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2019 (5) TMI 1885 - AT - Income TaxBogus LTCG - Exemption u/s 10(38) - HELD THAT - AO mainly made addition based on theory of Suspicious Transactions , on the basis of report of Investigation Wing. We note that the A.O. was required to convert the suspicion into the legal evidence by way of bringing concrete and conclusive findings and material on records. Since, the Ld A.O. took no step whatsoever the suspicion remains intact and suspicion whatsoever strong cannot take the position of legal evidences. AO as well as the Commissioner (Appeals) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. AO as well as the Commissioner (Appeals), have not brought out any part of the investigation wing report in which the assessee has been investigated and /or found to be a part of any arrangement for the purpose of generating bogus long term capital gains.We note that Mr. Deepak Kumar Agarwal has retracted from his statement which was taken by the DDIT (Inv). Wing Kolkata on 05.06.2015, by filing an affidavit. Statement recorded u/s 132(4) of the Act can form basis for an assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search. We note that in assessee s case under consideration, the search team did not find any incriminating material therefore, addition merely on the statement recorded under section 132(4) of the Act should not be made. Therefore, based on the above facts and circumstances, we delete the addition. Unexplained expenditure towards commission charges of sale of such shares by the operator - HELD THAT - As already held that the transactions relating to LTCG were genuine and not the accommodation entries as alleged by the AO. Consequently, the addition is hereby directed to be deleted.
Issues Involved:
1. Treatment of Long Term Capital Gain (LTCG) as bogus. 2. Addition of unexplained expenditure under section 69C of the Income Tax Act. 3. Validity of additions made in the absence of incriminating material for unabated assessments under section 153A of the Income Tax Act. Issue-wise Detailed Analysis: 1. Treatment of Long Term Capital Gain (LTCG) as bogus: The primary issue revolves around the Assessing Officer (AO) treating the assessee's claim of LTCG of ?3,39,46,071/- as bogus, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO observed that the assessee had claimed LTCG from the sale of shares of "Sulabh Engineers" and noted an unrealistic gain of around 2400% in about two years. The AO referenced a large-scale scam involving pre-arranged bogus LTCG, facilitated by brokers, entry operators, and promoters to regularize unaccounted money as LTCG exempt under section 10(38) of the Income Tax Act. During the search and seizure operation, the assessee admitted to availing pre-arranged bogus LTCG. Despite the assessee's submission of documents like contract notes, bank statements, and demat account statements to prove the genuineness of the transactions, the AO rejected these claims and made an addition of ?3,39,46,071/-. The Tribunal noted that the AO's reliance on the Investigation Wing's general report was misplaced without independent verification. The Tribunal emphasized that the transactions were conducted through registered stock brokers, payments were made through banking channels, and the shares were reflected in the demat account. The Tribunal found no evidence of the assessee's involvement in price rigging or collusion with brokers. The Tribunal also highlighted that the AO's conclusions were based on suspicion and not supported by concrete evidence. 2. Addition of unexplained expenditure under section 69C of the Income Tax Act: The AO made an additional charge of ?1,69,730/- as unexplained expenditure under section 69C for the commission paid to procure the impugned LTCG, which was also confirmed by the CIT(A). The Tribunal, however, held that since the LTCG transactions were genuine and not accommodation entries, the addition under section 69C was unjustified. Consequently, the Tribunal directed the deletion of the ?1,69,730/- addition. 3. Validity of additions made in the absence of incriminating material for unabated assessments under section 153A of the Income Tax Act: The Tribunal addressed the preliminary issue of whether additions could be made under section 153A for concluded assessments without incriminating material found during the search. The Tribunal noted that the assessments for the years 2013-14 and 2014-15 were concluded assessments as of the search date (03.03.2015). The Tribunal cited legal precedents, including the Delhi High Court's ruling in CIT vs. Kabul Chawla, which held that no additions could be made in concluded assessments without incriminating material found during the search. The Tribunal found that no incriminating material was unearthed during the search, and thus, no additions could be made for the assessment years 2013-14 and 2014-15. The Tribunal emphasized that the AO's reliance on the Investigation Wing's report and the assessee's retracted statement under section 132(4) was insufficient to justify the additions. Conclusion: The Tribunal allowed the assessee's appeals, deleting the addition of ?3,39,46,071/- as bogus LTCG and the addition of ?1,69,730/- as unexplained expenditure under section 69C. The Tribunal held that no additions could be made for the unabated assessment years 2013-14 and 2014-15 in the absence of incriminating material found during the search. The Tribunal's decision was based on the lack of concrete evidence to support the AO's findings and the legal precedents protecting concluded assessments from arbitrary additions.
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