AO Needs Evidence to Label Share Sale as Bogus Proving Assessee Converted Unaccounted Funds Through Fictitious Loss

Case Details: PCIT v. Champalal Gopiram Agarwal - [2023] 155 taxmann.com 66 (Gujarat)

Judiciary and Counsel Details

• • Biren Vaishnav & Devan M. Desai, JJ.
  • Varun K. Patel for the Appellant.

Facts of the Case

Assessing Officer (AO) received information from DDIT (Inv) that assessee had entered into trading of penny stock of two companies and claimed bogus loss. As a result, a notice under section 148 was issued upon the assessee.

Later, AO passed an order and made an addition to an account of alleged bogus loss on the sale of shares. On appeal, the Commissioner (Appeals) partly allowed the appeal of the assessee. However, ITAT deleted the addition.

Aggreived-AO filed the instant appeal before the High Court.

High Court Held

The High Court held that the Tribunal found that assessee had discharged the initial burden cast upon it under provisions of section 68. Shares of companies were purchased online, payments were made through banking channels, and shares were dematerialized. Additionally, the shares were transferred from the dematerialized account and received consideration through legitimate banking channels.

AO did not have any independent source or evidence to show an agreement between the assessee and any other party to convert unaccounted money by taking the fictitious loss. The decision of AO was unsupported by any material on record, and the finding was purely on an assumption basis. Thus, no substantial question of law arose from the order of the Tribunal, and the same was to be upheld.

List of Cases Reviewed

• • ITO v. Champalal Gopiram Agarwal [IT Appeal No. 592 (Ahd.) of 2020, dated 23-12-2022] affirmed.
  • Pr. CIT v. Narmada Chematur Petrochemicals Ltd. [2021] 439 ITR 761 (Guj.) (para 10) followed.

List of Cases Referred to

• • Pr. CIT v. Narmada Chematur Petrochemicals Ltd. [2021] 439 ITR 761 (Guj.) (para 10).