2010 (2) TMI 1234 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 16,83,000/- by holding that the capital gain arising out of share transactions was genuine.

Summary:

1. Deletion of Addition of Rs. 16,83,000/-:
The department appealed against the CIT(A)'s order for the assessment year 2003-04, objecting to the deletion of an addition of Rs. 16,83,000/-. The AO had questioned the genuineness of the capital gains claimed by the assessee from the sale of 15,000 shares of Mantra Online Ltd. The AO noted that the shares were purchased in cash and sold through a broker, M/s. Prakash Nahata & Co., with the sale proceeds received by cheque. The AO doubted the authenticity of the transactions due to the cash payment for the purchase and the lack of details in the broker's note. The AO concluded that the entire transaction was not genuine and taxed the sale consideration as "income from other sources" u/s.68.

Before the CIT(A), the assessee argued that cash payment does not render a transaction non-genuine and that off-market transactions are permissible. The assessee provided documentary evidence, including confirmations from the broker and the company, share certificates, and balance sheets reflecting the investment. The CIT(A) found the AO's doubts to be based on conjecture and surmises, noting that the transaction was supported by substantial documentary evidence. The CIT(A) deleted the addition, citing the decision in Mukesh R. Marolia (6 SOT 247) (Mum. ITAT), which upheld the genuineness of off-market transactions.

The department appealed to the Tribunal, where the ld. D.R. supported the AO's order, and the assessee's counsel relied on the CIT(A)'s order and the Tribunal's decision in Parasmal Nahata (ITA No.73/Mum/08). The Tribunal, after considering the submissions and evidence, found no reason to interfere with the CIT(A)'s findings. The Tribunal upheld the CIT(A)'s order, noting that the AO's conclusions were based on presumptions rather than factual evidence. The Tribunal confirmed the deletion of the addition of Rs. 16,83,000/-.

Conclusion:
The Tribunal dismissed the department's appeal, confirming the CIT(A)'s order that the share transactions were genuine and the addition of Rs. 16,83,000/- was rightly deleted. The order was pronounced on 24th February 2010.