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2023 (7) TMI 977 - AT - Income TaxCapital loss/capital gain computation - period of holding of the shares in the hands of the assessee -benefit of indexation cost - HELD THAT - Once the revenue has admitted that the assessee was the beneficial owner of the shares then the period of holding to our understanding must be taken from the year in which the shares were held by the registered owners. Admittedly, the assessee has made necessary compliance under the Companies Act by furnishing the necessary declarations in the form MGT-4, MGT-5 and MGT-6 which were duly accepted by the competent authority i.e. Registrar of companies. Authorities below cannot interpret such declarations according to their understanding without pointing out any fault therein. It is equally important to note that the two registered shareholders have admitted in the statements to having received money from the Amarpali group for making the investment. Assessee has also paid the taxes on the investment made by him in the name of registered shareholders out of his undisclosed income and therefore it will be inappropriate to allege that the transaction shown by the assessee represents the use of colorable device. Revenue while calculating the capital gain in the hands of the assessee has adopted the cost of acquisition shown in the name of the registered shareholders for the investment made in the shares in the years 2008-09 and 2009-10. Thus, period of holding while calculating the income under the head capital gain exceeds 36 months and therefore the assessee must be given the benefit of indexation cost. Hence, the ground of appeal of the assessee is hereby allowed. Unexplained money and unexplained expenses not recorded in the books of accounts u/s 69A/69C - HELD THAT - No addition based on the documents found from the premises of the 3rd party can be made in the hands of the assessee in the given facts and circumstances. Likewise, such documents were not in the handwriting of the assessee, nor the signature of the assessee was bearing on such papers. These documents found during the search raise doubts but the same cannot be used as evidence until and unless it is supported by the corroborative material and after carrying out independent enquiries. Even the statements recorded in the case of Venus group do not suggest the assessee was involved in such cash transactions. Moreover, the statements of the Venus group were not supplied to the assessee for the rebuttal and therefore the same cannot be used against the assessee and that too without providing the opportunity of cross-examination. Regarding the SMS between the assessee and Shri Ashok Vaswani, it does not establish that the assessee has carried out cash transactions with Venus group. The SMS was relating to transactions of the other companies which were duly recorded in the books of accounts. Therefore, the SMS cannot be a basis to draw any inference against the assessee. Under the provisions of section 69A/69C of the Act, the primary onus lies upon the revenue. In other words, it is the onus of the revenue to prove based on the documentary evidence that the assessee was the owner of the unaccounted money. But we note that the entire addition lacked supporting evidence. The Hon ble High Court of Bombay in the case of CIT Vs. BG Shirke Construction Technology (P) Ltd. 2018 (8) TMI 1207 - BOMBAY HIGH COURT has held that the primary onus under the 69C lies upon the revenue - Decided against revenue.
Issues Involved:
1. Rejection of Assessee's Claim of Capital Loss and Calculation of Short-Term Capital Gain. 2. Deletion of Additions Made by AO for Unexplained Money and Unexplained Expenses. Summary: Issue 1: Rejection of Assessee's Claim of Capital Loss and Calculation of Short-Term Capital Gain The assessee challenged the CIT(A)'s decision confirming the AO's rejection of a capital loss claim of Rs. 5,73,13,610 on the transfer of shares and the calculation of short-term capital gain at Rs. 2,60,17,820. The assessee, a promoter/director of various companies, claimed beneficial ownership of shares held by others, purchased with his undisclosed income, and offered to tax. The AO and CIT(A) found the transactions to be colorable devices, rejecting the long-term capital loss claim and treating the gain as short-term. The ITAT noted that the assessee was the beneficial owner and had complied with statutory declarations, thus the period of holding should be from when the registered shareholders acquired the shares. The ITAT concluded that the shares were held for more than 36 months, allowing the benefit of indexation cost and thereby accepting the assessee's claim of long-term capital loss. Issue 2: Deletion of Additions Made by AO for Unexplained Money and Unexplained Expenses The Revenue appealed against the CIT(A)'s deletion of additions totaling Rs. 16,42,38,460 made by the AO under sections 69A and 69C for unexplained money and expenses. The AO based the additions on documents found during a search at a third-party premises (Venus group) showing financial transactions with the assessee. The CIT(A) found the additions unjustified as the documents were not found from the assessee's premises, were not in his handwriting, and lacked corroborative evidence. The ITAT upheld the CIT(A)'s decision, emphasizing that the documents could not be used against the assessee without proper corroboration and opportunity for rebuttal. The ITAT also highlighted that the primary onus under sections 69A/69C lies on the Revenue, which was not discharged. Consequently, the ITAT dismissed the Revenue's appeal. Conclusion: The ITAT allowed the assessee's appeal regarding the capital loss and dismissed the Revenue's appeal on the additions for unexplained money and expenses.
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