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2019 (8) TMI 1322 - AT - Income TaxBogus LTCG - Addition u/s 68 - long term capital on sale of shares of M/s JIL and also the commission expenses as bogus - HELD THAT - Contract notes in connection with sale of shares along with bank statement reflecting the receipt of sale consideration and demat statement were produced before the lower authorities and are available in the paper book page nos. 14 to 22. A.O. has nowhere in the assessment order referred to any material which can prove the complicity of assessee either in the price rigging or in the alleged accommodation entry operation. Nothing on record/assessment order could show that assessee was connected with M/s. Jackson Investments Ltd. or their promoters, directors and any other person who exercises any control over M/s. Jackson Investments Ltd. or any so called entry operator. Other than adverse assumptions there is no evidence on record to disbelieve that the assessee sold shares through registered share and stock broker. The assessee had produced all evidences to explain the source of the amounts received by the assessee from the brokers and to corroborate the transaction in question. Thus I am of the opinion in the facts discussed supra, the AO was not justified in assessing the sale proceeds of shares as undisclosed income. Therefore, respectfully following the order of coordinate bench in Om Prakash Mundhra 2019 (3) TMI 559 - ITAT KOLKATA and the finding of facts as stated in (supra) am inclined to set aside the order of Ld. CIT(A) and direct the AO not to treat the long term capital on sale of shares of M/s JIL and also the commission expenses as bogus and delete the consequential additions. Therefore, the appeal of assessee is allowed.
Issues Involved:
1. Addition of ?17,91,918/- made by the AO under Section 68 of the Income-tax Act, 1961. 2. Addition of ?89,596/- on account of payment of commission under Section 69 of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Addition of ?17,91,918/- under Section 68 of the Income-tax Act, 1961: Facts and Arguments: - The assessee claimed long-term capital gains (LTCG) of ?17,91,918/- from the sale of shares of M/s. Jackson Investment Ltd. (JIL) and sought exemption under Section 10(38) of the Act. - The Assessing Officer (AO) noted that the shares were purchased at ?10/- each and sold at significantly higher prices, raising suspicion of price rigging. - The AO identified JIL as one of the 84 penny stocks involved in artificial price rigging and concluded that the transactions were pre-arranged to launder unaccounted money. - The AO treated the LTCG as unexplained cash credit under Section 68 and added it to the income of the assessee. Tribunal's Findings: - The Tribunal observed that the AO did not provide any material evidence to prove the assessee's involvement in price rigging or accommodation entry operations. - The assessee provided all necessary documents, including purchase bills, money receipts, share transfer advice, share certificates, contract notes, bank statements, and demat statements, to substantiate the transactions. - The Tribunal referred to previous decisions where similar additions were deleted, emphasizing the lack of direct evidence against the assessee. - The Tribunal held that the AO's conclusions were based on assumptions and not supported by concrete evidence. The addition of ?17,91,918/- was deleted. Relevant Case Laws Cited: - Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) - CIT (Central) Calcutta vs. Daulat Ram Rawatmull (87 ITR 349) - Andman Timber Industries vs. CCE [2015] 62 taxmann.com 3 (SC) - CIT vs. Eastern Commercial Enterprises 210 ITR 103 (Cal) - Omprakash Mundhra & Ors Vs. ITO in ITA No. 2235/Kol/2018 2. Addition of ?89,596/- on account of payment of commission under Section 69 of the Income-tax Act, 1961: Facts and Arguments: - The AO also added ?89,596/- as commission expenses, treating it as unexplained income under Section 69 of the Act. - The assessee contended that the commission was paid for legitimate transactions through registered brokers. Tribunal's Findings: - The Tribunal noted that the commission expenses were part of the same transactions scrutinized for LTCG. - Since the primary addition of LTCG was found to be unjustified, the consequential addition of commission expenses was also deemed unsustainable. - The Tribunal deleted the addition of ?89,596/- on account of commission expenses. Conclusion: - The Tribunal allowed both appeals, deleting the additions made by the AO under Sections 68 and 69 of the Income-tax Act, 1961. - The decisions were based on the lack of concrete evidence against the assessee and the adherence to legal principles established in previous judgments. Order Pronounced: - Both appeals of the assessee were allowed, and the order was pronounced in the open court on 23rd August 2019.
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