2019 (2) TMI 1680 - AT - Income Tax

Denial of exemption u/s 10(38) - addition u/s 68 - bogus LTCG - the entire conclusions drawn by the revenue authorities, are based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee - HELD THAT - Tribunal and Jurisdictional Calcutta High Court has consistently held that cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. 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) evidence of sale of shares through the stock exchange, (f) copy of demat statement showing the sale of shares, (g) copy of bank statement reflecting sale receipts, (h) copy of brokers ledger, (i) copy of Contract Notes etc. The proposition of law laid down in case laws by the Jurisdictional High Court as well as by the ITAT Kolkata in SANJAY MEHTA VERSUS ACIT, KOLKATA 2018 (10) TMI 187 - ITAT KOLKATA and other decisions on these issues are in favour of the assessee. These are squarely applicable to the facts of the case. The ld. Departmental Representative, though not leaving his ground, could not controvert the claim of the ld. Counsel for the assessee that the issue in question is covered by the above cited decisions of the Hon ble Jurisdictional Calcutta High Court and the ITAT. I am bound to follow the same. - In view of the above discussion I delete the addition made u/s 68, on account of Long Term Capital Gains.

Summary

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

Detailed Analysis:
1. The appeal was filed against the order of the ld. Commissioner of Income Tax (Appeals) regarding the rejection of the claim of Long Term Capital Gains on shares of M/s Kappac Pharma Limited under section 10(38) of the Income Tax Act, 1961. 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.

2. The ld. CIT(A) upheld the addition relying on circumstantial evidence, human probabilities, and rules of suspicious transactions. However, no direct material was presented to counter the evidence submitted by the assessee. The conclusions were based on a general report from the Director of Investigation, Kolkata, not specific to the assessee, without providing the report to the assessee for review.

3. The ld. Departmental Representative argued that the transaction was not genuine, claiming it was orchestrated by a few operators and investors. Various judgments were cited to support this argument. However, the ITAT Kolkata and the Jurisdictional Calcutta High Court consistently emphasized that decisions should be evidence-based, not on generalizations or suspicions. Several cases were cited where additions were deleted based on detailed findings.

4. The ITAT noted that the assessee had produced substantial evidence to support the transactions, including purchase evidence, payment details, bank statements, demat statements, sale evidence, and broker records. Citing previous case laws, the ITAT concluded that the evidence provided by the assessee was sufficient to support the genuineness of the transactions.

5. Relying on the precedents set by the Jurisdictional High Court and the ITAT Kolkata, the ITAT ruled in favor of the assessee and deleted the addition made under section 68 of the Act for Long Term Capital Gains. The decision was based on the evidence presented by the assessee and the application of relevant legal principles established in previous judgments.

6. Consequently, the appeal of the assessee was allowed, and the addition made by the AO was deleted. The judgment highlighted the importance of evidence-based decision-making in tax matters and emphasized the need for specific material to support conclusions rather than relying on generalizations or suspicions.