2011 (12) TMI 568 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 37,77,847/- made by the Assessing Officer u/s 68.
2. Deletion of addition of Rs. 1,88,890/- on account of alleged commission paid to broker.

Summary:

Issue 1: Deletion of Addition u/s 68

During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had shown Long Term Capital Gain (LTCG) from the sale of shares amounting to Rs. 37,77,847/-. The AO concluded that the income shown as LTCG was a sham transaction and added the amount u/s 68 of the Act, treating it as unexplained cash credit. The AO's conclusion was based on several observations, including the non-receipt of dividends, unserved letters to brokers, and discrepancies in the company's letterhead.

In response, the assessee provided detailed submissions and evidence, including broker notes, contract notes, share certificates, and Demat account statements, to establish the genuineness of the transactions. The CIT (A) found that the AO failed to bring any evidence to show that the transactions were bogus or that the assessee paid unaccounted cash to the brokers. The CIT (A) held that the purchase and sale of shares were genuine and that the profit from the sale of shares was assessable as LTCG, not as unexplained cash credit u/s 68.

The Tribunal confirmed the findings of the CIT (A), noting that the transactions were executed at prevailing market rates, the shares were credited to the Demat account, and the sale proceeds were received through account payee cheques. The Tribunal found no infirmity in the CIT (A)'s findings and upheld the deletion of the addition of Rs. 37,77,847/-.

Issue 2: Deletion of Addition on Account of Alleged Commission

The AO made an addition of Rs. 1,88,890/- on the basis that the transaction of sale of shares was an accommodation entry and that the assessee must have paid some commission to the broker. The CIT (A) deleted this addition, holding that since the transaction of purchase and sale of shares was genuine, there was no question of the assessee paying any commission over and above what was shown.

The Tribunal confirmed the deletion of the addition, agreeing with the CIT (A) that the transaction of purchase and sale of shares was genuine and that there was no evidence to support the AO's claim of commission payment.

Conclusion:

The Tribunal dismissed the department's appeal, confirming the CIT (A)'s findings that the transactions were genuine and that the additions made by the AO were not justified.