2018 (11) TMI 1939 - AT - Income Tax

Bogus LTCG on purchase and sale of the shares - addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) - CIT relied upon circumstantial evidence and human probabilities to uphold the findings of the AO - HELD THAT - No direct material was found to controvert the evidence filed by the assessee, in support of the genuineness of the transactions. The overwhelming evidence filed by the assessee remains unchallenged and uncontroverted. The entire conclusions drawn by the revenue authorities, are based on a common report of the Director of Investigation, Kolkata, which was general in nature and not specific to any assessee. The assessee was not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department and which were the basis on which conclusion were drawn against the assessee. Copy of the report was also not given. Under the circumstances, 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. The addition made u/s 68 of the Act, is deleted. Decided in favour of assessee.

Summary

Issues:
1. Rejection of claim of Long Term Capital Gains on purchase and sale of shares.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) relating to the Assessment Year 2014-15. The main issue was whether the Assessing Officer was correct in rejecting the claim of the assessee regarding Long Term Capital Gains on shares of a specific company. The AO concluded that the claimed gains were bogus based on a general report and common modus operandi, leading to the addition of the entire sale proceeds as income and denial of exemption under section 10(38) of the Income Tax Act. The evidence provided by the assessee to prove the genuineness of the transaction was dismissed by the AO.

The assessee appealed the decision, 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 counter the evidence supporting the genuineness of the transactions. The conclusions drawn by the revenue authorities were primarily based on a general report from the Director of Investigation, Kolkata, not specific to the assessee, without providing the assessee with the opportunity to address the basis of the report.

The Tribunal emphasized that decisions should be evidence-based rather than relying on generalizations, suspicions, or conjectures. Referring to previous cases, the Tribunal consistently ruled in favor of the assessee when faced with similar situations. The Tribunal noted that the decisions of the Jurisdictional High Court and ITAT Kolkata were directly applicable to the case, supporting the assessee's position. Despite the Departmental Representative's arguments, the Tribunal found the cited decisions of the High Courts and ITAT to be binding.

The Departmental Representative cited a judgment from the Bangalore ITAT that favored the revenue, but the Tribunal emphasized the precedence of the Jurisdictional High Court and the ITAT Kolkata on the issue. Consequently, the addition made under section 68 of the Act was deleted, and the appeal of the assessee was allowed, providing relief in the matter of Long Term Capital Gains on the shares in question.