2018 (12) TMI 520 - AT - Income Tax

Cash credits u/s 68 - bogus long term capital gain - exemption u/s 10(38) - Held that - Taking into consideration the facts and circumstances of the case and the judicial decisions cited, as find that the issue for consideration is squarely covered by the orders of the Bengaluru ITAT in the cases of Arvind Kumar Moolchand 2017 (5) TMI 1643 - ITAT BANGALORE and Pukhraj Hasmuchlal 2018 (1) TMI 1406 - ITAT BANGALORE - set aside the orders of the AO and restore the matter of treatment of sale proceeds declared on sale of shares as unexplained credits u/s 68 of the Act to the file of the AO to re-adjudicate the issue afresh; after making available to the assessee for her rebuttal all documents relied upon by Revenue for making the additions/disallowance and providing adequate opportunity to the assessee for cross-examination of persons whose statements are being relied upon. Assessee s appeal allowed for statistical purposes.

Issues:
1. Treatment of long-term capital gain on sale of shares as income under section 68 of the Income-tax Act.
2. Failure to provide findings of search/survey and opportunity for cross-examination.
3. Discharge of primary onus to establish genuineness of the transaction.
4. Investment in shares with bona fide intention.
5. Consideration of case laws.
6. Interest levied under section 234A.

Analysis:

1. Treatment of Long-Term Capital Gain: The appellant contested the order of the CIT(A) upholding the Assessing Officer's decision to treat the long-term capital gain on the sale of shares as income under section 68 of the Income-tax Act. The appellant argued that the gain should have been exempt under section 10(38) of the Act. The ITAT considered similar cases and concluded that the matter should be re-adjudicated by the AO, providing the appellant with an opportunity to rebut the documents relied upon by the revenue.

2. Failure to Provide Findings and Opportunity: The appellant raised concerns about the AO not providing findings of search/survey or allowing cross-examination of relevant parties during the assessment proceedings. The ITAT acknowledged the appellant's contention and directed the AO to provide all documents relied upon for the additions and allow cross-examination, following precedents set in similar cases.

3. Discharge of Primary Onus: The appellant argued that they had furnished all evidence to establish the genuineness of the transaction, thereby discharging their primary onus. The ITAT noted this argument and ordered a re-adjudication by the AO, emphasizing the need to provide the appellant with an opportunity to refute the additions made under section 68 of the Act.

4. Bona Fide Investment: The appellant asserted that the investment in the shares was made in good faith, without any intention to deceive the tax authorities. The ITAT considered this argument in light of the facts and circumstances of the case, directing a fresh adjudication by the AO to ensure procedural fairness.

5. Consideration of Case Laws: The appellant cited various case laws to support their position, highlighting precedents where similar issues were decided in favor of the assessee. The ITAT took note of these references but focused on the specific circumstances of the case at hand to arrive at its decision.

6. Interest Levied under Section 234A: The appellant contested the interest levied under section 234A, arguing against its imposition. The ITAT did not delve into this issue as the primary matters concerning the treatment of sale proceeds were deemed significant for the decision.

In conclusion, the ITAT allowed the appellant's appeal for assessment year 2014-15 solely for statistical purposes, setting aside the orders of the AO and directing a re-adjudication of the treatment of sale proceeds declared on the sale of shares under section 68 of the Income-tax Act. The other grounds raised on merits were deemed academic and not adjudicated further.

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