2018 (3) TMI 1619 - AT - Income Tax

Addition made on account of LTCG by treating the same as income from other sources - Assessee has shown LTCG from sale of 6000 shares of M/s HPC Biosciences Limited and the same has been claimed as exempt u/s. 10(38) - Held that - The assessee has submitted all documentary evidences in support of sale and purchase of shares. However, the entire transaction is through Banking channel and the rejection by the AO as well as CIT(A) as bogus long term capital gain has not basis, hence, the claim of long term capital gain should be allowed - lower authorities relied upon the statement recorded by Investigation Wing, Kolkatta which has no nexus to the assesssee s case. It is also noted that lower authorities made the addition u/s. 68 as unexplained credit instead of long term capital gain as claimed by the assessee, however, the source identity and genuineness of the transaction having been established by documentary evidences and there is no case for making addition u/s 68. - decided in favour of assessee

Summary

Issues involved:
- Addition of long term capital gain as unaccounted income
- Rejection of claim under section 10(38) of the Income Tax Act
- Reliance on statement by Investigation Wing, Kolkatta
- Addition under section 68 as unexplained credit
- Violation of principle of natural justice
- Addition of commission without basis

Analysis:

1. The primary issue in this case pertains to the addition of a significant amount as long term capital gain by the Assessing Officer (AO), alleging it to be unaccounted income. The AO held that the capital gain earned on shares was not genuine and represented unaccounted income, relying on the abnormal rise in share value and lack of past trading experience. The Commissioner of Income Tax (Appeals) upheld this decision, questioning the authenticity of the transaction based on suspicion and rejecting the evidence provided by the assessee.

2. The assessee contended that the transaction was genuine and exempt under section 10(38) of the Act. The counsel argued that all documentary evidence supported the sale and purchase of shares through proper banking channels. The counsel further highlighted that the lower authorities relied on irrelevant statements and failed to establish a case for treating the gain as unexplained credit under section 68.

3. The case law cited by the assessee's counsel emphasized the legality of the transaction and the lack of evidence supporting the suspicion raised by the revenue authorities. The Tribunal noted that the lower authorities had not substantiated their claims with concrete evidence and had misinterpreted the nature of the transaction, leading to the erroneous addition of income.

4. The Tribunal referred to a previous judgment by the Hon'ble High Court of Punjab & Haryana, which highlighted the importance of substantial evidence in cases involving share transactions. The Tribunal concluded that there was no legal basis for the additions made by the AO, and the claim of long term capital gain should be allowed based on the documentary evidence provided by the assessee.

5. Ultimately, the Tribunal ruled in favor of the assessee, deleting the additions of both the disputed long term capital gain and the commission amount. The decision was based on the lack of concrete evidence supporting the revenue authorities' claims and the failure to adhere to the principles of natural justice in the assessment process.

This detailed analysis outlines the key arguments, legal interpretations, and the final decision of the Tribunal in favor of the assessee, emphasizing the importance of evidence and legal compliance in tax assessments.