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2019 (6) TMI 352 - AT - Income TaxBogus LTCG - addition u/s 68 - rejection of assessee s claim of LTCG on sale of those shares - HELD THAT - When the Assessing Officer has not brought any material on record to show that the assessee has paid over and above the purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. Sale of shares of M/s. KAFL which was dematerlized in Demat account has taken place through recognised stock exchange and assessee received money through banking channel. So, assessee has explained the nature and source of the money with supporting documents and thus has discharged the onus casted upon him by producing the relevant documents mentioned, accordingly, the question of treating the said gain as unexplained cash credit u/s 68 cannot arise unless the AO is able to find fault/infirmity with the same. Note that the source of the receipt of the amount has been explained and the transaction in respect of which the said amount has been received by assessee has not been cancelled by the stock exchange/SEBI. So, it is difficult to countenance the action of AO/Ld. CIT(A) in the aforesaid facts and circumstances explained above. There is also nothing on record which could suggest that the assessee gave his own cash and got cheque from the alleged brokers/buyers. The assessment refers also to some third party statement of Shri Sunil Dokania which was admittedly recorded behind the back of the assessee and the assessee has neither been allowed to cross examine this person by the assessee nor the statement of Shri Sunil Dokania furnished to assessee, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee It is clear from the above that the facts of the case of the assessee are identical with the facts in the above case wherein the co-ordinate bench of the Tribunal has deleted the addition in the case of Shri Manish Baid 2017 (10) TMI 522 - ITAT KOLKATA in respect of sale of shares of M/s KAFL - direct the AO not to treat the long term capital on sale of shares of M/s KAFL as bogus and delete the consequential addition.- Decided in favour of assessee.
Issues Involved:
1. Justification of addition made by the AO under Section 68 of the Income Tax Act. 2. Treatment of sale proceeds of shares as income from undisclosed sources. 3. Rejection of the assessee's claim of Long Term Capital Gains (LTCG) exemption under Section 10(38) of the Income Tax Act. 4. Validity of the transactions in the scrip of Kailash Auto Finance Limited (KAFL). Issue-wise Detailed Analysis: 1. Justification of Addition Made by AO Under Section 68: The primary issue raised was whether the addition made by the Assessing Officer (AO) under Section 68 of the Income Tax Act was justified. The AO treated the sale proceeds of shares of Kailash Auto Finance Limited (KAFL) as income from undisclosed sources, rejecting the assessee's claim of Long Term Capital Gains (LTCG). The AO relied on the report of the Investigation Wing and an interim order by SEBI, which alleged that the transactions in KAFL shares were manipulated and the share prices were artificially hiked to earn LTCG. The Tribunal noted that similar issues had been adjudicated in favor of the assessee in previous cases, where it was held that the scrips of KAFL were not bogus and the LTCG claim should be allowed. 2. Treatment of Sale Proceeds of Shares as Income from Undisclosed Sources: The AO treated the entire LTCG as cash credit under Section 68, adding it to the income of the assessee as unexplained income. The Tribunal observed that the assessee had provided sufficient documentary evidence, including purchase bills, bank statements, demat account statements, and contract notes, to support the genuineness of the transactions. The Tribunal emphasized that the AO did not bring any direct evidence to prove that the transactions were bogus or that the assessee had introduced unaccounted money. 3. Rejection of Assessee's Claim of LTCG Exemption Under Section 10(38): The AO rejected the assessee's claim of LTCG exemption under Section 10(38), alleging that the transactions were pre-arranged and not genuine investment decisions. The Tribunal, however, noted that the shares were purchased and sold through recognized stock exchanges and the transactions were supported by documentary evidence. The Tribunal also highlighted that the SEBI order, which was initially relied upon by the AO, was later withdrawn, and there was no adverse material specifically against the assessee. 4. Validity of Transactions in the Scrip of KAFL: The Tribunal examined whether the transactions in the scrip of KAFL were valid and genuine. It was noted that the shares were sold through recognized brokers in recognized stock exchanges, and the sale consideration was received through banking channels. The Tribunal found that the AO's reliance on the SEBI order and the general statements from the Investigation Wing without specific evidence against the assessee was misplaced. The Tribunal concluded that the transactions were genuine and the LTCG claim should be allowed. Conclusion: The Tribunal allowed the appeal of the assessee, directing the AO to delete the addition made under Section 68 and to treat the gains arising out of the sale of shares as LTCG, exempt under Section 10(38). The Tribunal emphasized that the AO's conclusions were based on suspicion and conjecture without any direct evidence, and the documentary evidence provided by the assessee substantiated the genuineness of the transactions.
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