2013 (1) TMI 847 - AT - Income Tax

Whether share transactions were bogus and fictitious - Held that - The assessee filed copy of the balance sheet of earlier year, copy of bank account, allotment letter, quotation of shares and copies of shares sold along with the sale bills and contract notes issued by the share broker - Hence the sales are not sham transactions - Assessee has received entire sale consideration of shares through known sources - Decided against the revenue

Summary

Issues:
Challenging acceptance of capital gains on sale of shares and addition made under section 68 of the IT Act.

Analysis:
The appeal by the Revenue contested the order accepting the claim of the assessee regarding capital gains on the sale of shares and challenging the AO's addition under section 68 of the IT Act. The AO treated the amount received from the sale of shares as income from undisclosed sources, alleging that the transactions were bogus. The assessee claimed long-term capital gains and exemption under section 54EC, stating the amount was invested in NABARAD bonds. The AO requested evidence to verify the genuineness of the transaction, including the broker's involvement and the source of funds. The assessee provided various documents to support the transaction's authenticity, including balance sheets, bank account details, sale bills, and contract notes. The ld. CIT(A) found in favor of the assessee, noting the lack of evidence to prove the transactions were fictitious or bogus. The burden of proof was considered to be met by the assessee, leading to the deletion of the addition.

The Revenue argued that the company providing accommodation entries was non-existent, transactions were unverifiable, and statements of relevant individuals were not provided to the assessee. However, the ld. CIT(A) had already deleted the addition based on the evidence presented by the assessee, including documents supporting the purchase and sale of shares through known sources. The Tribunal found no reason to interfere with the ld. CIT(A)'s decision, especially considering similar cases where additions were deleted by the Tribunal and confirmed by the High Court. The assessee's evidence, supported by relevant documents, demonstrated the genuine nature of the transaction, leading to the dismissal of the departmental appeal.

In conclusion, the Tribunal upheld the ld. CIT(A)'s decision to delete the addition, as the assessee successfully proved the authenticity of the share transaction and the source of funds. The evidence presented, including documents and High Court decisions in similar cases, supported the assessee's position. Therefore, the departmental appeal was dismissed, and no addition under section 68 was warranted against the assessee.