2018 (10) TMI 1032 - AT - Income Tax

Addition u/s 68 - sale proceeds of shares of Kailash Auto Finance Limited (KAFL) treating the same as income from undisclosed sources - addition on account of the commission allegedly paid by the assessee for obtaining the entries for making such bogus claim of long term capital gain by treating the same as unexplained expenditure - claim of exemption u/s 10(38) denied - Held that - Similar issues involving identical facts had come up for consideration before the Division Bench of this Tribunal in the case of Manish Kumar Baid and Mahendra Kumar Baid 2017 (10) TMI 522 - ITAT KOLKATA wherein held SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee s name is not reflected at all. Hence the allegation that the assessee and/or Ashita Stock Broking Ltd. getting involved in price rigging of KAFL shares fails. The facts of the case and the evidences in support of the assessee s case clearly support the claim of the assessee that the transactions of the assessee were bonafide and genuine and therefore the AO was not justified in rejecting the assessee s claim of exemption under section 10(38) of the Act. AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. Tribunal also allowed the consequential relief to the assessee by deleting the additions made by the A.O. u/s 69C holding that the transactions giving rise to long term capital gain being genuine, there was no question of paying any commission for obtaining the alleged accommodation entries. Since the issues involved in the present cases as well as the material facts relevant thereto are similar to the cases of Shri Manish Kumar Baid and Mahendra Kumar Baid (supra) respectfully follow the order passed by division bench of this Tribunal and delete the additions made u/s 68 and 69C - Decided in favour of the assessee.

Summary

Issues involved:
Confirmation of disallowance of exemption on long term capital gain from sale of shares as bogus and unexplained cash credit, addition of commission as unexplained expenditure.

Analysis:
The six appeals by different assessees against orders of Ld. CIT (Appeals) involved common issues of disallowance of exemption on long term capital gain from the sale of shares of M/s. Kailash Auto Finance Ltd. The AO treated the transactions as bogus, adding the proceeds under section 68 and commission as unexplained expenditure under section 69C. The amounts in dispute ranged from Rs. 6,741 to Rs. 34,75,674 across the six appeals.

The assessees had purchased shares of unlisted companies, later amalgamated with M/s. Kailash Auto Finance Ltd., and claimed exemption on long term capital gain under section 10(38). The AO, after examination, deemed the claims as accommodation entries, treating the proceeds as unexplained cash credits under section 68 and adding commissions as unexplained expenditure under section 69C. The Ld. CIT(A) upheld these additions, leading to the appeals before the Tribunal.

The Tribunal referred to a previous case where similar issues were considered, and the Tribunal had deleted the additions made by the AO under sections 68 and 69C. The Tribunal found no legal evidence against the assessees, emphasizing the genuineness of the transactions and the lack of adverse material against them. The Tribunal held that the AO was unjustified in treating the sale proceeds as undisclosed income and deleted the additions accordingly, following the precedent case.

Consequently, the Tribunal allowed the appeals of the assessees, deleting the additions made under sections 68 and 69C to their total income. The Tribunal's decision was based on the similarity of issues and facts to the precedent case, providing relief to the assessees by overturning the disallowances.

In conclusion, the Tribunal allowed the appeals, pronouncing the order in favor of the assessees on 17th October 2018.