2019 (11) TMI 1556 - AT - Income Tax

Bogus LTCG - 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. Thus, the 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. As relying on case of Shri Heerachand Kanunga 2018 (6) TMI 1329 - ITAT CHENNAI 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. Therefore, the Assessing Officer 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. Appeal filed by the assessee is treated as partly allowed for statistical purposes.

Summary

Issues involved:
1. Validity of addition made by the Assessing Officer regarding Long Term Capital Gain claimed by the assessee.
2. Appeal against the order of the Commissioner of Income Tax (Appeals) dismissing the appeal of the assessee.
3. Claim of exemption under Section 10(38) by the assessee.
4. Assessment based on evidence collected by the Revenue without giving a fair opportunity to the assessee to prove the genuineness of the transactions.

Detailed Analysis:
1. The assessee appealed against the order of the Commissioner of Income Tax (Appeals) regarding the addition made by the Assessing Officer concerning Long Term Capital Gain claimed. The Assessing Officer concluded that the gains were a colorable device to bring unaccounted cash into the books without paying taxes. The CIT(A) dismissed the appeal based on circumstantial evidence. The Tribunal noted that the assessee should have been given a fair opportunity to prove the genuineness, emphasizing that the onus of proving exemption rests on the assessee. The Tribunal referred to relevant case law and remitted the issue for readjudication to determine the genuineness of the transactions.

2. The appeal also challenged the CIT(A)'s decision to dismiss the claim of exemption under Section 10(38). The Tribunal observed that the assessee had not been provided with a fair chance to establish the genuineness of the transactions. The Tribunal emphasized that the burden of proof lies with the assessee to claim exemption from income tax. The Tribunal referred to previous judgments and directed the Assessing Officer to re-examine the issue after giving the assessee an opportunity to substantiate the case.

3. The assessment was primarily based on evidence collected by the Revenue during investigations, without allowing the assessee a fair chance to prove the genuineness of the transactions. The Tribunal highlighted the importance of natural justice and the onus on the assessee to establish the right to exemption. The Tribunal directed the Assessing Officer to conduct a thorough inquiry and provide the assessee with the opportunity to present evidence and rebut any contrary evidence. The issue of exemption claim under Section 10(38) was remitted back to the Assessing Officer for re-adjudication.

4. The Tribunal emphasized the need for the Assessing Officer to allow the assessee a fair opportunity to prove the genuineness of the transactions and establish the exemption claim under Section 10(38). The Tribunal referred to previous cases with similar issues and directed the Assessing Officer to conduct a detailed examination, considering all aspects and providing adequate opportunity to the assessee. The Tribunal partly allowed the appeal for statistical purposes and remitted the issue for re-adjudication by the Assessing Officer.

In conclusion, the Tribunal's judgment focused on the importance of natural justice, the burden of proof on the assessee, and the need for a thorough examination of the genuineness of transactions before making additions or disallowances.