2012 (9) TMI 1154 - AT - Income Tax

Income on sale and purchase of shares - income assessable under the head income from other sources OR long term capital gain - Held that - No reason or logic in treating the purchase of 11,500 shares as bogus. The Lower Authorities could have directly verified the transaction from the company itself, whose shares were questioned to be bogus but both the Lower Authorities did not do this exercise. The Remand Report of the AO itself show that the transactions have been treated as genuine subsequently by the AO himself while sending the Remand Report to the CIT(A). We find that the sale transaction of 11,500 shares of M/s. Robinson Impex (India) Ltd (Robinson Worldwide Trade Ltd.,) has not been doubted or questioned by the Lower Authorities. A simple logical question arises if the shares were never purchased, how can they be sold subsequently? After considering all the facts and submissions, we find that both the Lower Authorities have grossly erred in treating the sale consideration as Income from un-disclosed sources .

Summary

Issues:
1. Treatment of sale consideration as 'Income from other sources' instead of 'Income from Long Term Capital Gains'.
2. Treatment of purchase transaction of shares as not genuine.

Analysis:
1. The appellant challenged the order of the CIT(A) regarding the treatment of the sale consideration of shares as 'Income from other sources' instead of 'Income from Long Term Capital Gains'. The appellant sold 11,500 shares and reinvested the proceeds in NABARD Bonds. The Assessing Officer (AO) raised concerns about the genuineness of the purchase transaction, leading to the classification of the income as 'Income from un-disclosed Sources'. The CIT(A) upheld this classification. The appellant argued that the purchases were made through off-market transactions and presented evidence to support the genuineness of the transaction, including purchase bills, DMAT account statements, and confirmation letters. The Tribunal found the purchases to be genuine and reversed the lower authorities' decision, directing the AO to accept the Long Term Capital Gains.

2. The second issue pertained to the treatment of the purchase transaction of shares as not genuine. The AO relied on a statement from a representative of the brokerage firm, which was later retracted. The appellant provided various pieces of evidence, including purchase bills, DMAT statements, and confirmation letters, to establish the authenticity of the transaction. The Tribunal noted that the shares were purchased in off-market transactions, transferred to a DMAT account, and subsequently sold. The AO's Remand Report also confirmed the genuineness of the transactions. The Tribunal criticized the lower authorities for not verifying the transactions directly with the company and concluded that the purchase of shares was genuine. Consequently, the Tribunal allowed the appeal and directed the AO to accept the Long Term Capital Gains as returned by the assessee.