2019 (5) TMI 1694 - AT - Income Tax

Bogus unexplained cash credits - Short Term Capital Loss (STCL) arising from sale of shares after payment of Security Transaction Tax (STT) - HELD THAT - Addition as per respective stands of the parties. There is hardly any dispute that Revenue has placed on reliance of the circumstantial evidence on statement of an alleged entry operator indicating artificial rigging of scrip prices in issue. AO as well as CIT(A) are of the view that the said clinching evidence in the nature of search statement make it clear that the assessee s STCL is not genuine. DR places strong reliance on hon ble apex court s landmark decisions in Sumati Dayal vs. CIT 1995 (3) TMI 3 - SUPREME COURT and CIT vs. Durga Prasad More 1971 (8) TMI 17 - SUPREME COURT that suspicious circumstances highlighted in the lower appellate discussion extracted hereinabove deserves to be upheld as per the human probabilities by removing all blinkers. This tribunal s co-ordinate bench s decision in Mahavir Jhanwav vs. ITO 2019 (3) TMI 210 - ITAT KOLKATA holds that such circumstantial carries no significance - Decided in favour of assessee.

Summary

Issues Involved:
1. Short Term Capital Loss (STCL) from sale of shares.
2. Allegation of bogus unexplained cash credits.
3. Assessment of genuineness of transactions.
4. Application of circumstantial evidence and human probability.

Issue-wise Detailed Analysis:

1. Short Term Capital Loss (STCL) from Sale of Shares:
The appellant claimed a Short Term Capital Loss of Rs. 11,92,320/- from the sale of 32,000 shares of Global Infratech & Finance Ltd. The shares were purchased through Eureka Stock and Shares Broking Services Limited at Rs. 77.37 per share and sold at Rs. 40.11 per share. The appellant argued that since the shares were held for less than 12 months, they qualified as Short Term Capital Assets under Section 2(42A) of the Income Tax Act, 1961.

2. Allegation of Bogus Unexplained Cash Credits:
The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) [CIT(A)] treated the STCL as bogus unexplained cash credits. The AO relied on information from the DDIT (Inv.), Kolkata, which indicated that the shares were part of a modus operandi to generate bogus capital losses. Statements from directors of Global Infratech & Finance Ltd. and Eureka Stock and Shares Broking Services Limited revealed that these companies were involved in providing accommodation entries for bogus losses.

3. Assessment of Genuineness of Transactions:
The AO issued a show cause notice to the appellant, questioning the genuineness of the transactions. The appellant responded by providing documentation of the transactions, including payments made through account payee cheques. However, the AO concluded that the transactions were sham, based on the pre-determined nature of the prices, timing, and buyers, and the involvement of accommodation entry providers.

4. Application of Circumstantial Evidence and Human Probability:
The CIT(A) concurred with the AO, emphasizing the importance of circumstantial evidence and the test of human probability. The CIT(A) referenced several judicial precedents, including the Supreme Court's decisions in CIT vs. Durga Prasad More and Sumati Dayal vs. CIT, which support the use of circumstantial evidence to assess the genuineness of transactions. The CIT(A) also cited the Supreme Court's denouncement of tax avoidance schemes in McDowell & Co Ltd. vs. CTO.

Judgment:
The CIT(A) upheld the AO's decision to treat the STCL as bogus, citing the appellant's failure to prove the genuineness of the transactions. The decision was based on the broader context of stock market manipulation and the findings of the Special Investigation Team (SIT) on black money. The CIT(A) dismissed the appellant's reliance on favorable case laws, arguing that the specific circumstances and human probabilities in the present case justified the disallowance of the STCL.

Conclusion:
The Tribunal allowed the appellant's appeal, adopting the detailed discussion of similar cases where circumstantial evidence and human probabilities were deemed insufficient to disprove the genuineness of transactions. The Tribunal emphasized the need for concrete evidence rather than generalizations and upheld the appellant's documentation as sufficient proof of genuine transactions. The order was pronounced in open court on 15/05/2019.