If there is no nexus to show that unaccounted money has been routed under the garb of share trading, income from such activity cannot be taxed u/s 68

Akshay Jain Vs DCIT

Whether when the nature of credit stands fully explained and there is no nexus to show that unaccounted money has been routed under the garb of share trading, then income from such activity cannot be taxed u/s 68 – YES: ITAT

– Assessee’s appeal allowed : DELHI ITAT

Whether when the nature of credit stands fully explained and there is no nexus to show that unaccounted money has been routed under the garb of share trading, then income from such activity cannot be taxed u/s 68 – YES: ITAT

++ the documents produced during course of assessment shows that the credits appearing in the bank account is from sales of shares only and the source of credit in the bank account stands well established as required u/s 68. The issue raised by the AO and the CIT(A) are that it is an unaccounted money which has been routed sham transaction of LTCG because for the reasons that the trading of the shares of M/s. Jolly Plastic Ltd. was suspended by SEBI; and prices of the shares of the said company were being manipulated without any financial fundamentals. However, a perusal of the assessment order as well as Appellate order shows that there is no information with the Department that assessee’s name has appeared as a beneficiary of accommodation entry in any kind of inquiry or investigation conducted by the Department or assessee has routed his unaccounted money in the garb of Long Term Capital Gain. The entire emphasis is on the fact that there is an astronomical rise in the price of the shares in BSE;

++ in the present case, the addition has been sought to be made u/s 68 which postulates that assessee has to prove the nature and source of credit appearing in his books of account. Here, from the perusal of the nature of credit, it is seen that the same has come through sales of shares which fact has also not been doubted by the Department. The source of money is through broker who has undertaken the transaction of the shares lying with the assessee purchased in the earlier years and same has been sold after paying due taxes in the form of STT. Thus, nature of the credit stands fully explained. Under such circumstances, there is no reason to sustain addition u/s 68.

ITA No.4199/Del/2018