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2018 (11) TMI 805 - AT - Income TaxBogus Long Term Capital Gains on purchase and sale of the shares - claim of exemption made u/s 10(38) rejected - Held that - 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. 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, against the claim of the assessee, the judgment of the Hon ble Supreme Court in the case of Securities and Exchange Board of India vs Rakhi Trading Private Ltd 2018 (2) TMI 580 - SUPREME COURT OF INDIA cannot be applied to the facts of this case. Addition in question is deleted and the appeal of the assessee is allowed.
Issues involved:
Determining the validity of the Assessing Officer's rejection of the claim of Long Term Capital Gains made by the assessee on the shares of two companies based on circumstantial evidence and general observations. Detailed Analysis: 1. Issue of Rejection of Long Term Capital Gains Claim: The primary issue in this case pertains to the Assessing Officer's rejection of the assessee's claim of Long Term Capital Gains on the purchase and sale of shares of two companies. The AO based the rejection on a general report and modus operandi commonly seen in such cases, deeming the claimed gains as bogus. The AO added the entire sale proceeds as income and disallowed the exemption under section 10(38) of the Income Tax Act, 1961. The evidence provided by the assessee to establish the genuineness of the transactions was dismissed by the AO. 2. Analysis of CIT(A)'s Decision: Upon appeal, the Commissioner of Income Tax (Appeals) upheld the AO's addition of the Long Term Capital Gains claim. The CIT(A) relied on circumstantial evidence, human probabilities, and rules of suspicious transactions to support the AO's findings. Despite the absence of direct material contradicting the evidence presented by the assessee, the CIT(A) upheld the addition. The reliance on a general report by the Director of Investigation, Kolkata, without specific details or confrontation with the assessee, formed the basis of the CIT(A)'s decision. 3. Precedents and Tribunal's Stance: The Tribunal referred to various cases where similar additions based on generalization, suspicions, and conjectures were consistently deleted. Citing specific cases such as Manish Kumar Baid & Others vs ACIT, the Tribunal emphasized the importance of decisions based on concrete evidence rather than general observations. The Tribunal highlighted that the evidence presented by the assessee remained unchallenged and uncontroverted, leading to the deletion of such additions in previous cases. 4. Applicability of High Court Decisions: The Tribunal acknowledged the relevance of decisions by Hon'ble High Courts and the ITAT, such as the case of Securities and Exchange Board of India vs Rakhi Trading Private Ltd. The Departmental Representative failed to counter the applicability of these decisions to the current case, further strengthening the assessee's position. 5. Final Decision and Outcome: Considering the arguments presented and the lack of surviving adverse orders from SEBI against the assessee, the Tribunal decided to delete the addition in question. Consequently, the appeal of the assessee was allowed, overturning the earlier decisions of the AO and the CIT(A). In conclusion, the judgment by the Appellate Tribunal ITAT Kolkata focused on the rejection of the Long Term Capital Gains claim by the Assessing Officer, the subsequent decision by the CIT(A), the importance of concrete evidence in such cases, and the application of relevant legal precedents to support the assessee's position, ultimately resulting in the allowance of the appeal.
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