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2019 (6) TMI 1698 - AT - Income TaxBogus LTCG - unexplained cash credits u/s 68 - Transaction in scrips - HELD THAT - Assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase / sale of shares through registered brokers by banking channel, demat statements etc., The Revenue s only case as per its pleadings and both the lower authorities unanimously conclusion that there is very strong circumstantial evidence against the assessee suggesting bogus STCL accommodation entries There is not even a single case which could pin-point any making against these assessees which could be taken as a revenue nexus. CBDT s circular dated 10.03.2003 has itself made it clear that mere search statements in the nature of admission in absence of supportive material do not carry weight. Coupled with this, hon'ble jurisdictional high court s other decisions in CIT vs. Rungta Properties Pvt. Ltd. 2017 (6) TMI 521 - CALCUTTA HIGH COURT , CIT vs. Shreyahi Ganguly 2012 (9) TMI 1113 - CALCUTTA HIGH COURT , M/s Classic Growers Ltd 2013 (2) TMI 825 - CALCUTTA HIGH COURT also hold such transactions in scrips supported by the corresponding relevant evidence to be genuine. We adopt the above extracted reasoning mutatis mutandis therefore to delete the impugned STCL disallowance / addition. Unexplained commission expenditure disallowance, if any shall automatically follow suit as a necessary corollary. Assessee appeal allowed.
Issues Involved:
1. Genuineness of Long Term Capital Gains (LTCG) / Long Term Capital Loss (LTCL) 2. Treatment of LTCG/LTCL as unexplained cash credits under Section 68 of the Income Tax Act, 1961 Detailed Analysis: 1. Genuineness of Long Term Capital Gains (LTCG) / Long Term Capital Loss (LTCL): The primary issue in the appeals was the genuineness of the assessees’ LTCG/LTCL derived from the sale of shares held in various scrips. The Commissioner of Income Tax (Appeals) [CIT(A)] and the Assessing Officer (AO) treated the gains/losses as bogus, alleging that the transactions were pre-arranged to provide accommodation entries for tax avoidance. The CIT(A) relied on a report from the Department's Investigation Wing that identified a racket involving the rigging of share prices by certain operators. The report pointed to suspicious transactions in specific companies' shares, including Luminaire Technologies Ltd and Unno Industries Ltd, indicating artificial price inflation and subsequent sharp declines. The CIT(A) upheld the AO's addition of LTCG as unexplained cash credits under Section 68 of the Act, dismissing the assessees' claims of genuine transactions supported by contract notes, demat statements, and banking channel payments. 2. Treatment of LTCG/LTCL as unexplained cash credits under Section 68: The Tribunal examined whether the addition of LTCG as unexplained cash credits under Section 68 was justified. The Revenue's argument was based on circumstantial evidence and the findings of the Investigation Wing, which suggested that the share prices were rigged, and the transactions were accommodation entries. However, the Tribunal found that the assessees had provided substantial documentary evidence, including contract notes, demat statements, and banking records, to support the genuineness of the transactions. The Tribunal noted that the Revenue had not provided concrete evidence directly implicating the assessees in the alleged racket. The Tribunal referred to several judicial precedents, including the decisions of the Hon'ble Supreme Court in Sumati Dayal vs. CIT and CIT vs. Durga Prasad More, which emphasized the need for substantive evidence rather than mere suspicion or circumstantial evidence. The Tribunal also cited its own coordinate bench's decision in Mahavir Jhanwar vs. ITO, which dealt with similar facts and circumstances, and where the addition of bogus LTCG was deleted. The Tribunal emphasized that the CBDT's circular dated 10.03.2003 clarified that mere search statements without supportive material do not carry weight. The Tribunal concluded that the Revenue's case was based on general reports and suspicions without specific evidence against the assessees. Consequently, the Tribunal deleted the addition of LTCG as unexplained cash credits under Section 68, holding that the transactions were genuine and supported by credible evidence. Conclusion: The Tribunal allowed all the seventeen appeals, deleting the disallowance/addition of LTCG as unexplained cash credits under Section 68. The Tribunal's decision was based on the substantial documentary evidence provided by the assessees and the lack of concrete evidence from the Revenue to substantiate the allegations of bogus transactions. The Tribunal's order emphasized the importance of evidence-based conclusions and rejected the Revenue's reliance on circumstantial evidence and general reports.
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