Cash credits : Section 68: A. Y. 2004-05: Assessee sold shares and claimed to have earned capital gains: Assessee produced purchase bills of shares, letter of transfer, sale bills, accounts with brokers, purchase and sale chart and copy of quotations from stock exchange showing rate of shares at relevant time and letters from brokers confirming sale of shares: Payment of sale price was made through bank channel and not in cash: Sale transactions of shares could not be disbelieved only for reaso<

In the A. Y. 2004-05, the assessee had showed long term capital gains on sale of shares. The Assessing Officer found that the assessee had purchased the shares for a price of Rs. 1,37,750/- in April 2002 and had sold the shares in May and November 2003 for a price of Rs. 42,34,350/-. The Assessing Officer found that the shares were sold for a price more than 30 times of the purchase price. He therefore held that the transactions are bogus. Therefore, he treated the sale price of the shares as the income from undisclosed sources u/s. 68 of the Income Tax Act, 1961. The Commissioner (Appeals) deleted the addition as the assessee had filed purchase bills of shares, letters of transfer, sale bills, accounts of brokers, purchase and sale chart, copy of quotations of Stock Exchange showing the rate of shares at relevant times and letters from broker confirming sale. On an independent inquiry, ICICI Bank informed that payment of sale price of shares was made through bank draft. Thus, documentary evidence proved that the transactions were actual and not fictitious accommodation entries. On appeal, the Tribunal upheld the order of Commissioner (Appeals).

On appeal by the Revenue, the Allahabad High Court upheld the decision of the Tribunal and held as under:

“i) The Commissioner (Appeals) after considering entire evidence of record, found that purchase and sale transactions were proved. He further found that payment of the sale price was made to the assessee through bank channel and not in cash and as such, the transactions are actual transactions and not a fictitious accommodation entries.

 ii) The sale transactions cannot be disbelieved only for the reason that the assessee could not give the identity of the purchasers.”