2019 (3) TMI 210 - AT - Income Tax

Bogus Long Term Capital Gains on purchase and sale of the shares - addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) - addition based on evidence or generalisation - circumstantial evidence and human probabilities - not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department - HELD THAT - In number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. In the case on hand, all evidences were produced by the assessee. The assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) copy of merger order passed by the High Court , (f) copy of allotment of shares on merger, (g) evidence of sale of shares through the stock exchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statement reflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc. - Decided in favour of assessee

Summary

Issues:
Whether the Assessing Officer correctly rejected the claim of Long Term Capital Gains on shares of M/s Unno Industries by the assessee.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) concerning the rejection of the claim of Long Term Capital Gains by the assessee. The Assessing Officer concluded that the claimed gains were bogus based on general observations and a report, adding the entire sale proceeds as income and rejecting the exemption under section 10(38) of the Income Tax Act, 1961. The evidence supporting the transaction's genuineness was dismissed. The Commissioner (Appeals) upheld this decision based on circumstantial evidence, human probabilities, and rules of suspicious transactions, without direct material to challenge the evidence provided by the assessee. The conclusions were drawn from a general report of the Investigation Wing without specific confrontation or evidence provided to the assessee.

The Departmental Representative argued that the transaction was not genuine, claiming it was orchestrated by a few operators and investors. Various judgments were cited to support this argument. However, the Tribunal and the Jurisdictional Calcutta High Court consistently emphasized that decisions should rely on evidence rather than generalizations or suspicions. Previous cases where similar additions were deleted were cited, highlighting the importance of specific evidence.

Regarding the case laws cited by the Departmental Representative, it was noted that in cases where the assessee failed to justify the claim with evidence, the decisions were against the assessee. However, in the current case, the assessee provided substantial evidence including purchase details, payment proofs, bank statements, merger orders, demat statements, sale evidence, and more. The precedents set by the Jurisdictional High Court and the ITAT Kolkata favored the assessee's position, leading to the deletion of the addition of Long Term Capital Gains under section 68 of the Act.

In conclusion, the Tribunal deleted the addition of Long Term Capital Gains, as the evidence presented by the assessee was deemed sufficient and in line with the decisions of the Jurisdictional High Court and the ITAT Kolkata. The appeal of the assessee was allowed based on these findings.