2022 (1) TMI 1358 - AT - Income Tax

Additions u/s.68 - sale proceeds of shares unexplained - addition made as considering it Pre-arranged transactions, Sale of scares and unusual rise in the price through rigging not backed by, Failure of the assessee to discharge its onus to prove that the LTCG claimed by it is genuine - as vehemently pleaded by the DR that AO in the remand report had only stated that the evidences submitted by the assessee are proper and genuine and had not stated that the transactions carried out by the assessee are proper and genuine HELD THAT - As entire evidences are filed by the assessee only in support of the transactions carried out by the assessee, we are unable to persuade ourselves to accept to the narrow argument of the revenue. When the evidences are accepted as proper and genuine, that too after due enquiries and examination thereon, obviously the transactions carried out by the assessee also would be proper and genuine. Hence the only logical conclusion would be that the ld. AO had indeed accepted the entire transactions together with its evidences as proper and genuine. We deem it unnecessary to go into the merits of the addition made herein. The entire remand report of the ld. AO had already been reproduced herein supra. We hold that when the ld. AO had given a favourable report in his remand proceedings, then fairly the Revenue ought not to have preferred any further appeal before this Tribunal as there could not be any grievance for them. We draw support in this regard on the decision of the Hon ble Madras High Court in the case of Smt. B.Jayalakshmi 2018 (8) TMI 208 - MADRAS HIGH COURT as categorically held that when the Assessing Officer had accepted the contentions of the assessee in the remand report, the Revenue could not be aggrieved by filing further appeal and since this fact had not been taken cognizance by the Tribunal in that case, the Hon ble Madras High Court had remanded the matter back to the Tribunal for fresh consideration. Admittedly, such conclusion was drawn by the ld. AO after carrying out detailed investigations and enquiries carried out with various parties as mandated. We find that the ld. CIT(A) granted relief based on the said remand report apart from giving relief on merits. We are not giving any opinion on the merits of the case. We find that at the threshold itself, this appeal is required to be decided against the Revenue by following the decision of the Hon ble Madras High Court referred to supra in view of the fact that the ld. AO had accepted the entire contentions of the assessee in the remand report. We also find that the Revenue had not raised any grounds before us stating that remand report of the ld. AO is incorrect. Accordingly, the grounds raised by the Revenue are dismissed.

Issues Involved:
1. Justification for deleting additions made under Section 68 of the Income Tax Act.
2. Validity of the remand report and its implications.
3. Allegations of pre-arranged transactions and penny stock manipulation.
4. Role and statements of Shri Vipul Vidur Bhat.
5. Evidentiary support for the transactions in question.

Detailed Analysis:

1. Justification for Deleting Additions Made Under Section 68 of the Income Tax Act:
The primary issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the additions made under Section 68 of the Income Tax Act regarding the sale proceeds of shares of M/s. Sunrise Asian Ltd (SAL). The assessee, an LLP formed by converting a company, declared exempt income from the sale of SAL shares, claiming long-term capital gains exempt under Section 10(38) of the Act. The Assessing Officer (AO) disallowed this, treating the transactions as bogus based on statements from Shri Vipul Vidur Bhat, who was initially implicated in providing accommodation entries. However, Bhat retracted his statements, and during cross-examination, he confirmed the genuineness of the transactions, stating he had no role in the purchase and sale of SAL shares by the assessee. The AO, however, relied on the original statements and made additions under Sections 68 and 69C of the Act.

2. Validity of the Remand Report and Its Implications:
The CIT(A) directed the AO to conduct further enquiries and submit a remand report. The AO’s remand report concluded that the evidences provided by the assessee were proper and genuine after conducting detailed enquiries with various authorities and individuals. The CIT(A) relied on this remand report to delete the additions made by the AO. The Tribunal noted that the Revenue did not object to the remand report's validity, and thus, the appeal by the Revenue was not maintainable. The Tribunal emphasized that when the AO had given a favorable remand report, the Revenue should not have filed an appeal.

3. Allegations of Pre-arranged Transactions and Penny Stock Manipulation:
The AO's main contention was that the transactions were pre-arranged, involving price rigging of SAL shares, which were considered penny stocks. The AO alleged that the assessee failed to discharge its onus to prove the genuineness of the long-term capital gains. However, the assessee provided substantial documentary evidence, including share purchase agreements, DEMAT account statements, contract notes, and bank statements, demonstrating the transactions' genuineness. The CIT(A) found that these documents were not controverted by the AO and that there was no direct evidence linking the assessee to any manipulation or price rigging.

4. Role and Statements of Shri Vipul Vidur Bhat:
Shri Vipul Vidur Bhat initially implicated in providing accommodation entries, retracted his statements and confirmed during cross-examination that he had no involvement in the assessee's transactions. The AO, however, disregarded this retraction and relied on the original statements. The CIT(A) and the Tribunal noted that retracted statements without corroborative evidence could not be the basis for additions. The Tribunal emphasized that the AO's reliance on the original statements was unwarranted, especially when Bhat had reaffirmed his retraction during cross-examination.

5. Evidentiary Support for the Transactions in Question:
The assessee provided comprehensive evidence supporting the purchase and sale of SAL shares, including payment proofs, DEMAT statements, and contract notes. The CIT(A) observed that these transactions were conducted through recognized stock exchanges and subjected to Securities Transaction Tax (STT). The Tribunal noted that the AO had accepted these evidences as genuine in the remand report, and thus, the transactions were deemed proper and genuine. The Tribunal also highlighted that no adverse findings were reported against the assessee in the remand report.

Conclusion:
The Tribunal dismissed the Revenue's appeal, emphasizing that the AO's favorable remand report and the substantial evidences provided by the assessee supported the genuineness of the transactions. The Tribunal concluded that the Revenue should not have filed an appeal when the AO had accepted the assessee's contentions in the remand report. The Tribunal also noted that the CIT(A) had rightly deleted the additions made under Sections 68 and 69C of the Act, based on the evidences and the remand report.

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