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2022 (8) TMI 30 - AT - Income TaxUnexplained expenditure u/s 69 - HELD THAT - The assessee has sold the shares of GCM securities Ltd, which were the shares of the same company in respect of which the above decisions have been rendered in favour of the assessee on similar set of facts. No specific allegation has been made by any of the entry operators alleging that the assessee has engaged in sham/bogus transaction on sale of the above shares. Nothing has been brought on record to substantiate that the assessee s own unaccounted money was used to purchase the shares on which capital gains has been earned by the assessee. The entire case of the Revenue is based on the report of the Investigation Wing, however, no specific material/information has been found specifically implicating the assessee and the addition is based on the general modus operandi in connection with sale of shares to earn bogus capital gains. The assessee, admittedly has carried out or transactions through banking channels/DMAT account. The only allegation of the Revenue is that the scrip which the assessee sold was identified by the Directorate of Income Tax (Investigation), Kolkata in which large scale rigging was done to allow benefit of bogus LTCG entities to several beneficiaries. Therefore, respectfully following the decision in the case of Smt. Aparna Misra 2019 (7) TMI 179 - ITAT KOLKATA and Smt. Rachna Agarwal 2022 (5) TMI 1000 - ITAT KOLKATA which have been rendered on similar set of facts, we are of the considered view that Ld. CIT(A) has erred in facts and in law in in allowing the assessee s appeal.
Issues Involved:
1. Treatment of sale proceeds of equity shares as "Income from Other Sources" instead of "Capital Gains." 2. Addition of unexplained expenditure under Section 69 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Treatment of Sale Proceeds of Equity Shares: The primary issue in this case was whether the sale proceeds of equity shares of GCM Securities Limited should be treated as "Income from Other Sources" or as "Capital Gains." The assessee declared these proceeds as Long Term Capital Gains (LTCG) and claimed exemption under Section 10(38) of the Income Tax Act, 1961. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] observed that the assessee purchased shares offline from an intermediary and sold them after holding for a little more than one year. The AO noted that GCM Securities Ltd. was identified by the Directorate of Income Tax (Investigation), Kolkata for large-scale rigging to provide bogus LTCG benefits. The AO concluded that the transactions were pre-arranged and treated the entire sale proceeds of Rs. 38,30,904/- as income from other sources, adding it to the assessee's income. The CIT(A) upheld the AO's decision, stating that the assessee failed to prove the genuineness of the transactions and that the entire sequence of transactions indicated they were accommodation entries and sham transactions. The CIT(A) further noted that the company in which the assessee invested was used to launder money in the guise of LTCG. 2. Addition of Unexplained Expenditure under Section 69: The AO also added Rs. 1,91,545/- as unexplained expenditure under Section 69 of the Income Tax Act, 1961, being 5% of the sale proceeds, alleging it as commission paid for obtaining the bogus LTCG. The CIT(A) confirmed this addition, noting that the assessee did not provide any evidence to support her contention against the addition. Appellate Tribunal's Analysis: The counsel for the assessee argued that there was no specific evidence against the assessee showing that her unaccounted money was used to earn bogus capital gains. It was also highlighted that all transactions were carried out through account payee cheques/DMAT account, which was not disputed by the Revenue Authorities. The counsel referred to ITAT decisions in the cases of Smt. Aparna Misra and Smt. Rachna Agarwal, where relief was granted to the assessee under similar circumstances involving the same shares of GCM Securities Ltd. The Tribunal noted that in both cases, the ITAT Kolkata had allowed the appeals in favor of the assessee, stating that the transactions were supported by confirmations, contract notes, DMAT statements, and bank statements. The Tribunal emphasized that the AO did not bring any material evidence to show that the transactions were sham or bogus. The Tribunal also noted that the entire addition was based on a general report of the Investigation Wing, without any specific material implicating the assessee. Conclusion: The Tribunal concluded that the CIT(A) erred in facts and law by treating the sale proceeds as income from other sources and by upholding the addition of unexplained expenditure. The Tribunal allowed the appeal of the assessee, directing the AO to treat the transactions as genuine and to delete the additions made. Order: The appeal of the assessee was allowed, and the order was pronounced in the open court on 29-07-2022.
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