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2024 (3) TMI 1155 - AT - Income TaxAddition u/s 68 - Bogus LTCG - Penny stock transactions - long-term capital gains derived by the assessee on sale of shares of listed companies questioned - entry operators involved in facilitating bogus LTCG to beneficiaries like assessee, which according to AO is nothing but converting the black money of the beneficiaries to white - CIT(A) deleted the addition - HELD THAT - As decided in the case of PCIT v. Ziauddin A Siddique 2022 (3) TMI 1437 - BOMBAY HIGH COURT which is found to be relevant in the facts involved in the present case. In the decided case, the issue before the Hon ble High Court was whether this Tribunal was right in law in deleting the addition made u/s 68 in relation to LTCG derived on sale of shares, ignoring the fact that the shares were purchased from off-market sources and that the sharp rise in prices were not supported by financials. Answering the question raised by the Revenue in the negative, the Hon ble High Court held that there was a finding of fact that the purchase sale of shares occured on the platform of stock exchang, upon payment of STT and were supported by documentary ecidences and therefore there was no perversity in the order of this Tribunal. The Court further noted that there was no allegation against the assessee that he had participated in price rigging in the market and therefore dismissed the appeal of the Revenue. We concur with the view of the CIT(A) and uphold the impugned order of the CIT(A) deleting the addition - we direct the AO to allow the LTCG/exemption claimed by assessee u/s 10(38) on sale of shares of M/s Shaleen Textile Ltd. Decided against revenue.
Issues Involved:
1. Deletion of addition made u/s 68 of the Income Tax Act, 1961. 2. Deletion of addition made u/s 69C of the Income Tax Act, 1961. Summary: Issue 1: Deletion of Addition Made u/s 68 The revenue's main grievance was against the deletion of the addition of Rs. 2,30,79,975/- made by the AO u/s 68 of the Income Tax Act, 1961. The AO noted that the assessee had claimed LTCG of Rs. 2,05,52,685/- on the sale of shares of M/s. Shaleen Textile Ltd, which was identified as a penny stock by the Kolkata Investigation Wing. The AO concluded that the financials of M/s. Shaleen Textile were weak and that the assessee's transactions were part of a pre-arranged scheme to convert black money into white through bogus LTCG claims. The Ld. CIT(A) deleted the addition, holding that the assessee had provided sufficient documentary evidence to prove the genuineness of the transactions, including share application forms, allotment letters, bank statements, demat account statements, and contract notes. The CIT(A) also noted that the AO had not provided the assessee with an opportunity to cross-examine the alleged operators of bogus entities and had not disproved the evidence submitted by the assessee. The ITAT upheld the CIT(A)'s decision, noting that the AO had not found any infirmity in the primary documents filed by the assessee and had relied on a generalized investigation report without proving the assessee's involvement in any manipulation or rigging of share prices. Issue 2: Deletion of Addition Made u/s 69C The AO had also made an addition of Rs. 4,61,600/- u/s 69C of the Act, alleging that the assessee might have incurred unaccounted expenditure on account of payment of commission to entry operators. The CIT(A) deleted this addition, noting that since the main addition u/s 68 was deleted, the consequential addition u/s 69C also had to be deleted. The ITAT agreed with the CIT(A), stating that the AO had not provided any evidence to prove that the assessee had incurred such expenditure. Conclusion: The ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the additions made u/s 68 and 69C of the Income Tax Act, 1961. The ITAT noted that the assessee had provided sufficient evidence to prove the genuineness of the transactions and that the AO had not disproved this evidence or provided any material to show the assessee's involvement in any manipulation of share prices. The ITAT also referenced several judicial precedents supporting the assessee's case.
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