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2023 (8) TMI 335 - AT - Income TaxAddition u/s 68 - capital gain declared by assessee as non-genuine - question to genuineness of the transactions - HELD THAT - The shares were purchased and sold through recognized stock-exchange and not off-market. Next we find that the purchase price was paid through A/c payee cheques and the sale consideration was also received through A/c payee cheques; there is no payment or receipt in cash. Then, we find that immediately after purchase of shares, the assessee got those shares credited in De-mat A/c (there was some time-gap of 11 months which is suitably explained by Ld. AR). Notably, the assessee was holding share in De-mat A/c for as many as 10 years from purchase till last sale and this single factor is more than enough to dislodge any allegation of revenue on assessee s transactions. Then, we also find that the assessee is having investment in other securities as well and it is not the case that the assessee has made a stray transaction of shares of KCLIPL only. Thus, there is a complete series of factors and evidences demonstrating the genuineness of assessee s transactions and not a single of them has been disputed by revenue. Thus capital gain declared by assessee must be accepted as genuine and we do so. Accordingly, we delete the additions made by revenue-authorities. The assessee succeeds in these appeals.
Issues Involved:
1. Whether the revenue is justified in treating the capital gain declared by the assessee as non-genuine and thereby making an addition under Section 68 of the Income-tax Act, 1961? Summary: Issue 1: Justification of Revenue in Treating Capital Gain as Non-Genuine The controversy revolves around whether the revenue is justified in treating the capital gain declared by the assessee from the sale of shares of M/s KCL Infra Projects Ltd. (KCLIPL) as non-genuine and thereby making an addition under Section 68. Assessee's Arguments: 1. Documentary Evidence: The transactions were fully supported by valid documents, including year-wise summaries, de-mat accounts, bank passbooks, contract notes, and statements of purchases and sales. 2. Purchase Details: Shares were purchased in tranches on various dates and payments were made through banking channels, not in cash. 3. Dematerialization: Shares were credited in the de-mat account after purchase, albeit with a slight delay due to the system's popularity at the time. 4. Holding Period: Shares were held for approximately 10 years, which rules out allegations of non-genuineness. 5. Regular Investor: The assessee held other securities, indicating regular investment activities. Revenue's Contentions: 1. Penny Stock Allegation: The AO found that KCLIPL was a penny stock providing accommodation entries to beneficiaries. 2. Buyer Data: Majority of buyers were shell entities, and some notices to buyers returned unserved or were unresponsive. 3. Director's Statement: The director of KCLIPL admitted to market manipulation. 4. Financial Analysis: The company's financials did not support the abnormal rise in share price. 5. Preponderance of Probabilities: The AO concluded that the transactions were executed to legitimize unaccounted income. Tribunal's Findings: 1. Documentary Evidence: The assessee produced all necessary documents, none of which were disputed by the revenue. 2. Transaction Methodology: Both purchase and sale were conducted through recognized stock exchanges, and payments were made through account payee cheques. 3. Holding Period: The long holding period of shares (approximately 10 years) strongly indicated the genuineness of the transactions. 4. Regular Investor: The assessee's investment in other securities further supported the genuineness of the transactions. 5. Procedural Fairness: The AO did not provide the assessee with details of enquiries or statements from buyers and the director of KCLIPL, violating the principle of "audi alteram partem." Conclusion: The Tribunal concluded that the facts did not reveal any problem or negativity, and the revenue cannot rely on mere suspicion or conjecture. The capital gain declared by the assessee was accepted as genuine, and the additions made by the revenue authorities were deleted. The appeals of the assessee were allowed. Order Pronouncement: The order was pronounced in the open court on 04/08/2023.
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