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2020 (4) TMI 734 - AT - Income TaxAddition u/s 68 - Bogus LTCG - HELD THAT - The contract note of showing sale of shares of M/s. NGFL and the bank statement reflecting the receipt on sale of shares of M/s. NGFL is found placed and the Demat statement reflecting sale on 17th September, 2013 has been furnished at the time of hearing which copy has been given to the ld. DR also. Thus it is noted that the assessee has purchased on-line scrips of M/s. NGFL and sold it also on-line after paying STT. The assessee has discharged its onus to prove the transactions to be bonafide transactions from which it claimed the LTCG and therefore this amount is an exempt income u/s 10(38) - We note that the AO has not found any fault with the aforesaid documents though he accepted that he has gone through the same. In such a scenario we are bound to follow the decision of this Tribunal in another case of an assessee wherein similar claim of LTCG on sale of M/s. NGFL was considered and granted. Respectfully following the Tribunal s order in Madhu Killa 2018 (11) TMI 261 - ITAT KOLKATA and taking into consideration the documents filed by the assessee to prove the transaction which has taken place through on-line (both purchase and sale) after giving STT need to be allowed and therefore allow the claim and direct deletion of addition - Decided in favour of assessee.
Issues Involved:
1. The legitimacy of the Long Term Capital Gain (LTCG) claim of ?7,10,447/- by the assessee. 2. The addition of the claimed LTCG as bogus under Section 68 of the Income Tax Act, 1961. Detailed Analysis: 1. Legitimacy of the Long Term Capital Gain (LTCG) Claim: The assessee declared an LTCG of ?7,10,447/- from the sale of shares in M/s. Nikki Global Finance Ltd. (NGFL) and claimed it as exempt under Section 10(38) of the Income Tax Act. The Assessing Officer (AO) questioned the legitimacy of this claim, suspecting it to be artificial and bogus. The AO noted that the shares were purchased on 19.07.2012 for ?1,31,658/- and sold on 13.09.2013 for ?8,42,133/-, resulting in the claimed LTCG. The AO relied on information from the Department's Investigating Wing, which suggested that several penny stock companies, including NGFL, were involved in providing bogus LTCG to beneficiaries through a pre-planned modus operandi. The assessee provided contract notes, demat account statements, and bank transaction details to substantiate the share transactions. The AO, however, dismissed these documents without identifying any specific defects, based on the general report from the Investigation Wing. 2. Addition of Claimed LTCG as Bogus Under Section 68: The AO added the claimed LTCG of ?7,10,447/- to the assessee's income under Section 68, treating it as unexplained cash credits. The AO's decision was based on the suspicion that the transactions were part of a scam involving penny stock companies and share brokers to convert unaccounted money into exempt LTCG. The AO highlighted the involvement of 84 penny stock companies and 32 share broking entities in this alleged scam. The assessee challenged this addition before the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the AO's decision. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT). Tribunal's Findings: The ITAT noted that the assessee had provided substantial evidence to support the genuineness of the transactions, including contract notes, demat account statements, and bank transaction details. The AO had acknowledged these documents but dismissed them without any specific findings of falsity or fabrication. The ITAT emphasized that the AO's decision was based on assumptions and general reports rather than concrete evidence against the assessee. The ITAT referenced previous cases, such as "Madhu Killa vs. ACIT" and "Aditya Vikram Sureka HUF vs. ACIT," where similar claims of LTCG on NGFL shares were allowed. The Tribunal reiterated that once the assessee had discharged the onus of proving the genuineness of the transactions, the burden shifted to the AO to verify and confront any adverse findings. The AO failed to do so in this case. The ITAT concluded that the transactions were conducted through recognized stock exchanges, with payments made through banking channels and shares held in demat accounts. There was no evidence of manipulation or falsity in the documents provided by the assessee. The Tribunal held that the AO's reliance on general reports and assumptions without specific evidence against the assessee was unjustified. Conclusion: The ITAT allowed the assessee's appeal, directing the deletion of the addition of ?7,10,447/- made under Section 68. The Tribunal emphasized the need for concrete evidence and proper verification before rejecting genuine transactions based on suspicion and general reports. The assessee's claim of LTCG was thus upheld as legitimate and exempt under Section 10(38) of the Income Tax Act. Order Pronouncement: The order was pronounced in the open court on 7th August, 2019, allowing the appeal of the assessee.
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