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2021 (2) TMI 1180 - AT - Income TaxBogus LTCG - denial of exemption u/s. 10(38) of the Act which the assessee had earned on the sale of equity shares after holding them for more than a year - HELD THAT - Assessee had paid service tax and STT and shares were sold through screen based transactions wherein the exact time and order numbers are mentioned. From the Demat statement, we further observe that assessee was holding certain other scrips also. The assessee, therefore, had filed sufficient evidences to prove the genuineness of the transactions but authorities below has rejected the claim of the assessee on the basis of an investigation report of the Department whereby the scrip was held to be penny stock which was being used for providing bogus long term gains. Hon'ble Delhi High Court 2021 (1) TMI 1008 - DELHI HIGH COURT startling spike in the share price and other factors may be enough to show circumstances that might create suspicion but the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The Hon'ble court further distinguished the judgment in the case of Suman Podar which was in favour of Revenue. The Hon'ble court further held that case of Sumati Dayal u/s CIT was also not applicable to the assessee. The Hon'ble court further held that reliance placed by the Assessing Officer on the investigation report of Investigation Wing without further corroboration on the basis of cogent material does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. - Decided in favour of assessee.
Issues Involved:
1. Validity of Notice under Section 143(2). 2. Denial of Exemption under Section 10(38) for Long Term Capital Gains. 3. Treatment of Transactions as Sham and Bogus by Assessing Officer. 4. Admission of Additional Evidence. 5. Deposits in Bank Account. Issue-wise Analysis: 1. Validity of Notice under Section 143(2): The assessee contended that the Notice dated 22.09.2015 issued under Section 143(2) was invalid, thereby rendering the assessment framed under Section 143(3) without jurisdiction and bad in law. The Tribunal upheld the CIT(A)'s decision that the notice was valid, dismissing the assessee's claim. 2. Denial of Exemption under Section 10(38) for Long Term Capital Gains: The primary issue was the denial of exemption under Section 10(38) for the long-term capital gains earned by the assessee on the sale of equity shares of M/s Sulabh Engineering and Services Ltd. The Income Tax Department, based on an investigation report, treated the gains as bogus. The Tribunal noted that various benches had allowed relief to assessees in similar cases involving the same scrip, citing multiple precedents where the transactions were held genuine. 3. Treatment of Transactions as Sham and Bogus by Assessing Officer: The Assessing Officer, relying on an investigation report, treated the capital gains as bogus, alleging that the transactions were a means to convert unaccounted money into accounted money. The assessee provided extensive documentation, including bank statements, allotment letters, demat account statements, and contract notes, to substantiate the genuineness of the transactions. The Tribunal found that the authorities below rejected the assessee's claim based on suspicion without conducting independent inquiries or corroborating the investigation report's findings. The Tribunal referred to several judgments, including those from the Kolkata and Chennai Benches, which had ruled in favor of the assessee in similar cases. 4. Admission of Additional Evidence: For AY 2015-16, the assessee sought to admit additional evidence related to cash deposits in the bank account, which were not submitted earlier due to the counsel's oversight and the assessee's illness. The Tribunal admitted the additional evidence and remitted the issue back to the Assessing Officer for examination, instructing to provide the assessee a reasonable opportunity to present the case. 5. Deposits in Bank Account: The assessee explained that the deposits in the bank account were from cash sales. Due to the non-submission of certain bank statements earlier, the Tribunal remitted the issue back to the Assessing Officer for re-examination with the newly admitted evidence. Conclusion: The Tribunal allowed the appeals partly. For AY 2014-15, the Tribunal upheld the validity of the notice under Section 143(2) but allowed the exemption under Section 10(38) for long-term capital gains, dismissing other grounds as not pressed. For AY 2015-16, the Tribunal allowed the exemption under Section 10(38) and remitted the issue of bank deposits back to the Assessing Officer for re-examination with additional evidence. The decisions were guided by precedents and a detailed examination of the evidence provided by the assessee.
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