2018 (10) TMI 2022 - AT - Income Tax

Bogus LTCG on sale of shares - addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) 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. Assessee submits that 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 of the Hon ble Supreme Court 2018 (2) TMI 580 - SUPREME COURT cannot be applied to the facts of this case. Consequently, the addition made u/s 69C is hereby deleted. Addition in question is deleted and the appeal of the assessee is allowed.

Summary

Issues Involved:
Whether Assessing Officer correctly rejected claim of Long Term Capital Gains on shares.

Detailed Analysis:

1. The appeal was filed against the Commissioner of Income Tax-(A)-10's order concerning the Assessment Year 2014-15, questioning the rejection of the claim of Long Term Capital Gains on shares of M/s SRK Industries Ltd by the Assessing Officer.

2. The Assessing Officer concluded the gains were bogus based on general observations and a report, adding the entire sale proceeds as income and disallowing exemption under section 10(38) of the Income Tax Act, 1961, rejecting the evidence provided by the assessee.

3. The Commissioner (Appeals) upheld the addition relying on circumstantial evidence, human probabilities, and rules of suspicious transactions without direct material to counter the assessee's evidence, which remained unchallenged and uncontroverted. The basis for the conclusions against the assessee was a general report from the Investigation Wing, not specific to the assessee.

4. The Tribunal consistently emphasized decisions should rely on evidence, not generalizations, suspicion, or conjectures. Previous cases were cited where similar additions were deleted based on lack of concrete evidence.

5. The Tribunal found the cited case laws applicable to the current case, with the Departmental Representative unable to counter the applicability of the decisions from High Courts and ITAT.

6. The Departmental Representative referenced a Supreme Court judgment, but the assessee's counsel argued that without an adverse SEBI order against the assessee or the relevant company, the Supreme Court judgment did not apply.

7. Consequently, the addition under section 69C was deleted, and the appeal of the assessee was allowed.

8. The Tribunal ruled in favor of the assessee, deleting the questioned addition.

9. The appeal of the assessee was allowed, and the order was pronounced in court on 05.10.2018.