2018 (11) TMI 1823 - AT - Income Tax

Bogus LTCG - addition of the entire sale proceeds of the shares as income and rejection of claim of exemption made u/s 10(38) - CIT(A) upheld the addition as relied upon circumstantial evidence and human probabilities to uphold the findings of the AO. He also relied on the so called rules of suspicious transaction - HELD THAT - The overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. 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. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given. Under the circumstances, in a number of cases this bench of the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. We have in all cases deleted such additions. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of claim of Long Term Capital Gains on shares by Assessing Officer.

Analysis:
The appeal before the ITAT Kolkata involved the rejection of the assessee's claim of Long Term Capital Gains on the purchase and sale of shares by the Assessing Officer. The AO concluded that the assessee's claim was bogus based on general observations and a common report, adding the entire sale proceeds as income and rejecting the exemption claimed under section 10(38) of the Income Tax Act, 1961. The evidence provided by the assessee supporting the genuineness of the transaction was dismissed.

The Commissioner of Income Tax (Appeals) 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 drawn by the revenue authorities were based on a general report without specific details relevant to the assessee, and the assessee was not provided with the report or the basis for the conclusions against them.

The ITAT Kolkata emphasized that decisions should be evidence-based rather than relying on generalizations, suspicions, or conjectures. Referring to previous cases, the ITAT consistently overturned similar additions where evidence was lacking. The ITAT found that the case law from the Jurisdictional High Court and ITAT Kolkata supported the assessee's position, leading to the deletion of the addition and allowing the appeal. The Departmental Representative failed to counter the applicability of the cited decisions to the present case.

Therefore, based on the legal precedents and lack of substantial evidence against the genuineness of the transaction, the ITAT Kolkata ruled in favor of the assessee, deleting the addition and allowing the appeal on the 16th day of November, 2018.