2019 (8) TMI 740 - AT - Income Tax

Bogus LTCG - bogus accommodation entries - HELD THAT - Assessee has filed voluminous evidence in support of acquisition/sale of the shares in issue. The mere effect that assessee s lives at far away destination is no ground to dispute the same in view of the above overwhelming details. The assessee s brokers found also appeared before the Assessing Officer to support his case in response to section 133(6) notices. Coming to demat issue (supra), the assessee s paper book pages 15 to 16 contains the relevant contract notes regarding the scrip s market value statement particulars as well as purchase and sales details. We find that the Revenue has not placed on record any cogent evidence regarding the accommodation entry nexus between assessee, his brokerage firm and the two other firms such namely M/s. Sikaria Shares and Stock Broking Services and M/s Hira Commodities and Derivatives Pvt. Ltd. There is not even a single transaction between the assessee and the other two brokerage firms. The relevant assertion that the SEBI has also penalized the brokerages firms for price, does not carry any substance since the relevant order dated 12.04.2010 involves times between 17.08.2004 to 31.03.2005 whereas we are concerned with the assessee s allotment of shares much later i.e. on 04.02.2012 (pages 65 to 77). There is further no issue about the correctness of the corresponding amalgamation details. We conclude in these peculiar facts that the assessee has sufficiently discharged his onus of proving genuineness of the impugned share transactions in the lead assessment years. Coming to the later assessment years, both the lower authorities alleged that the assessee was involved in artificial rigging of share prices in collusion with entries. We repeat herein as well as that there is no such nexus proved with the help of cogent details which could be lead us to the conclusion of the assessee having derived non-genuine share profits. This tribunal s coordinate bench decision in Navneet Agarwal vs. ITO 2018 (8) TMI 509 - ITAT KOLKATA has analyzed the entire factual/legal position to decide the very issue against the revenue. We adopt the above detailed reasoning mutatis mutandis to delete the impugned bogus long-term capital gain addition in both these assessee s appeals before us. - decided in favour of assessee

Issues Involved:
1. Treatment of Long-Term Capital Gains (LTCG) as Bogus and Non-Genuine.
2. Compliance with Section 68 of the Income Tax Act.
3. Validity of Share Transactions and Broker’s Role.
4. Relevance of Demat Account Entries.
5. Legal Precedents and Principles of Natural Justice.

Detailed Analysis:

1. Treatment of Long-Term Capital Gains (LTCG) as Bogus and Non-Genuine:
The assessee challenged the actions of the lower authorities in treating LTCG of ?28,65,192/- and ?93,86,844/- derived from the sale of shares as bogus and non-genuine. The Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)] viewed these transactions as accommodation entries based on a report from the department's investigation wing. The AO cited the appreciation in share value and findings from a survey operation on other brokers to support the claim of bogus transactions. However, the tribunal found no merit in these arguments, emphasizing that the assessee provided substantial evidence supporting the genuineness of the share transactions, including share bills, contract notes, demat statements, and bank statements. The tribunal noted that the mere fact of the assessee living far from the broker’s location was not sufficient to dispute the transactions.

2. Compliance with Section 68 of the Income Tax Act:
The AO made additions under Section 68, which deals with unexplained cash credits. The assessee argued that they had discharged their burden by proving the identity of the creditor, the capacity of the creditor to advance money, and the genuineness of the transaction. The tribunal agreed, noting that the AO had not provided specific findings to justify the addition under Section 68. The tribunal highlighted that the AO's reliance on suspicion and general allegations without concrete evidence was insufficient to support the addition.

3. Validity of Share Transactions and Broker’s Role:
The AO questioned the legitimacy of the share transactions, citing the involvement of tainted brokers penalized by SEBI for price manipulation. The assessee clarified that their transactions were conducted through a different broker, M/s Sajendra Mookim, and provided evidence of legitimate transactions. The tribunal found no direct nexus between the assessee and the brokers involved in the alleged manipulation. The tribunal emphasized that the AO failed to establish a link between the assessee’s transactions and the alleged bogus activities of other brokers.

4. Relevance of Demat Account Entries:
The AO raised concerns about the absence of entries in the assessee’s demat account for the share transactions. The tribunal noted that the assessee provided contract notes and other documentation supporting the transactions. The tribunal found that the AO did not present any cogent evidence to dispute the demat entries or the genuineness of the transactions. The tribunal concluded that the assessee had sufficiently discharged their onus of proving the genuineness of the share transactions.

5. Legal Precedents and Principles of Natural Justice:
The tribunal referred to various legal precedents emphasizing the importance of concrete evidence over suspicion and general allegations. The tribunal cited the Supreme Court’s decisions in Durga Prasad More and Sumati Dayal, stressing the need to appreciate the assessee’s explanation in light of human probabilities. The tribunal also referenced decisions from other benches and courts, highlighting the principles of natural justice, including the right to cross-examine witnesses and the requirement for the revenue to provide specific evidence when making additions. The tribunal concluded that the AO’s reliance on general reports and the absence of direct evidence against the assessee rendered the additions unsustainable.

Conclusion:
The tribunal allowed the assessee’s appeals, deleting the additions made under Section 68 for LTCG. The tribunal emphasized the need for concrete evidence and adherence to principles of natural justice in tax assessments. The assessee’s detailed documentation and lack of direct evidence against them led to the conclusion that the share transactions were genuine.

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