Assessee Resorts To Colourable Devices, Sham Transactions To Defraud Dept: ITAT

The Panaji Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessee had resorted to colourable devices and sham transactions in order to defraud the Department by camouflaging its unaccounted income so that ultimately, the tax could be evaded.The bench of Partha Sarathi Chaudhury (Judicial Member) and Inturi Rama Rao (Accountant Member) has observed that tax planning is legitimate provided it is within the framework of law, and colourable devices cannot be part of tax planning. The legal principle clearly sets out that where tax planning is permitted, the assessee is not allowed to resort to sham transactions or colourable devices for avoiding and evading tax.The appellant/assessee is an individual who filed his return of income, declaring an income of Rs. 7,50,670. A search and seizure action under Section 132 of the Income Tax Act, 1961, was carried out in the case of the assessee on October 24, 2017. In response to the notice issued under Section 148, the assessee filed his return of income, declaring a total income of Rs. 7,50,670.The Assessing Officer (AO) completed the assessment under Section 143(3) r.w.s. 147, determining the total income at Rs. 3,20,00,670. AO had come to a conclusion after meticulous inquiry as regards the purchases found by him as a sham transaction, treating the difference as undisclosed income.The CIT(A) observed that the transactions entered into by the assessee are nothing but the conversion of unaccounted money by way of shell companies, giving them the legitimate colour of converting such unaccounted cash available to the individuals.The tribunal upheld the findings of the CIT(A) and held that the assessee had designed a structure of tax evasion by employing paper companies that were listed on the recognized stock exchanges and the subsidiary paper companies of such listed companies.Counsel For Appellant: NoneCounsel For Respondent: Prabhakar AnandCase Title: Manoj Anand Versus ACITCase No.: ITA No.09/PAN/2022Click Here To Read The Order

Assessee Resorts To Colourable Devices, Sham Transactions To Defraud Dept: ITAT

Mariya Paliwala

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