2018 (10) TMI 1979 - AT - Income Tax

Bogus LTCG - purchase and sale of the shares - AO based on a general report and modus operandi adopted and concluded that the assessee has claimed bogus long term capital gain - HELD THAT - As in a number of cases this bench of the Tribunal has consistently held that decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. We have in all cases deleted such additions. As there is no surviving order of SEBI against the assessee or the company, the script of which was purchased and sold by the assessee. When there is no surviving adverse order of SEBI, disputing the claim of the assessee, the judgment in RAKHI TRADING PRIVATE LTD. 2018 (2) TMI 580 - SUPREME COURT cannot be applied to the facts of this case. In view of the above discussion the addition in question is deleted and the appeal of the assessee is allowed.

Summary

Issues:
Whether Assessing Officer was right in rejecting the claim of Long Term Capital Gains on shares purchase and sale.

Analysis:
The appeal was against the Commissioner of Income Tax's order relating to A.Y. 2014-15. The main issue was the rejection of the assessee's claim of earning Long Term Capital Gains on shares of a specific company. The Assessing Officer (AO) rejected the claim based on a general report and modus operandi without specific evidence against the assessee. The AO added the entire sale proceeds as income and disallowed the exemption under section 10(38) of the Income Tax Act, 1961. The evidence provided by the assessee supporting the genuineness of the transaction was disregarded.

The assessee appealed, but the CIT(A) upheld the addition relying on circumstantial evidence, human probabilities, and rules of suspicious transactions. However, no direct material was presented to challenge the genuineness of the transactions. The Tribunal emphasized that decisions should be evidence-based rather than on generalizations, suspicions, or conjectures. Several similar cases were cited where such additions were deleted based on lack of concrete evidence against the assessee.

The Tribunal was bound by previous case laws cited, which were applicable to the current case. The Departmental Representative failed to counter the applicability of these precedents. Reference was made to a Supreme Court judgment, but as there was no adverse order from SEBI against the assessee or the company involved, the Supreme Court ruling was deemed irrelevant.

Conclusively, the addition in question was deleted, and the appeal of the assessee was allowed. The Tribunal pronounced the order in favor of the assessee on 05.10.2018.