2011 (4) TMI 1331 - AT - Income Tax

Bogus LTCG - unexplained credit u/s 068 - This is an appeal filed by the Revenue directed against the order of the CIT(A). In present case, AO questioned the veracity of the fact brought in the affidavit of Mr. Mekesh Chokshi. The AO has doubted the genuineness of the very transactions entered by the appellant and were sold by the appellant at R.79 to 95 per share where in the rate quoted in the Ahmedabad Stock Exchange (ASSESSEE) was only ₹ 49/- per share on the last trading. The AO was of the view that selling of the shares of Talent Infoway Ltd. at ₹ 79 to ₹ 95 per share as against ₹ 49/- per share quoted in the ASSESSEE on the last trading of share itself give a vital view of the fabricated transaction. The AO also expressed his apprehensions for the genuineness of the real buyers of the shares from M/s Mahasagar securities Pvt. Ltd. The AO also gave a finding that appellant failed to establish any real buyer has purchased the shares and no detail was given by M/s Mahasagar securities Pvt. Ltd. regarding the buyers of the shares. HELD THAT - Considering all the facts and the fact that the similar addition on similar grounds was deleted by the CIT(A), the deletion was confirmed by the Hon ble Mumbai ITAT with the following remarks We first take up the revenue of the as the both the parties have agreed that the issue is covered in favour of the assessee and against the revenue by the decision of this Bench of the Tribunal in the case of Shri Mukesh R. Morolia 2005 (12) TMI 457 - ITAT MUMBAI and a decision in the case of Mrs. Rajnidevi K. Chaudhary 2009 (4) TMI 936 - BOMBAY HIGH COURT as confirmed by the Hon ble Bombay High Court, we uphold the order of the CIT(A). Respectfully following this decision of the Hon ble ITAT on similar facts in the case of the appellant s brother and taking into consideration all the reasons discussed, the addition made by the AO treating LTCG as unexplained credits u/s 068 of the Act is deleted and AO is directed to assess the same as LTCG as shown by the appellant.

Summary

Issues:
1. Appeal filed by Revenue against CIT(Appeals) order.
2. Treatment of LTCG on sale of shares as unexplained cash credit.
3. Disputed genuineness of share transactions.
4. Validity of transactions made off-market.
5. Requirement to produce buyers in share transactions.
6. Comparison with similar cases and precedent judgments.

Analysis:

1. The appeal was filed by the Revenue against the order of CIT(Appeals)-27, Mumbai dated 8th December, 2009. The case involved the treatment of Long Term Capital Gains (LTCG) on the sale of shares as unexplained cash credit under section 68 of the Income Tax Act.

2. The Assessing Officer (AO) raised concerns regarding the genuineness of the share transactions, alleging that the transactions were fabricated and involved hawala transactions. The AO questioned the authenticity of the transactions despite the appellant providing documentary evidence such as broker fees, contract notes, and banking channel transactions.

3. The appellant contended that the share transactions were legitimate and supported by proper documentation. The appellant highlighted that the transactions were conducted through recognized stock exchanges and provided evidence of the transfer of shares, payments made, and dematerialization process.

4. The CIT(Appeals) upheld the appellant's submissions, emphasizing that off-market transactions do not necessarily indicate fraudulent activities. The absence of the buyer's details was not deemed a valid objection, and the price fluctuations in share values were considered normal.

5. The CIT(Appeals) referred to similar cases and precedent judgments where additions made by the AO on similar grounds were deleted. The Tribunal and the High Court had ruled in favor of the assessee in those cases, supporting the legitimacy of off-market share transactions and rejecting the AO's doubts.

6. Considering the consistent decisions in similar cases, the ITAT Mumbai upheld the CIT(Appeals) order, directing the AO to assess the LTCG as shown by the appellant and deleting the addition made under section 68 of the Act. The judgment relied on the established legal principles and precedents to resolve the issues raised by the Revenue effectively.