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2012 (3) TMI 498 - AT - Income TaxUnexplained cash credit u/s 68 - Held that - The identity of the brokers has not been doubted. Even if the sale transactions were of off market transactions, the same are properly documented and supported by evidences. The purchase of shares in the preceding assessment year 2006-07 is not doubted by the AO even while finalizing the scrutiny assessment u/s 143 (3) of the IT Act. Since the shares have been reflected in the balance sheet of the preceding assessment year, therefore, genuineness of the purchase of the shares in earlier years should not have been doubted by the AO in the assessment year under appeal particularly when in earlier year the assessment was made in scrutiny. Thus, the above evidence and explanation of the assessee support the case of the assessee that the assessee entered into genuine transaction. The details noted above clearly prove the sources of sales of the shares; therefore, no addition was required to be made u/s 68 of the IT Act.
Issues Involved:
1. Addition of Rs. 22,93,718/- as unexplained cash credit under Section 68 of the IT Act. 2. Classification of capital gains as long-term or short-term. Detailed Analysis: 1. Addition of Rs. 22,93,718/- as Unexplained Cash Credit under Section 68 of the IT Act: The assessee challenged the addition of Rs. 22,93,718/- on account of unexplained cash credit under Section 68 of the IT Act. The assessee claimed a long-term capital gain of Rs. 19,78,515/- on the sale of shares, which was claimed as exempt. The shares were purportedly purchased from M/s. Swan Securities Pvt. Ltd. in April 2005 and sold through M/s. Motilal Oswal Securities Ltd. in March 2007. The Assessing Officer (AO) called for various details and issued a letter under Section 133(6) of the IT Act to verify the purchase from M/s. Swan Securities Pvt. Ltd. The broker confirmed the purchase but did not provide sufficient details to prove the transfer of shares. The AO observed that the assessee failed to establish that the shares were held for more than 12 months, concluding that the transaction was sham and treated the amount as unexplained cash credit under Section 68 of the IT Act. Before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee provided several documents, including sale bills, purchase bills, account statements, bank statements, and demat account details, to support the genuineness of the transactions. The CIT(A) considered these submissions and directed the AO to reduce the addition, treating it as short-term capital gain (STCG) instead of unexplained cash credit. The CIT(A) noted that the shares were purchased and sold within a few days in March 2007, not held from April 2005 to March 2007, and thus could not be treated as long-term capital gain. 2. Classification of Capital Gains as Long-Term or Short-Term: The assessee argued that the shares were purchased in April 2005 and sold in March 2007, qualifying for long-term capital gains. The CIT(A), however, found that the shares were purchased in March 2007 and held for only a few days, thus classifying the gains as short-term capital gains. The Tribunal reviewed the documentary evidence, including the confirmation from M/s. Swan Securities Pvt. Ltd., ledger accounts, debit notes, balance sheets, and scrutiny assessment orders from previous years. The Tribunal noted that the AO had not doubted the sales of the shares and that the transactions were conducted through account payee cheques. The Tribunal referred to various case laws and CBDT Circular No. 704, which clarified that the date of the broker's note should be treated as the date of transfer if followed by actual delivery of shares and transfer deeds. The Tribunal concluded that the assessee had provided sufficient evidence to prove the purchase of shares in April 2005. Therefore, the gains should be treated as long-term capital gains. The Tribunal set aside the CIT(A)'s order to the extent it classified the gains as short-term and directed the AO to accept the claim of the assessee for long-term capital gains. Conclusion: The Tribunal allowed the appeal of the assessee, directing that the gains be treated as long-term capital gains and dismissed the Revenue's appeal. The order pronounced in the open Court on 16/03/2012 concluded that the assessee had successfully demonstrated the genuineness of the transactions and the correct classification of the capital gains.
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