2012 (8) TMI 452 - AT - Income Tax

Treating the sale consideration as bogus cash credits - Held that - Not only that assessee also had number of transaction including speculation profits in stock market and conduct of assessee shows that he is a regular investor. In the absence of any specific information about assessee s transactions being bogus, the general inquiry made by the Department in a particular broker s case cannot be accepted at face value that assessee s transactions are also bogus - There were letters about the delivery of shares and sub Division of Shares and these evidences against the same broker cannot be ignored. As the CIT (A) extracted the cross examination, incidentally by the same AR, in another case with reference to another broker who is not at all connected to assessee s transactions and confirmed the action of AO. Therefore it is a fit case to restore the matter to the file of AO to examine the contentions - in favour of assessee for statistical purposes.

Summary

Issues:
Consideration of sale of shares as bogus capital gain and treatment as undisclosed income under section 68, addition of commission for arranging capital gains in penny stocks.

Analysis:
The appeal before the Appellate Tribunal ITAT, Mumbai involved the issue of treating the sale of shares by the assessee as bogus capital gain and undisclosed income under section 68, along with the addition of commission for arranging capital gains in penny stocks. The assessee, engaged in various businesses, disclosed long-term capital gain on the sale of shares. The Assessing Officer (AO) deemed the transactions as non-genuine based on a modus operandi and letters from a brokerage firm, treating the entire receipts as income under section 68 and adding a commission amount. The CIT (A) upheld the AO's decision, citing similar cases and investigations. The tribunal noted the assessee's submissions, including purchase and sale bills, and the availability of balance shares. The tribunal disagreed with the AO and CIT (A), emphasizing the need to establish specific bogus transactions. It highlighted the assessee's prior investments, conduct as a regular investor, and evidence supporting the genuineness of transactions with the brokerage firm. The tribunal directed the matter back to the AO for detailed examination, cross-examination of relevant persons, independent inquiries, and providing the assessee with an opportunity before deciding the issue. The tribunal set aside the orders of the AO and CIT (A) and allowed the appeal for statistical purposes.

This detailed analysis of the judgment highlights the key issues, arguments presented by the parties, the tribunal's reasoning, and the ultimate decision to remand the matter back to the AO for further examination.