2019 (6) TMI 1624 - AT - Income Tax

Addition u/s 68 - Bogus LTCG - HELD THAT - Addition made by the Assessing Officer on account of long term capital gain - HELD THAT - As relying on Sanjib Kumar Patwari (HUF) 2019 (5) TMI 1670 - ITAT KOLKATA wherein as considered the issue relating to LTCG in the scrip / share of M/s Kailash Auto Finance Ltd. and adjudicated the issue in favour of the assessee therefore we delete the addition made by the Assessing Officer on account of long term capital gain. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Addition of ?42,06,250/- under Section 68 on account of alleged bogus Long Term Capital Gain (LTCG).

Issue-wise Detailed Analysis:

1. Violation of Principles of Natural Justice:
The assessee contended that the order passed by the CIT(A) was in violation of the principles of natural justice. The tribunal did not specifically address this issue in detail, focusing instead on the substantive issue of the addition under Section 68.

2. Addition of ?42,06,250/- under Section 68 on Account of Alleged Bogus LTCG:
The assessee filed a return of income for the assessment year 2015-16, declaring a total income of ?7,50,830/-. The case was selected for scrutiny due to suspicion regarding the sale transaction in shares and exempt long term capital gain. The assessee claimed exemption under Section 10(38) for LTCG from the sale of shares of M/s Kailash Auto Finance Ltd. The Assessing Officer (AO) added ?42,06,250/- to the total income under Section 68, treating the LTCG as bogus.

The CIT(A) upheld the AO's addition, reiterating the findings without addressing the detailed submissions made by the assessee. The assessee appealed to the tribunal, submitting extensive documentary evidence to support the genuineness of the transactions, including purchase bills, demat statements, bank statements, and contract notes.

The tribunal noted that the AO failed to point out any discrepancies in the documents produced. The transactions were conducted through SEBI-registered brokers and were reflected in the demat and bank statements. The tribunal emphasized that the AO's addition was based on a generalized view without considering the detailed submissions and evidence provided by the assessee.

The tribunal referred to a similar case adjudicated by the Division Bench in the case of Sanjib Kumar Patwari (HUF), where the transactions in the same scrip (Kailash Auto Finance Ltd.) were held to be genuine. The tribunal observed that the AO did not provide any opportunity for cross-examination of the alleged entry operator, whose statement was relied upon for making the addition. This was a serious flaw, making the order nullity, as per the precedent set by the Hon'ble Calcutta High Court in Eastern Commercial Enterprises.

The tribunal also highlighted that the SEBI had revoked its interim order against the entities involved, including the assessee, indicating no adverse findings against them. The tribunal concluded that the AO's addition was based on suspicion and not supported by concrete evidence.

Conclusion:
The tribunal allowed the assessee's appeal, deleting the addition of ?42,06,250/- made by the AO under Section 68. The tribunal emphasized that the transactions were genuine, supported by documentary evidence, and conducted through recognized stock exchanges. The tribunal's decision was consistent with the principles of natural justice and previous judicial precedents.