2011 (5) TMI 1050 - AT - Income Tax

Claim of the assessee - capital gain - unexplained credit under the provisions of section 068 - HELD THAT - the assessee filed a paper book containing 36 pages which inter alia include the demat account statement showing purchase of shares through M Bhiwaniwala Co. and sales through Ashok kumar Kayan Broker note for the sale of the shares of Shree Nidhi Trading Ltd. Working of long term capital gain exempt u/s 010(38) and Form 10DB as proof of payment of security transaction tax. The Counsel of the assessee submitted that on doubts and suspicion AO treated the capital gain of Rs. 36, 71, 882/- declared on sale of share as unexplained credit u/s 068 and the ld. CIT(A) rightly directed the AO to treat the same as capital gain. Therefore the view taken by the ld. CIT(A) be upheld. In the result the appeal of the Revenue is dismissed.

Summary

Issues:
Appeal against order treating capital gain as unexplained credit under section 68 - Assessment year 2006-2007.

Analysis:
1. The appellant, Revenue, challenged the order of the ld. CIT(A) directing the AO to accept the claim of the assessee of Rs. 36,71,882/- as capital gain instead of unexplained credit under section 68 for the assessment year 2006-2007.

2. The AO treated the amount as unexplained credit, disputing the genuineness of the transactions. However, the ld. CIT(A) directed acceptance of the claim based on various grounds presented by the assessee.

3. The grounds for accepting the claim included:
- Broker suspension not sufficient to deem transactions as bogus.
- Use of 'self' code by broker pre-1.4.2005 permissible.
- Confirmation by Calcutta Stock Exchange of online trading.
- Transactions not done offline.
- No mandatory agreement required as per SEBI guidelines.
- Price increase not sole basis for treating transactions as bogus.

4. The Revenue contended that the broker confirmed purchases were not made by the assessee, casting doubt on the transactions' authenticity. The absence of client code and tax charges raised suspicions.

5. The Revenue further argued that the broker's suspension indicated a history of malpractices, and the sharp increase in share value raised doubts about the transactions' legitimacy.

6. The assessee's representative supported the ld. CIT(A)'s decision, providing documentary evidence to substantiate the transactions' genuineness.

7. The Tribunal examined the details and upheld the ld. CIT(A)'s order, emphasizing the explanations provided by the assessee, including compliance with pre-1.4.2005 guidelines, confirmation by brokers, and absence of evidence supporting the Revenue's doubts.

8. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the acceptance of the claimed capital gain of Rs. 36,71,882/-.

This detailed analysis highlights the key arguments, counter-arguments, and the Tribunal's decision in the legal judgment regarding the treatment of capital gain as unexplained credit under section 68 for the assessment year 2006-2007.