Tax authorities must rely on cogent evidence to substantiate claims regarding unexplained income, not on mere suspicion; the taxpayer may fulfill the burden of proof by demonstrating transparency in transactions.

JUDGMENT

Manmohan, J. (Oral)

CM Appl. 50158/2022

Keeping in view the averments in the application, delay in re-filing the appeal is condoned.

Accordingly, the application stands disposed of.

ITA 477/2022

1. Present Income Tax Appeal has been filed challenging the Order dated 6th August, 2019 passed by the Income Tax Appellate Tribunal (`ITAT') in ITA No. 2772/Del/2019 for the Assessment Year 2015-16.

2. Learned counsel for the appellant states that the ITAT has erred in deleting the additions of Rs.1,60,18,923/-as unexplained credit under Section 68 read with Section 115BBE of the Income Tax Act, 1961 (`the Act') on account of bogus Long-Term Capital Gain on sale of penny stock company namely M/s Goldline International Finvest Ltd. on the ground that the assessing officer has not made independent enquiry.

3. Though Revenue has mentioned in the present appeal that the issue involved is covered by the judgment of this Court in Suman Poddar v. ITO, 423 ITR 480, wherein appeal of the Assessee was dismissed taking judicial notice of the fact that there was an astronomical increase in the share price of a company which was not commensurate with the financial parameters of the said company, yet this Court finds that a Co-ordinate Bench of this Court in PCIT vs. Smt. Krishna Devi, [ITA 125/2022] & connected ITAs has upheld the ITAT order which is impugned in the present appeal.

4. The relevant portion of the order in PCIT vs. Smt. Krishna Devi (supra) is reproduced hereinbelow:

"11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a pre-planned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumpt