2023 (6) TMI 78 - AT - Income Tax

Addition u/s 68 - Bogus LTCG from share transactions - HELD THAT - AO has failed to appreciate that the shares were originally acquired in the year 1995 which fall outside the period commencing from January 2011 and ending on January 2015 examine/analysed by the Investigation Wing and/or the AO - The shares under consideration were not purchased by the Assessee and were acquired by way of gift during the relevant previous year. Assessment has been framed on the Assessee without carrying out any independent enquiry or investigation by the AO by merely relying upon the report of the investigation, and on the basis of incorrect understanding of the relevant facts. Accordingly, we overturn the findings returned by the AO and CIT(A) that the transactions entered into by the Assessee resulting in Long Term Capital Gains in the hands of the Assessee in respect of shares of M/s Aricent Infra Limited was not genuine transaction and delete addition u/s 68 - Decided in favour of assessee.

Summary

Issues Involved:
The judgment involves challenges to the order passed by the Ld. Commissioner of Income Tax (Appeals) for the Assessment Year 2012-13. The issues include violation of principles of natural justice, confirmation of additions under Section 68 and Section 69C of the Income Tax Act, and the genuineness of transactions involving the sale of shares of a specific company.

Violation of Principles of Natural Justice:
The Appellant contended that the Ld. Commissioner of Income Tax (Appeals) violated the principles of natural justice by not providing a reasonable opportunity of being heard. The Appellant argued that the order was passed prematurely, without considering responses already filed. The Appellant sought to set aside the order based on these grounds.

Additions under Section 68 and Section 69C:
The Assessing Officer made additions of INR 3,07,495 under Section 68 of the Income Tax Act, treating the sale consideration of shares as unexplained cash credit. Additionally, an amount of INR 6,150 was added under Section 69C, representing accommodation charges paid to a broker. The Assessee challenged these additions, asserting that the transactions were genuine and the additions should be deleted.

Genuineness of Share Transactions:
The Tribunal found that the shares in question were originally acquired in 1995 by the Assessee's parents and subsequently gifted to the Assessee. The Assessee sold these shares, and the Assessing Officer's conclusions were based on incorrect premises regarding the purchase timeline. The Tribunal noted that no independent inquiry was conducted to verify the facts presented by the Assessee. Consequently, the Tribunal overturned the additions made under Section 68 and Section 69C, deeming the transactions genuine and deleting the said additions.

Separate Judgement by Tribunal:
The Tribunal, comprising SHRI B. R. BASKARAN, ACCOUNTANT MEMBER, and SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER, allowed the appeal preferred by the Assessee. The Tribunal found in favor of the Assessee, concluding that the Assessing Officer and the CIT(A) had erred in treating the share transactions as non-genuine. The Tribunal overturned the additions made under Section 68 and Section 69C of the Income Tax Act, thereby allowing the appeal.