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2023 (1) TMI 211 - AT - Income TaxBogus transaction in the scrip - bogus LTCG - Onus to prove - HELD THAT - AO nowhere found any discrepancies in the documentary evidences. The dominant basis of treating the impugned transaction as bogus was based on assumption of the AO that the impugned scrip was found as penny stock by the DDIT(Inv.), unit-6(2) Mumbai. Thus, it was the onus upon the AO to bring such facts on record before making any allegations against the assessee. In the present case, the learned CIT-A after detailed verification has reached to the conclusion that the transaction carried out by the assessee was genuine and based on the documentary evidence. At the time of hearing, DR has not brought any iota of evidence against the finding of the learned CIT-A. At the same time, we also note that there was no allegation against the broker through whom the assessee has purchased and sold the impugned script. What has been adopted by the AO for making the addition/disallowances was the mere assumption. To our understanding, the mere assumption, surmises and conjecture cannot the basis of making the addition or treating the transaction in sale of share of impinged company as bogus until and unless it is supported by the material documents. Income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and assumptions of certain facts. In order to hold income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/stock brokers for such an arrangements. In absence of such finding, no adverse inference can be drawn against the assessee. Whether a person who genuinely entered into purchase and sale of particular shares at stock exchange which was rigged up by some other person or group of persons, therefore, he enjoyed the windfall from such action of other person, can he be disallowed the benefit of tax exemption or carry forward of loss ? - To our mind the Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometime we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of M/s. Arya Global Shares Securities Ltd. and Vax Housing Finance Corp. Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith. As relying on case Smt. Krishna Devi 2021 (1) TMI 1008 - DELHI HIGH COURT we hold that in absence of any specific finding against the assessee, the assessee cannot be held to be guilty or linked to the wrong acts merely on basis of surmises and assumptions. In view of the above discussion, we hold that the income earned by the assessee on the scrip of M/s. Arya Global Shares Securities Ltd. and loss incurred on the scrip of Vax Housing Finance Corp. limited cannot be held bogus merely on the basis of some assumption of the AO unless cogent materials are brought on record. Therefore, we don't find any reason to disturb the finding of the learned CIT(A) and direct the AO to delete the addition and disallowances made by him. Hence the grounds of Revenue's appeal is hereby dismissed. Decided against revenue.
Issues Involved:
1. Deletion of addition of Rs. 19,310/- on account of alleged bogus transaction in the scrip of M/s. Arya Global Shares & Securities Ltd. 2. Disallowance of carry forward of loss amounting to Rs. 43,54,574/- from trading in the scrip of Vax Housing Finance Corporation Ltd. 3. Initiation of penalty proceedings under section 271(1)(c). Issue-wise Detailed Analysis: 1. Deletion of Addition of Rs. 19,310/-: The Revenue contested the deletion of the addition of Rs. 19,310/- by the CIT-A, which was initially added by the AO on the grounds of being a bogus transaction in the scrip of M/s. Arya Global Shares & Securities Ltd. The AO's decision was based on information from the DDIT(Inv.), suggesting that the scrip was a penny stock used for accommodation entries. However, the assessee provided documentary evidence, including bills, Demat account statements, and proof of payment through banking channels, which were not disputed by the AO. The CIT-A found that the transactions were genuine and conducted through the stock exchange with all necessary taxes paid. The Tribunal upheld the CIT-A's decision, emphasizing that the AO's addition was based on assumptions without any specific adverse findings against the assessee. 2. Disallowance of Carry Forward of Loss of Rs. 43,54,574/-: The AO disallowed the carry forward of the loss incurred by the assessee from trading in the scrip of Vax Housing Finance Corporation Ltd., labeling it as a penny stock and the loss as non-genuine. The assessee provided substantial documentary evidence to support the genuineness of the transactions, including purchase and sale bills, Demat account details, and proof of payment through banking channels. The CIT-A, after examining the evidence, found no adverse material against the assessee and allowed the carry forward of the loss. The Tribunal agreed with the CIT-A, stating that the AO's disallowance was based on mere assumptions without any concrete evidence of wrongdoing by the assessee. The Tribunal emphasized that income or loss cannot be held bogus based on generalization and assumptions without specific evidence of collusion or manipulation. 3. Initiation of Penalty Proceedings under Section 271(1)(c): The CIT-A noted that the initiation of penalty proceedings under section 271(1)(c) is procedural and consequential, causing no prejudice to the assessee at this stage. Therefore, this ground was dismissed by the CIT-A. The Tribunal did not find any reason to interfere with this finding. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT-A's decision to delete the addition of Rs. 19,310/- and allow the carry forward of the loss of Rs. 43,54,574/-. The Tribunal emphasized that the AO's actions were based on assumptions without specific adverse findings or evidence against the assessee. The Tribunal reiterated that genuine transactions supported by documentary evidence cannot be deemed bogus merely based on the nature of the stock involved. The appeal filed by the Revenue was thus dismissed. Order Pronounced: The order was pronounced in the Court on 23/12/2022 at Ahmedabad.
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