2014 (12) TMI 350 - AT - Income Tax

Genuineness of claim of loss Addition as income from other sources upheld Sale and purchase in shared - Held that - The sale and purchase of shares shown by the assessee are supported by documentary evidence which has not been refuted by AO or CIT(A) - The addition is based simply on information according to which the assessee has entered into the transactions with one of the concern engaged in the bogus billing - However, there is no material on record to suggest that the transactions entered into by the assessee were bogus either in the terms of sale and purchase or in the terms of rates at which these shares were purchased and sold - assessee has filed evidence to show that these shares were purchased for a price which were prevalent in the market and payments were made through banking channel and these shares were also sold at the prevalent market rate - These shares were also credited in the D-mat account and have gone out of the D-mat account following the decision in Chandrakant Babulal Shah Versus AO 2010 (12) TMI 713 - ITAT, Mumbai - the assessee has proved the genuineness of the share transactions - Decided in favour of assessee.

Summary

Issues:
Validity of re-assessment proceedings and treatment of loss as income from other sources.

Analysis:
The appeal was against the order passed by the Ld. CIT(A) for the assessment year 2005-06. The assessee claimed a loss of Rs. 3,33,956 from transactions involving purchase and sale of shares of a company through a specific intermediary. The AO alleged that the intermediary was involved in fraudulent activities, implying the assessee benefited from the loss. The assessee provided evidence of the transactions, including purchase and sale details, which were not refuted. The AO and Ld. CIT(A) based their decision solely on information regarding the intermediary's activities. The assessee argued that the transactions were genuine, supported by market rates, banking transactions, and D-mat account entries. The Tribunal noted that similar additions were deleted in other cases where the transactions were proven genuine despite allegations. The Tribunal found no evidence to deem the transactions as bogus and ruled in favor of the assessee, citing the genuineness of the transactions and lack of justification for disallowance. The Tribunal referenced previous decisions supporting their ruling and allowed the appeal, deleting the addition of the claimed loss as income from other sources.

In conclusion, the Tribunal held that the assessee had substantiated the genuineness of the share transactions, proving no justification for disallowing the claim of long-term capital gain. The Tribunal directed the AO to allow the claim, ultimately allowing the appeal filed by the assessee.