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2012 (5) TMI 647 - AT - Income TaxUnexplained Cash Credits u/s 68 - The client code shown by the CSE and as provided by the assessee varied and on this basis, the AO held that the purchases shown by the assessee were not genuine, therefore, the sale proceeds were bogus/sham - HELD THAT - Revenue authorities have heavily relied on the discrepancy pointed out by CSE, regarding client code, but at no point of time the revenue authorities have been able to prove that the sale of the impugned shares was bogus/sham. We are unable to sustain the additions primarily on the point that the credits in the books of the assessee are on account of sale of a commodity (shares), which is duly reflected in the DMAT account, both of which cannot be challenged. We are in full agreement with the argument of the AR that even if the sale by any chance could not be effected through broker, even then the sale would remain sale, till the time it is not proved otherwise that these were not conducted through regular channels. The burden of proof shifts on the department, which the revenue authorities have failed. Making an addition on conjectures cannot be expected to be sustained. Therefore, additions by AO are to be deleted. Sale Proceeds of Shares - Credits u/s 68 or Not? - AO disallowed the claim of loss incurred on sale of shares - HELD THAT - As the sales of shares are not bogus, sale proceeds of the shares are not to be treated as credits u/s 68. Thus, the loss on the sale of shares is allowed. Decision in favour of Assessee.
Issues Involved:
1. Addition of sale proceeds as unexplained cash credit under section 68 of the Income Tax Act. 2. Disallowance of the claim of loss on the sale of shares. Detailed Analysis: 1. Addition of Sale Proceeds as Unexplained Cash Credit under Section 68: Facts and Background: The assessee, an individual maintaining a shares portfolio, was subjected to search and seizure operations under section 132, leading to assessments under sections 153A/143(3). The focus was on transactions involving shares of Bolton Properties Ltd., Mantra Online Ltd., and Prime Capital Ltd., conducted through brokers at the Calcutta Stock Exchange (CSE). The Assessing Officer (AO) questioned the genuineness of these transactions, leading to additions under section 68 for unexplained cash credits. Assessment Year 2003-04: The AO added Rs. 25,93,150 as unexplained cash credit, doubting the genuineness of the sale proceeds. The CIT(A) upheld this addition, rejecting the assessee's claim of capital gains. Appeal by Assessee: The assessee argued that the transactions were genuine, conducted through regular brokers with proper documentation and reflected in the DMAT account. The AR presented evidence, including broker notes and bank transactions, to support the claim. Tribunal's Findings: The Tribunal examined the evidence and found that the transactions were genuine and reflected in the DMAT account. The revenue authorities failed to prove that the transactions were bogus or that there was an accommodation of cash. The discrepancy in client codes pointed out by CSE was not sufficient to discredit the transactions. The Tribunal relied on several judicial precedents, including the Bombay High Court's decision in CIT Vs Smt. Jamnadevi Agarwal, to conclude that the transactions were genuine and the additions under section 68 were unwarranted. Conclusion: The Tribunal deleted the additions made by the AO and sustained by the CIT(A), allowing the appeal in favor of the assessee for the assessment year 2003-04. Similar reasoning was applied to the appeals for assessment years 2005-06 and 2006-07, leading to the deletion of additions for those years as well. 2. Disallowance of the Claim of Loss on the Sale of Shares: Assessment Year 2004-05: The AO disallowed the claim of loss of Rs. 5,95,720 incurred on the sale of shares of Prime Capital Markets Ltd., treating the sale proceeds as unexplained cash credits under section 68. Appeal by Assessee: The assessee argued that the loss was genuine and supported by proper documentation. Tribunal's Findings: The Tribunal, following its reasoning for the addition of sale proceeds, held that the sale proceeds of the shares should not be treated as credits under section 68. Consequently, the loss incurred on the sale of shares was genuine and allowable. Conclusion: The Tribunal allowed the claim of loss of Rs. 5,95,720 for the assessment year 2004-05, in favor of the assessee. Final Order: The appeals filed by the assessee for the assessment years 2003-04, 2004-05, 2005-06, and 2006-07 were allowed, with the Tribunal deleting the additions made under section 68 and allowing the claim of loss on the sale of shares. The order was pronounced in open court on 04/05/2012.
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