

9. Regular Investor Status:
The CIT(A) and AO held that the assessee was not a regular investor. The Tribunal agreed, noting the suspicious nature of the transactions.

10. Conversion of Unaccounted Money:
The Tribunal upheld the finding that the assessee converted unaccounted money through exempt capital gains, referencing the bogus nature of M/s Kappac Pharma Ltd.

11. Modus Operandi of Unrelated Concerns:
The Tribunal found that the modus operandi adopted by unrelated concerns was relevant to the assessee's case, supporting the AO's findings.

12. Observations on Penny Stocks:
The Tribunal upheld the observations regarding penny stocks, noting the suspicious nature of M/s Kappac Pharma Ltd.

13. Consideration of Judgments:
The CIT(A) did not appreciate the judgments relied upon by the assessee. The Tribunal found no error in this approach, given the specific facts of the case.

14. Applicability of Judgments:
The Tribunal found that the judgments cited by the CIT(A) and AO were applicable and relevant to the case.

15. Connection with Broker:
The Tribunal found that neither the assessee nor the broker was named in the investigation, but the findings were still applicable.

16. Treatment of Sale Transactions:
The AO treated the sale transactions as ingenuine, which was upheld by the Tribunal, noting the earlier acceptance of purchase transactions did not validate the sales.

17. Addition on Alleged Commission:
The addition of Rs. 1,43,210/- on alleged commission paid to Sh. Davesh Upadhaya was upheld, with the Tribunal finding no evidence to counter the AO's findings.

18. Charging of Interest:
The Tribunal upheld the charging of interest under Sections 234B and 234C, finding it legally justified.

19. Penalty Proceedings:
The Tribunal found the initiation of penalty proceedings under Section 271(1)(c) to be on valid grounds, noting the submission of inaccurate particulars of income by the assessee.

Conclusion:
The Tribunal dismissed both appeals, upholding the CIT(A) orders and confirming the findings of the AO. The decision in the case of Udit Kalra vs. ITO was a significant precedent, influencing the outcome of these appeals. The Tribunal found no merit in the assessee's grounds and upheld the additions and findings of the revenue authorities.

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