2012 (5) TMI 669 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 6,19,680/- by CIT(A) holding share transaction as genuine.
2. General grounds of appeal by the Revenue.

Summary:

Issue 1: Deletion of Addition of Rs. 6,19,680/- by CIT(A) Holding Share Transaction as Genuine

The Revenue appealed against the CIT(A)'s order dated 22.06.2009, which deleted the addition of Rs. 6,19,680/- by holding the share transaction as genuine. The Revenue argued that the CIT(A) ignored the material on record and reversed the findings of the AO, who had concluded that the assessee failed to prove the genuineness of the purchase of shares.

The assessee had declared long-term capital gains from the sale of shares of M/s Sangotri Construction Ltd. and Punjab National Bank, claiming exemption u/s 10(38) of the Act. The AO, based on SEBI's report and other inquiries, concluded that the transactions were bogus, citing artificial volume creation and the involvement of connected entities. The AO added Rs. 6,19,680/- to the assessee's income, claiming the long-term capital gain was fictitious.

The CIT(A) found that the AO's conclusions were based on circumstantial evidence and that there was no conclusive proof that the transactions were ingenuine. The CIT(A) noted that SEBI's report did not specifically declare the assessee's transactions as bogus and that the shares were listed on the Kolkata Stock Exchange. The CIT(A) also highlighted that the purchase and sale prices were consistent with prevailing market rates and that the transactions were executed through a demat account, indicating actual possession of shares by the assessee.

The Tribunal upheld the CIT(A)'s findings, stating that the AO failed to provide cogent and relevant material to prove the transactions as bogus. The Tribunal emphasized that the surrounding circumstances must be strong enough to establish the transactions as ingenuine, which was not the case here. Therefore, the Tribunal dismissed the Revenue's appeal on this ground.

Issue 2: General Grounds of Appeal by the Revenue

The Tribunal found that Ground Nos. 2 and 3 were general in nature and did not require separate adjudication.

Conclusion:

The appeal of the Revenue was dismissed, and the order of the CIT(A) was upheld. The Tribunal found no infirmity in the CIT(A)'s decision to treat the income from the sale of shares as capital gains. The order was pronounced in the Open Court on 17th May 2012.