2024 (4) TMI 263 - AT - Income Tax

Denial of exemption u/s 10(38) - AO had doubted the veracity of receipt of money in the form of sale consideration of shares of CCL International Ltd by making an addition u/s 69 - HELD THAT - The provisions of section 69 of the Act per se could not be made applicable to the facts of the instant case as it talks about Unexplained Investments made by an assessee. The entire allegations leveled by the revenue qua this company falls flat. We find that the ld. AO had not found any material against this company CCL International Ltd. There is no allegation / statement of any party regarding the said company giving any adverse remarks on the ground that the said company s share prices were artificially manipulated in the stock market. No action has been taken by Securities Exchange Board of India (SEBI). Instead the ld. AO had merely adopted the cut paste modus operandi of some other scrips and had made vague allegations of some investigation by department and SEBI which are totally unconnected to the assessee and the scrip dealt by the assessee herein. In our considered opinion, the entire issue has been looked into by the ld. AO from the angle of suspicion by ignoring the aforesaid factual details placed on record proving the credentials of CCL International Ltd. It is trite law that suspicion howsoever strong cannot partake the character of a legal evidence. This is a classic case of the revenue ignoring their own officers scrutiny assessment orders framed on the said company CCL International Ltd duly accepting the fact that the said company is engaged in various businesses and had reported huge incomes year after year. Hence it cannot be classified as a penny stock company at all. Once it is held that this company is not a penny stock, none of the allegations leveled by the ld. AO and upheld by the ld. CIT(A) in their orders would be applicable to the said company. The ld. AR also stated that the said company is still listed in the stock exchange and is priced at Rs 30 approximately per share. We find that the coordinate bench of Delhi Tribunal in the case of Reeshu Goel 2019 (10) TMI 1387 - ITAT DELHI had categorically given a finding that the said company CCL International Ltd cannot be held to be a paper entity . We hold that the capital gains earned by the assessee on sale of shares of CCL International Ltd is genuine and accordingly the assessee would be entitled for exemption u/s 10(38) of the Act thereon. Hence the addition made u/s 69 of the Act by the ld. AO is hereby deleted. The Ground raised by the assessee are allowed. Addition u/s 68 - unsecured loans received by the assessee - HELD THAT - With regard to loan received by the assessee from Rakesh Gupta (HUF) assessee had duly explained even the source of source of the lender to be out of sale proceeds of shares received from Trustline Securities Ltd. Hence the creditworthiness of the lender is also proved beyond reasonable doubt. Since all the three necessary ingredients of section 68 of the Act are proved by the assessee herein, no addition could be made u/s 68 of the Act in respect of loan received from Rakesh Gupta (HUF). Loan received from Ankita Garg, there is no reason for the ld. CIT(A) to merely reject this crucial document of bank statement as additional evidence which only supports the documents already placed on record by the assessee before the ld. AO viz. the ledger account of Agro Auto Grind Engineers Pvt Ltd. Hence we have no hesitation to hold that the assessee had duly proved the identity of the lender, creditworthiness of the lender and genuineness of the transactions in respect of loan received from Ankita Garg in the sum of Rs 12,20,000/- and hence the addition made u/s 68 of the Act thereon is hereby directed to be deleted. Loan received from Kapil Gupta, considering the smallness of the amount of Rs 16,000/-, we hold that the lender has got sufficient sources to advance loan of Rs 16,000/- to the assessee on 13.8.2014 through regular banking channel. Hence we have no hesitation to hold that the assessee had duly proved the identity of the lender, creditworthiness of the lender and genuineness of the transactions in respect of loan received from Kapil Gupta in the sum of Rs 16,000/- and hence the addition made u/s 68 of the Act thereon is hereby directed to be deleted. Appeal of assesee allowed.

Summary

Issues Involved:

1. Addition of Rs 49,33,062/- by denying exemption u/s 10(38) of the Income-tax Act.
2. Addition of Rs 29,56,000/- u/s 68 of the Income-tax Act in respect of unsecured loans.

Summary:

Issue 1: Addition of Rs 49,33,062/- by denying exemption u/s 10(38) of the Income-tax Act

The appeal concerns the confirmation of an addition of Rs 49,33,062/- by denying the exemption u/s 10(38) of the Act. The assessee, an individual deriving income from salary and other sources, had purchased 12500 equity shares of CCL International Ltd and later sold 9500 shares, claiming exemption u/s 10(38) for long-term capital gains. The Assessing Officer (AO) doubted the genuineness of the transactions, classifying the scrip as a penny stock and adding the sale consideration as income u/s 69 of the Act. The Tribunal found that the AO's suspicion was baseless, noting that CCL International Ltd is a legitimate company recognized by the Government of India and not a penny stock. The Tribunal held that the capital gains earned by the assessee on the sale of shares were genuine and entitled to exemption u/s 10(38), thus deleting the addition made u/s 69.

Issue 2: Addition of Rs 29,56,000/- u/s 68 of the Income-tax Act in respect of unsecured loans

The assessee challenged the addition of Rs 29,56,000/- u/s 68 of the Act concerning unsecured loans received from various parties. The AO questioned the identity, creditworthiness, and genuineness of the transactions. Specifically, the AO doubted the loan from Rakesh Gupta (HUF) due to the source being sale proceeds from Trustline Securities Ltd, and loans from Ankita Garg due to the absence of her bank statement. The Tribunal found that the AO's doubts were unfounded, as the assessee provided sufficient documentation, including confirmations, bank statements, and income tax returns of the lenders. The Tribunal held that the assessee had proved the identity, creditworthiness, and genuineness of the transactions, directing the deletion of the additions made u/s 68.

Conclusion:

The Tribunal allowed the appeal, deleting the additions made by the AO u/s 69 and u/s 68 of the Act, thereby granting relief to the assessee. The order was pronounced in the open court on 03/04/2024.