2018 (10) TMI 2023 - 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:
Whether Assessing Officer correctly rejected claim of Long Term Capital Gains on shares sale based on suspicion and general report.

Detailed Analysis:
The appeal was against the Commissioner of Income Tax-(A)-10, Kolkata's order concerning A.Y. 2014-15. The main issue was the rejection of the assessee's Long Term Capital Gains claim on shares of M/s SRK Industries Ltd by the Assessing Officer. The AO deemed the gains as bogus based on a general report and common modus operandi, adding the entire sale proceeds as income and disallowing the exemption under section 10(38) of the Income Tax Act, 1961. The evidence supporting the transaction's genuineness was dismissed.

The assessee appealed, but the CIT(A) upheld the addition relying on "circumstantial evidence," "human probabilities," and "rules of suspicious transaction." However, no direct material contradicted the evidence provided by the assessee, which remained unchallenged. The revenue authorities' conclusions were based on a general report from the Director of Investigation, Kolkata, not specific to the assessee, without providing the report or confronting the assessee with its contents.

The Tribunal consistently held that decisions should rely on evidence, not generalizations, suspicions, or conjectures. Previous cases where similar additions were deleted were cited to support this stance. The Departmental Representative failed to counter the applicability of these precedents to the current case.

The Departmental Representative cited a Supreme Court judgment, but the assessee argued that since there was no surviving adverse SEBI order against the assessee or the company involved in the share transactions, the Supreme Court judgment was not relevant. Consequently, the addition under section 69C was deleted, and the appeal was allowed.

In conclusion, the Tribunal deleted the addition, emphasizing the necessity of evidence-based decisions over generalizations. The appeal was allowed, and the decision was pronounced in court on 05.10.2018.