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2019 (3) TMI 464 - AT - Income TaxBogus LTCG - unexplained cash credits u/s 68 - HELD THAT - There is no dispute that assessee having derived her LTCG on transfer of shares held in M/s Kailash Auto Finance Ltd. Learned Departmental Representative fails to dispute that very issue stands adjudicated in assessee s favour in co-ordinate bench s decision in SANJEEV GOEL (HUF) VERSUS INCOME TAX OFFICER, WARD-45 (3) , KOLKATA 2018 (8) TMI 1747 - ITAT KOLKATA Revenue fails to indicate any specific evidence against the assessee in above terms qua his LTCG derived from transfer of share in Jackson Investments Ltd. Therefore adopt the above extracted reasoning mutatis mutandis to delete the impugned bogus LTCG addition. Same order to follow in all remaining twelve cases as well since notice that there is no specific evidence co-relating these assessee with any kind of rigging of share price. All these impugned LTCG/losses addition(s) are reversed in these fact and circumstances. - Decided in favour of assessee.
Issues Involved:
1. Treatment of Long Term Capital Gains (LTCG) as bogus. 2. Addition under section 68 of the Income Tax Act for unexplained cash credits. 3. Disallowance of commission expenditure as unexplained. 4. Examination of evidence and burden of proof. 5. Principles of natural justice and cross-examination rights. Issue-wise Detailed Analysis: 1. Treatment of Long Term Capital Gains (LTCG) as bogus: The primary issue in the appeals was whether the LTCG declared by the assessees from the transfer of shares were genuine or bogus. The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) had treated the LTCG as bogus, alleging that the assessees had colluded with operators to rig stock market prices. The AO cited factors such as the preferential allotment of shares, thin trading volumes, and the lack of business credentials of the companies involved. However, the Tribunal found that there was no specific evidence against the assessees to support these allegations. The Tribunal noted that similar cases had been adjudicated in favor of the assessees, where the transactions were supported by proper documentation such as bills, contract notes, demat statements, and bank statements. 2. Addition under section 68 of the Income Tax Act for unexplained cash credits: The AO had added the LTCG to the income of the assessees under section 68 of the Income Tax Act, treating them as unexplained cash credits. The Tribunal, however, found that the AO had relied on general observations and reports from the investigation wing without providing specific evidence against the assessees. The Tribunal emphasized that the burden of proving that the transactions were bogus lay with the revenue authorities, which they failed to discharge. The Tribunal cited several judgments, including those from the Kolkata Bench of the ITAT and the Hon'ble Jurisdictional High Court, which had upheld the genuineness of similar transactions. 3. Disallowance of commission expenditure as unexplained: In some cases, the AO had also disallowed commission expenditure related to the LTCG transactions, treating it as unexplained. The Tribunal found that the AO had not provided any specific evidence to support this disallowance. The Tribunal reiterated that the onus was on the revenue authorities to prove that the expenditure was bogus, which they failed to do. Consequently, the Tribunal deleted the disallowance of commission expenditure. 4. Examination of evidence and burden of proof: The Tribunal emphasized the importance of examining the evidence provided by the assessees, such as bills, contract notes, demat statements, and bank statements. The Tribunal found that the revenue authorities had not controverted this evidence with any concrete material. The Tribunal cited several judgments, including those from the Hon'ble Supreme Court, which held that suspicion, however strong, cannot take the place of legal evidence. The Tribunal concluded that the revenue authorities had failed to discharge their burden of proving that the transactions were bogus. 5. Principles of natural justice and cross-examination rights: The Tribunal highlighted the principles of natural justice, particularly the right to cross-examine witnesses. The Tribunal found that the AO had relied on statements and reports from third parties without providing the assessees an opportunity to cross-examine them. The Tribunal cited judgments from the Hon'ble Supreme Court and other courts, which held that denying the right to cross-examination violated the principles of natural justice. The Tribunal concluded that the revenue authorities had not followed due process in making the additions and disallowances. Conclusion: The Tribunal allowed all the appeals, deleting the additions made under section 68 of the Income Tax Act and the disallowances of commission expenditure. The Tribunal emphasized the importance of specific evidence, the burden of proof, and the principles of natural justice in adjudicating such cases. The Tribunal's decision was consistent with several judgments from the Kolkata Bench of the ITAT and the Hon'ble Jurisdictional High Court, which had upheld the genuineness of similar transactions.
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