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2010 (6) TMI 769 - AT - Income TaxDeduction u/s 54F - Deduction denied as capital gains is bogus - HELD THAT - Considering the facts of the case it is to be concluded that the addition has been made by the A.O. without any basis and merely on conjectures and surmises. We also noticed that the learned CIT(A) while confirming the case of the A.O. has referred to certain details not furnished such as purchase and sale of M/s DSQ Software which was squared of against the purchase of the shares of M/s Bolton Properties Ltd. and also the fact that the ultimate buyers of the shares were operating from the same broker s address. These inferences relied upon by the learned CIT(A) in the light of the documentary evidence are not sufficient to come to the conclusion that these transactions of purchase and sale of shares by the assessee resulting in capital gains is bogus. Not only that the company also transferred the shares in the name of the assessee by issuance of jumbo certificate and ownership of the shares were also recorded in the form of demat account maintained in Bank of Baroda. The member client agreement was also furnished which indicate that the assessee was registered with the broker as per the norms. Under the facts and circumstances of the case we are of the view that the capital gain as declared by the assessee is to be accepted and the addition made by the A.O. deserves to be deleted. Consequent to that the assessee is eligible for deduction under section 54F. The A.O. is directed to do so. Accordingly the respective grounds are considered allowed. Addition u/s 69C for the low withdrawals - In the absence of any information on record we deem it fit to restore the issue back to the file of the A.O. to give one more opportunity to the assessee to furnish the necessary details in support of the expenditure. In the absence of any details from the assessee the A.O. is free to estimate the expenditure keeping in mind the capital account of the assessee in firms and also husband s capital account. With these directions the issue is restored back to the file of the A.O. Ground is allowed. Appeal partly allowed.
Issues Involved:
1. Validity of assessment under section 148. 2. Classification of income from sale of shares as long-term capital gains vs. income from other sources. 3. Eligibility for exemption under section 54F on investment in residential house. 4. Addition under section 69C for low withdrawals. Issue-wise Detailed Analysis: 1. Validity of Assessment under Section 148: The assessee did not press for this ground during the argument, leading to its withdrawal. Therefore, the issue regarding the initiation of assessment proceedings under section 148 is treated as withdrawn. 2. Classification of Income from Sale of Shares: The assessee claimed long-term capital gains on the sale of shares of Bolton Properties Ltd. The Assessing Officer (A.O.) treated the sale proceeds as income from other sources, citing the non-genuineness of the transactions based on various newspaper reports and investigations indicating fraud. The A.O. presumed that the assessee converted unaccounted money into sale proceeds through off-market transactions and cash deposits with brokers. However, the assessee provided evidence, including share transfer deeds, dematerialization records, broker confirmations, and bank statements, to substantiate the genuineness of the transactions. The Tribunal noted that the A.O.'s conclusions were based on conjectures and newspaper reports unrelated to the assessee's transactions, which occurred much earlier. The Tribunal found no evidence linking the assessee to the alleged fraudulent activities. Consequently, the Tribunal concluded that the transactions were genuine, and the gains should be classified as long-term capital gains. 3. Eligibility for Exemption under Section 54F: The assessee claimed exemption under section 54F for the investment in a residential house. The A.O. denied this exemption due to the classification of the gains as income from other sources. However, since the Tribunal accepted the gains as long-term capital gains, the assessee became eligible for the exemption. The Tribunal directed the A.O. to allow the deduction under section 54F, noting that there was no restriction on claiming the exemption for the same property over multiple years, provided the conditions of section 54F were met. 4. Addition under Section 69C for Low Withdrawals: The A.O. added Rs. 1,89,000 under section 69C due to low withdrawals for household expenses, estimating higher living expenses based on the standard of living in Mumbai. The Tribunal found that the assessee had not provided sufficient details of personal expenditures and sources. Therefore, the Tribunal restored the issue to the A.O. for reconsideration, instructing the A.O. to examine the capital accounts and other relevant details to make a fair estimation of household expenses. The assessee was directed to furnish the necessary details for a proper assessment. Conclusion: The Tribunal allowed the appeals partly, directing the A.O. to: - Classify the gains from the sale of shares as long-term capital gains. - Allow the exemption under section 54F. - Re-examine the addition under section 69C for low withdrawals with detailed scrutiny of household expenses and sources.
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