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2018 (6) TMI 836 - AT - Income TaxCorrectness of exemption claimed u/s 10(38) - LTCG on sale of shares - A.O disallowing the exemption claimed u/s 10(38) and treating the same as unexplained cash credit - whether the purchase of shares are bogus? - Held that - the facts are mutatis mutandis identical in the case of SMT. SARITA DEVI, AND SMT. NITIKA KUMARI VERSUS INCOME TAX OFFICER WARD-14 (5) , HYDERABAD 2017 (5) TMI 1111 - ITAT HYDERABAD treating the transactions as bogus, since the very basis for reopening the assessment was not provided to the assessee nor an opportunity was given to cross-examine the socalled Mr. Chokshi AO who conducted survey operation on assessee, much prior to filing of return, did not find any transaction of bogus nature and the f act that the Long Term Capital Gain was accepted do indicate that the transactions are genuine and cannot be held to be sham on the basis of so called statement of Mr Mukesh Choksi on 16-01- 2013. The genuineness of statement itself cannot be accepted - There is no basis for treating the said transactions as not genuine. Considering the documents placed on record and the case law relied, we have no hesitation in directing the A.O. to accept the long term capital gains and short term capital gains declared - hence we dismiss the appeals filed by the Revenue and allow the cross objections filed by the assessee.
Issues Involved:
1. Reopening of assessment. 2. Correctness of exemption claimed under Section 10(38) of the Income Tax Act. 3. Treatment of sale proceeds from shares as unexplained cash credit. 4. Burden of proof and evidence provided by the assessee. 5. Reliance on statements made by third parties (specifically Shri Mukesh Choksi). 6. Judicial precedents and their applicability to the case. Issue-wise Detailed Analysis: 1. Reopening of Assessment: The Tribunal observed that the reopening of the assessment was challenged by the assessee, citing a precedent in the case of Smt. Saritha Devi w/o Shri Anil Kumar. It was noted that the reopening was based on a communication from CCIT, Mumbai, regarding statements made by Mr. Chokshi about providing accommodation entries. However, the Tribunal found that neither the statement of Mr. Chokshi was provided to the assessee nor was cross-examination allowed. The Tribunal concluded that the Assessing Officer (A.O.) did not have any 'tangible information' to justify reopening the assessment under Section 147, making the reopening bad in law. 2. Correctness of Exemption Claimed under Section 10(38) of the Income Tax Act: The Revenue's appeals centered around the correctness of the exemption claimed under Section 10(38) for long-term capital gains (LTCG). The A.O. disallowed the exemption, treating the transactions as bogus and the sale proceeds as unexplained cash credit. The Tribunal, however, found that the assessee had provided sufficient documentary evidence, including purchase bills, sale bills, de-mat account statements, and contract notes, to support the genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision to allow the exemption, following precedents that supported the assessee's claim. 3. Treatment of Sale Proceeds from Shares as Unexplained Cash Credit: The A.O. treated the sale proceeds from shares as unexplained cash credit under Section 68, arguing that the transactions were bogus. The Tribunal, however, noted that the A.O. did not bring any concrete evidence to prove that the proceeds represented the assessee's undisclosed income. The Tribunal emphasized that the burden of proof lay with the A.O., who failed to discharge it. Consequently, the Tribunal directed the A.O. to accept the LTCG declared by the assessee as genuine. 4. Burden of Proof and Evidence Provided by the Assessee: The assessee contended that all necessary details to prove the genuineness of the transactions were provided, including purchase bills, contract notes, de-mat account statements, and payment receipts. The Tribunal agreed, noting that the A.O. did not provide any evidence to counter the documentary proof submitted by the assessee. The Tribunal highlighted that the assessee's burden of proof was adequately met, and the A.O. failed to provide contrary evidence. 5. Reliance on Statements Made by Third Parties (Specifically Shri Mukesh Choksi): The Tribunal scrutinized the reliance on statements made by Shri Mukesh Choksi, who was alleged to have provided accommodation entries. The Tribunal found that the A.O. did not provide the assessee with the opportunity to cross-examine Mr. Choksi, nor was his statement included in the record. The Tribunal observed that Mr. Choksi's statements did not specifically implicate the assessee's transactions. Therefore, the Tribunal concluded that the A.O.'s reliance on these statements was unfounded and could not be used to discredit the assessee's transactions. 6. Judicial Precedents and Their Applicability to the Case: The Tribunal referred to several judicial precedents that supported the assessee's position. Notably, the Tribunal cited decisions from the ITAT Hyderabad Bench in similar cases, where the reopening of assessments and the treatment of LTCG were scrutinized. The Tribunal found that the facts of the present case were identical to those precedents and followed the rationale laid down in those decisions. The Tribunal also referenced CBDT Circulars that clarified the determination of the date of transfer and the period of holding for securities, supporting the assessee's claim of LTCG. Conclusion: The Tribunal dismissed the Revenue's appeals and allowed the cross objections filed by the assessee. The Tribunal upheld the CIT(A)'s decision to allow the exemption under Section 10(38) and directed the A.O. to accept the LTCG declared by the assessee. The judgment emphasized the importance of providing tangible evidence, the right to cross-examination, and adherence to judicial precedents. The Tribunal's decision was pronounced in the open court on 15th June 2018.
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