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2019 (11) TMI 1543 - AT - Income TaxAddition u/s 68 - treating the purchase and sale of shares by the assessee, as penny stock transactions - HELD THAT - It is noticed that the assessee has not been given a fair opportunity to prove the genuineness but the assessment has been made primarily, based on the evidences collected by the Revenue in the course of the investigation conducted by them on the brokers / share broking entities etc. This is not permissible. This being so, in the interests of natural justice, the issue of the genuineness of the transactions require readjudication. Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion. AO must keep in mind that the onus of proving the exemption rests on the assessee. If the AO does have any evidence to the contrary, it is to be put to the assessee for his rebuttal. The internal communications of the Revenue are evidences for drawing an opinion on possible wrong claims but they are not the final evidence. we deem it fit to remit the issue of exemption in this appeal back to the file of the Assessing Officer for readjudication on the lines indicated above. AO shall require the assessee; to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. The assessee shall comply with the Assessing Officer s requirements as per law. Thus, the issue of exemption claim u/s 10(38) is restored to the file of the Assessing Officer for re-adjudication on the lines indicated above.
Issues:
Appeal against addition of Long Term Capital Gains as not genuine, CIT(A) confirming the addition, genuineness of penny stock transactions, burden of proof on the assessee, fair opportunity to prove genuineness, reliance on tribunal and high court decisions, lack of evidence for assessment, need for re-examination by AO, role of assessee in transactions, requirement for proper materials for exemption claim, need for onus on assessee to establish transactions, lack of evidence for holding shares for more than 12 months, reliance on previous tribunal decisions, need for re-adjudication by AO. Detailed Analysis: 1. The appeal was filed against the addition of Long Term Capital Gains by the Assessing Officer as not genuine, based on investigations by the Revenue and a pattern of organized rackets involving the assessee and associates. The CIT(A) confirmed the addition, relying on previous decisions. The Tribunal noted that the assessee was not given a fair opportunity to prove the genuineness of the transactions, as the assessment was primarily based on evidence collected by the Revenue during investigations. The Tribunal emphasized that the onus of proving exemption from income tax lies on the assessee, and the AO must provide evidence for the assessee to rebut. The Tribunal highlighted the need for proper materials to establish exemption claims and the importance of natural justice in the assessment process. 2. The issue in the appeal revolved around the treatment of the purchase and sale of shares by the assessee as penny stock transactions. The Tribunal observed that the assessee's case was similar to previous cases where re-examination by the Assessing Officer was required. The Tribunal referenced previous tribunal decisions to emphasize the need for a thorough investigation into the transactions, including the role of the assessee in promoting the company and relationships with other promoters. The Tribunal directed the AO to provide a fair opportunity to the assessee to substantiate the transactions and conduct a detailed enquiry as necessary. 3. The Tribunal highlighted the lack of evidence in the assessment order and the importance of factual support for assessments. It noted that assessments should not be based on mere suspicion but require factual substantiation. The Tribunal emphasized the need for the assessee to provide evidence for transactions, including details of share purchases, demat processes, and sales. The Tribunal directed the AO to re-examine the case, considering all relevant factors and providing the assessee with an opportunity to present necessary evidence to support the exemption claim under section 10(38). 4. In conclusion, the Tribunal partially allowed the appeal for statistical purposes and remitted the issue of exemption claim back to the Assessing Officer for re-adjudication. The AO was instructed to require the assessee to establish the genuineness of transactions, provide necessary evidence, and conduct a thorough enquiry into the transactions. The Tribunal emphasized the need for a fair process, proper materials, and adherence to legal requirements in determining the validity of the exemption claim under section 10(38). This detailed analysis of the judgment highlights the key issues, legal principles, and directions provided by the Tribunal in the case.
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