2017 (9) TMI 1924 - HC - Income Tax

Unaccounted investment - bogus LTCG on shares transactions - whether shares transactions to be genuine since the same were carried out through banking channel though the same were not executed on the floor of NSE/ISE? - CIT(Appeals) and the Tribunal deleted the additions - HELD THAT - CIT(Appeals) in his elaborate order considered the nature of transactions and while deleting the addition observed that the assessee had shown the identity of the person from whom the sale consideration was received. He had also proved the genuineness of the transaction by submitting demat statement of the seller, sale invoices of the broker and copy of the bank statement through which the transactions were routed. Interalia, on such grounds the CIT(Appeals) allowed the appeal. The Tribunal additionally relied on similar issues which were decided by the Bombay Tribunal to dismiss the revenue's appeal. The issue is primarily based on appreciation of facts and materials on record and is purely factual in nature. No question of law arises.

Issues:
1. Appellate Tribunal's decision on upholding the order of CIT(A) without considering fraudulent activities in group cases.
2. Appellate Tribunal's decision on allowing the claim of assessee for LTCG.
3. Appellate Tribunal's decision on deleting the addition treated as income from other sources and allowing the claim of the assessee as STCG.
4. Appellate Tribunal's decision on holding shares transactions to be genuine.
5. Appellate Tribunal's decision on accepting the contention of the assessee that sale of shares was genuine despite substantiation by bogus documents.

Analysis:
1. The central issue revolves around the genuineness of the assessee's purchase and sale transactions leading to long term and short term capital accounts. The Assessing Officer raised concerns based on the admission of fraudulent billing activities by a key person in the group during a search operation. The AO alleged unaccounted investments by the assessee. However, both the CIT(A) and the Tribunal, after detailed scrutiny, overturned the additions. The CIT(A) emphasized the proof provided by the assessee, including the identity of the seller, demat statements, sale invoices, and bank statements, to establish the legitimacy of the transactions. The Tribunal, citing precedents, upheld the decision, dismissing the revenue's appeal.

2. The second issue pertains to the allowance of the claim for Long Term Capital Gain (LTCG) by the Appellate Tribunal. The Tribunal, in alignment with the CIT(A), reviewed the transaction details and supporting documents submitted by the assessee. By considering the evidence presented, including the source of funds and transaction trail through the banking channel, the Tribunal affirmed the legitimacy of the LTCG claim, leading to the deletion of the addition made by the Assessing Officer.

3. The third issue involves the deletion of an addition treated as income from other sources and the allowance of the claim for Short Term Capital Gain (STCG) by the Appellate Tribunal. Similar to the previous instances, the Tribunal and CIT(A) scrutinized the documentary evidence provided by the assessee, such as bank statements, demat statements, and broker invoices, to validate the transactions. By establishing the genuineness of the source of income and the transaction process, the Tribunal ruled in favor of the assessee, rejecting the Assessing Officer's assertions.

4. The fourth issue concerns the Appellate Tribunal's decision on the genuineness of the shares transactions. Despite not being executed on the floor of NSE/ISE, the Tribunal upheld the transactions as genuine since they were conducted through the banking channel. The Tribunal emphasized the importance of documentary evidence and transaction trails to substantiate the legitimacy of the shares transactions, ultimately supporting the assessee's position.

5. The final issue questions the Appellate Tribunal's acceptance of the assessee's claim regarding the genuineness of the sale of shares, even when supported by allegedly bogus documents. The Tribunal, following the lead of the CIT(A) and relying on established precedents, evaluated the evidence presented by the assessee. By verifying the transaction details and the authenticity of supporting documents through a thorough examination, the Tribunal concluded in favor of the assessee, emphasizing the importance of substantiated evidence in determining the legitimacy of transactions.

In conclusion, the judgment is centered on factual analysis and the appreciation of evidence presented during the proceedings. The Tribunal and CIT(A) based their decisions on the documentary proof provided by the assessee to establish the genuineness of the transactions, ultimately leading to the dismissal of the tax appeal.

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