ITAT Deletes Addition On Availing Accommodation Entries In Shape Of LTCG As It Was Not Recorded In Books Of Accounts

The Indore Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition of availing accommodation entries in the shape of Long Term Capital Gain (LTCG) as it was not recorded in the books of accounts.

The bench of Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) has observed that once the assessee has denied the alleged transaction and it is also not found recorded in the books of accounts, including the Demat account of the assessee maintained by the banks, then the addition made by the AO is purely based on assumption.

The appellant or assessee is in the business of reporting and monitoring as an agency, as well as deriving income from the purchase and sale of shares and securities. The assessee filed its return of income for the assessment year 2011–12 on December 16, 2011, declaring total income at Rs. 5,02,650. The AO reopened the assessment by issuing a notice under Section 148 for assessing the income escaped assessment on account of bogus transactions of the purchase and sale of shares of M/s. Twenty-First Century India Limited.

In response to the notice, the assessee filed a return of income, declaring the same income as it was declared in the original return of income. The AO completed the assessment under Section 147, read with Section 144 of the Income-tax Act, 1961, with an addition under Section 68 to the tune of Rs. 2,09,239 being bogus long-term capital gains.

The assessee challenged the action of the AO before the CIT(A) and contended that the assessee has not carried out any transaction in the shares of M/s. Twenty-First Century India Limited. Therefore, the addition made by the AO is highly arbitrary or unjustified. The CIT (A) has rejected the contention of the assessee and confirmed the addition made by the AO.

The assessee submitted that the AO has reopened the assessment on the basis of the information received from the Kolkata Investigation Wing in respect of some bogus transactions of capital gain from the purchase and sale of shares of M/s. Twenty-First Century India Limited.

The department contended that the AO has passed an ex parte order due to the non-submission of the relevant details and records by the assessee. The CIT(A) has also acknowledged the fact that, in the absence of the relevant record, the AO has passed the order under Section 144.

The tribunal noted that before making the addition on account of bogus long-term capital gains under Section 68 of the Income Tax Act, the AO ought to have ascertained the correct facts about the alleged transaction of accommodation entries for bogus capital gains. The addition made by the AO for the assessment year 2012–13 is not sustainable by law and is liable to be deleted.

Counsel For Appellant: V.N. Dubey

Counsel For Respondent: Ashish Porwal

Case Title: Himanshu Botadara Versus ITO

Case No.: ITA Nos. 155 & 156/Ind/2023

Click Here To Read The Order