2019 (8) TMI 1703 - AT - Income Tax

Bogus LTCG - Denial of claim u/s.10(38) - HELD THAT - As noticed that the evidences clearly shows that the transactions of purchase and sale of shares by the assessee herein are through the BSE as also it is noticed that the assessee s name is not coming out of the Investigation Report, which has been received by the AO from the Directorate of Investigation, Kolkatta, we are of the view that the disallowance made by the AO and as confirmed by the CIT(A) merely on presumptions is unsustainable. Following the decision of the decision of the co-ordinate Bench of this Tribunal in the case of Shri Ashwin Kumar Davey 2018 (12) TMI 1880 - ITAT CHENNAI AO is directed to grant the assessee the benefit of deduction u/s.10(38) of the Act as claimed. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Allegations of treating transactions as penny stock.
2. Disallowance of claim under section 10(38) of the Income Tax Act.

Analysis:
1. The appeal was filed against the Order of the Commissioner of Income Tax (Appeals) regarding the treatment of transactions as penny stock. The assessee had purchased shares through the Bombay Stock Exchange and sold them after a subdivision. The Securities Transaction Tax (STT) was paid, and the assessee argued that the transactions were genuine. Reference was made to a similar decision by a co-ordinate Bench of the Tribunal in another case. The Revenue argued that the substantial profits indicated suspicious transactions.

2. The Tribunal noted that the Assessing Officer (AO) had alleged a modus operandi for a bogus claim under section 10(38) of the Act. However, it was observed that the transactions were conducted through the BSE, and the assessee's name was not mentioned in the Investigation Report. Relying on the precedent set by the co-ordinate Bench in a similar case, the Tribunal held that the disallowance based on presumptions was unjustified. Consequently, the AO was directed to grant the assessee the benefit of deduction under section 10(38) of the Act as claimed.

This judgment highlights the importance of concrete evidence in tax assessments and the need to base decisions on facts rather than presumptions. The Tribunal's reliance on precedents and legal provisions ensures a fair and just outcome in tax matters.