2018 (12) TMI 971 - AT - Income Tax

Addition u/s 68 - bogus purchase of shares - paper transactions - genuineness of purchase of shares - Held that - The gain on sale of earlier investment has been reflected by the assessee in his return of income for AY 2004-05 and the same has been accepted by the revenue. In support of genuineness of purchase of impugned shares, the assessee has placed on record contract note, relevant share certificate, statement of demat holding on various dates. The perusal of the share certificate reveal that the said shares were transferred in assessee s name and the said shares were subsequently converted into demat form which is evidenced by the statement of demat holding as on 31/05/2004. The cost of these shares has been reflected in assessee s Balance Sheet for the financial year 2003-04. All the aforesaid facts lead us to conclude that the assessee, in fact, acquired the share at some point of time and the said transactions were not mere paper transactions. Nothing on record suggest that any cash transactions got exchanged between the assessee and the share broker - assessee invested the entire gains in purchase of new house property - So far as the huge rise in the sale price of the shares is concerned, it is trite law that the additions could not be made merely on the basis of suspicion, conjectures or surmises. Nothing on record suggest that the assessee, in any manner, collided with his share broker to manipulate the price of the stated shares. - addition deleted - decided in favour of assessee. Eligibility of claim u/s 54F - claim denied only on the premise that the possession of the flat could not be obtained by the assessee within stipulated period of time - Held that - No ground to deny the deduction particularly when the assessee has acquired certain rights in the property and has appropriated the capital gains towards the same and fulfilled all the other conditions as envisaged by Section 54F. The assessee could not be penalized for delays in the construction which is a common feature of the industry. Therefore, we hold that the assessee was entitled for deduction u/s 54F. AO is directed to allow the same. - decided in favour of assessee. Addition on account of low household expenses are concerned, we concur with the stand of lower authorities, in this regard and therefore, dismiss this ground of assessee s appeal.

Summary

Issues:
Appeal against order confirming addition u/s 68 and denial of deduction u/s 54F for AY 2005-06.

Analysis:

1. Addition u/s 68:
The appellant contested the addition u/s 68 of ?11.98 Lacs before the ITAT Mumbai. The AO treated the transaction as sham due to discrepancies in documents provided by the assessee. However, the ITAT found evidence supporting the genuineness of the share purchase, including ledger extracts, share certificates, and demat statements. The ITAT concluded that the transactions were genuine, and there was no evidence of collusion to manipulate share prices. Therefore, the addition u/s 68 was deleted.

2. Deduction u/s 54F:
Regarding the denial of deduction u/s 54F, the ITAT noted that the assessee invested the gains in a new property but could not obtain possession within the stipulated period. Despite this delay, the ITAT held that the assessee fulfilled all other conditions of Section 54F and should not be penalized for construction delays common in the industry. Thus, the ITAT directed the AO to allow the deduction u/s 54F.

3. Low Household Withdrawals:
The ITAT concurred with the lower authorities regarding the addition of ?61,000 due to low household withdrawals of ?89,000 reflected by the assessee. This ground of the appeal was dismissed.

In conclusion, the ITAT partially allowed the appeal, deleting the addition u/s 68, directing the allowance of deduction u/s 54F, and dismissing the ground related to low household expenses. The decision was based on the factual matrix of the case, pronounced on 2nd November 2018.