2022 (5) TMI 1324 - AT - Income Tax

Bogus LTCG - bogus share transaction - AO made addition by treating capital gain on sale of shares as income from other sources - HELD THAT - The assessee sold 8500 shares of Buniyad Chemicals during Financial Year 2006-07, which were debited in the Demat account on 07/08/2006. The closing balance as per Demat account statement as on 31/08/2006 was 15100 shares. The transaction of 8500 shares during the financial year 2006-07 is further substantiated by contract note - The assessee has also placed on record a copy of her bank statement with IDBI Bank to show that the assessee has received a sum of Rs.5,03,621.91 towards sale consideration of shares by clearing on 15/07/2006. This date is same as the date of sale of shares mentioned in the contract note and proximate to the date of debit of shares in the Demat account of the assessee. The examination of documents on record clearly indicate that the assessee was holding shares of Buniyad Chemicals at least from the Financial Year 2004-05 and that the assessee had sold 8500 shares of Buniyad Chemicals during Financial Year 2006-07. As in so far as cancellation of registration of M/s. Alliance Intermediaries and Network Pvt. Ltd. as sub-broker by the NSE through whom the assessee had sold shares of Buniyad Chemicals, it would not make the transaction of sale of shares bogus. By furnishing cogent evidence, assessee has discharged her onus in proving that she was holding the shares since 2004 and had sold the shares during the relevant period. The Revenue has neither controverted nor rejected the Demat account statement of the assessee. After examining the documents on record, we merit in the appeal of assessee. The addition made by the Assessing Officer by treating capital gain on sale of shares as income from other sources is directed to be deleted.

Summary

Issues involved:
Appeals against the order of Commissioner of Income Tax(Appeals) -26, Mumbai for Assessment Years 2007-08, 2008-09, and 2009-10 regarding the treatment of long term capital gains from the sale of shares as income from unexplained sources.

Analysis:

Assessment Year 2007-08:
The assessee sold shares of a company through a broker, and the Assessing Officer treated the long term capital gain as income from unexplained sources due to the cancellation of the broker's registration. The assessee provided evidence of holding the shares in her Demat account and receiving the sale consideration through banking channels. The ITAT found that the shares were held by the assessee since at least 2004, and the transaction was genuine. The appeal was allowed, and the addition was deleted.

Assessment Years 2008-09 and 2009-10:
The facts in these years were similar to 2007-08, with the assessee selling shares of the same company. The Assessing Officer rejected the capital gain on the sale of shares. The ITAT noted that the transactions and reasons for rejecting the capital gain were identical across all three years. Therefore, the appeal for these years was allowed based on the findings for 2007-08.

In conclusion, the ITAT allowed all three appeals for Assessment Years 2007-08, 2008-09, and 2009-10, as the transactions were deemed genuine, and the additions made by the Assessing Officer were deleted.