2024 (2) TMI 1488 - HC - Income Tax

Addition u/s 68 - bogus short Term Capital gain on sale of shares - ITAT deleted addition - HELD THAT - The payment for purchase was through account payee cheque. The purchase and sale was through a Demat Account maintained by an independent agency. The shares were sold through registered share broker by an online transaction and as per the share prices prevalent on that day. AO failed to contradict the evidence adduced by the respondent to support the claim of long term capital gain. It was considered that the statements recorded at the back of the respondent without affording an opportunity of cross examination was no evidence in eyes of law. The statements nowhere stated that the transactions of the respondent with regard to sale and purchase of the shares of the company was an accommodating entry. It would be appropriate to note that second addition on account of undisclosed expenditure of commission paid was consequent upon addition made of long term capital gain. Tribunal allowed the appeal on appreciation of evidence adduced by respondent and considering that no contrary material produced by the department. No case is made out for interference - Decided against revenue.

Summary

Issues:
Appeal under Section 260A of Income Tax Act against Tribunal's order allowing respondent's appeal. Substantial questions of law proposed regarding addition of income, commission paid, and long term capital gain exemption. Tribunal's decision to delete additions challenged.

Analysis:
The case involved an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal, Jaipur Bench, allowing the respondent's appeal. The appellant raised substantial questions of law regarding the addition of income, commission paid, and long term capital gain exemption. The Tribunal had deleted these additions, prompting the present appeal.

The respondent had filed an income tax return declaring income for the assessment year 2015-2016. The Assessing Officer made additions on account of bogus long term capital gain and undisclosed expenditure towards commission for the sale of shares. The Commissioner Income Tax (Appeals) upheld the additions, but the Tribunal, in its order dated 03.04.2023, allowed the respondent's appeal and deleted the additions, leading to the current appeal.

The appellant argued that the Tribunal erred in allowing the appeal, citing statements of individuals alleging accommodating entries in the guise of long term capital gains. The appellant contended that the sharp rise in share prices without supporting documentation raised doubts about the transactions.

However, the Tribunal, in its decision, considered the evidence presented by the respondent. It noted that the shares were purchased through a Demat Account and sold through a registered share broker via an online transaction. The payment for purchase was made through an account payee cheque. The Tribunal found no contradiction in the evidence supporting the claim of long term capital gain.

The Tribunal also highlighted that the statements recorded without affording an opportunity for cross-examination held no evidentiary value. It was observed that the statements did not indicate that the transactions were accommodating entries. The deletion of the addition of commission paid was consequent upon the deletion of the long term capital gain addition.

Ultimately, the Tribunal allowed the appeal based on the evidence presented by the respondent and the lack of contrary material from the department. It was concluded that there was no basis for interference, especially considering the absence of any plea of perversity. Consequently, the appeal was dismissed.