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2018 (11) TMI 870 - AT - Income TaxBogus Long Term Capital Gains (LTCG) - unexplained cash credits u/s. 68 addition - Held that - We afforded sufficient opportunity to the Revenue for indicating any material on record indicating the assessee s nexus with the alleged share price rigging or her name having specifically mentioned in any search statement. There is no such material forthcoming from the case file. We therefore adopt the detailed reasoning given in NAVNEET AGARWAL, LEGAL HEIR OF LATE KIRAN AGARWAL VERSUS ITO, WARD-35 (3) , KOLKATA 2018 (8) TMI 509 - ITAT KOLKATA and NEERAJ GUPTA VERSUS INCOME TAX OFFICER, WARD-44 (1) , KOLKATA 2018 (11) TMI 805 - ITAT KOLKATA mutatis mutandis to delete the impugned addition of unexplained LTCG. - Decided in favour of assessee.
Issues Involved:
1. Whether the Long Term Capital Gains (LTCG) claimed by the assessee were genuine or bogus. 2. Whether the addition of the LTCG as unexplained cash credits under Section 68 of the Income Tax Act was justified. Issue-wise Detailed Analysis: 1. Whether the Long Term Capital Gains (LTCG) claimed by the assessee were genuine or bogus: The assessee's sole substantive ground challenges the lower authorities' action of terming its LTCG of ?34,25,766/- as bogus, thereby adding the same as unexplained cash credits under Section 68 of the Income Tax Act. The Commissioner of Income Tax (Appeals) [CIT(A)] affirmed the Assessing Officer's (AO) action by analyzing the economic parameters of the company involved, M/s NCL Research, over the period from March 2010 to March 2014. The CIT(A) noted that the rise and fall of the share prices were manipulated and not based on genuine business activities. The AO had also brought forth information that the Securities and Exchange Board of India (SEBI) had investigated and suspended trading in certain scripts, indicating manipulated transactions. The AO confronted the assessee with facts from the statement of a broker involved, which the assessee failed to rebut satisfactorily. The CIT(A) concluded that the transactions were "suspicious" and "dubious," leading to the inevitable conclusion that the LTCG claimed was not genuine. 2. Whether the addition of the LTCG as unexplained cash credits under Section 68 of the Income Tax Act was justified: The AO concluded that the LTCG of ?34,25,766/- derived from the transfer of 1700 shares in M/s NCL Research was bogus and added it as unexplained cash credits under Section 68. The AO's assessment was based on the lack of business activity in M/s NCL Research during the relevant period to justify the astronomical rise in its share price. The AO prepared a detailed chart assuming collusion of entry operators in the stock price rigging and concluded that the LTCG was actually unexplained cash credits. The AO rejected the assessee's explanation despite the documentary evidence provided, including statements of share investments, contract notes, and bank statements. Tribunal's Observations and Decision: The tribunal noted that the Revenue's case was based on general reports and modus operandi without specific evidence against the assessee. The tribunal referred to its previous decisions, including Neeraj Gupta vs. ITO and Navneet Agarwal vs. ITO, where it was held that decisions should be based on evidence and not on generalizations, human probabilities, or suspicion. The tribunal emphasized that the burden of proving a transaction to be bogus lies on the Revenue, and suspicion, however strong, cannot replace evidence. The tribunal found no material on record indicating the assessee's involvement in share price rigging or any specific mention in search statements. The tribunal rejected the Revenue's arguments based on suspicious circumstances and upheld the assessee's claim of genuine LTCG. The tribunal concluded that the AO had failed to bring any specific evidence against the assessee and that the addition of the LTCG as unexplained cash credits was not justified. Conclusion: The tribunal allowed the assessee's appeal, deleted the addition of the LTCG as unexplained cash credits, and upheld the genuineness of the LTCG claimed by the assessee. The decision was based on the lack of specific evidence against the assessee and the principle that suspicion cannot replace evidence in tax assessments.
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