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Writer's picturePiyush Singla

Money Laundering through Stockbroker: ITAT upholds Denial of Income Tax Exemption u/s10(38)


The Income Tax Appellate Tribunal (ITAT), Delhi bench has upheld an order denying income tax exemption to the assessee allegedly involved in the scam of money laundering through stockbroker.


The AO, while concluding the assessment proceedings against the assessee, a lady noted that as per the Investigation report of the Investigation Wing, Kolkata, M/s Lifeline Drugs & Pharma Ltd. is a penny stock company and certain stockbrokers were involved in providing accommodation entries in the form of sale of shares against payment ofa commission. He noted that certain brokers had admitted that they had received cash from beneficiaries including the assessee and the same was returned in the form of sale proceeds of shares with STT payment to entitle them to claim the benefit of exemption under section 10(38) of the Act.


Upholding the action of the AO, the Tribunal bench comprising R. K. Panda, Accountant Member and Shri Anubhav Sharma, Judicial Member observed that the claim of deduction under section 10(38) of the Act on the ground that the assessee failed to substantiate with evidence to his satisfaction regarding sale of shares of M/s Lifeline Drugs & Pharma Ltd. which increased from Rs.6 to Rs.186.84 in just 18 months.


“According to him, hike in price of the scrip is not supported by the fundamental of the company and the assessee could not substantiate with any supporting evidence to justify the transaction. We find the ld. CIT(A) in his elaborate order has decided the issue and dismissed the appeal filed by the assessee on the ground that the AO has clearly given the modus operandi of money laundering by the stockbroker of the agents and the beneficiaries are interested in having their money laundered. He has given detailed reasoning as to how the assessee has introduced her unaccounted money in the garb of Long-Term Capital Gain. Nothing has been brought by the assessee before us to take a contrary view than the view taken by the ld. CIT(A) on this issue. We, therefore, uphold theorder of the Ld. CIT(A) and the ground raised by the assessee is dismissed,” the Tribunal said.


Senior Council Sh. Rajesh Kumar Dhanesta appeared for the department.

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