2019 (2) TMI 1636 - AT - Income Tax

Bogus LTCG - claim of exemption made u/s 10(38) rejected - addition u/s 68 - HELD THAT - In a number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. The assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) copy of merger order passed by the High Court , (f) copy of allotment of shares on merger, (g) evidence of sale of shares through the stock exchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statement reflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc. Thus delete the addition made u/s 68 of the Act, on account of Long Term Capital Gains. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of claim of Long Term Capital Gains on sale of shares.

Detailed Analysis:

Issue 1: Rejection of claim of Long Term Capital Gains on sale of shares

The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the rejection of the claim of the assessee on Long Term Capital Gains from the sale of shares of a company. The Assessing Officer (AO) rejected the claim based on general observations and a report, treating the gains as bogus and adding the entire sale proceeds as income. The evidence provided by the assessee supporting the genuineness of the transaction was dismissed. The Commissioner upheld the addition based on circumstantial evidence and human probabilities, without any direct material contradicting the assessee's evidence. The conclusions drawn were solely based on a general report from the Investigation Wing, without specific evidence against the assessee.

The Departmental Representative argued that the transaction was not genuine, citing the involvement of operators and investors in managing the capital gain. Reference was made to previous judgments to support the position. However, the Tribunal highlighted the necessity for decisions to be evidence-based rather than relying on generalizations, suspicions, or conjectures. Several cases were cited where additions were deleted based on detailed findings and evidence.

The Tribunal found that the assessee had provided extensive evidence supporting the transactions, including purchase and sale details, bank statements, demat statements, merger orders, and other relevant documents. The Tribunal noted that the case laws cited by the Departmental Representative did not apply directly to the current case, as the assessee had adequately substantiated the transactions with evidence. The Tribunal emphasized the importance of following the precedents set by the Jurisdictional High Court and the ITAT Kolkata, which favored the assessee in similar cases.

Conclusively, the Tribunal ruled in favor of the assessee, deleting the addition made under section 68 of the Income Tax Act concerning Long Term Capital Gains. The decision was based on the extensive evidence provided by the assessee and the precedents established by the Jurisdictional High Court and the ITAT Kolkata in similar cases.

In summary, the judgment revolved around the rejection of the claim of Long Term Capital Gains on the sale of shares, emphasizing the importance of evidence-based decisions and adherence to legal precedents in similar cases. The Tribunal ultimately ruled in favor of the assessee, deleting the addition made by the Assessing Officer.