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2024 (6) TMI 984 - AT - Income TaxBogus Long Term Capital Gain claimed u/s. 10(38) - bogus transaction of shares through penny stock - AO has held that the sale of shares of SRK Industries Ltd. as bogus transaction based on Investigation Wing report received by the department - HELD THAT - Only reason for denying the benefit is based on the investigation report of the Department that M/s. SRK Industries Ltd. is identified as one of the penny stock company. A.O. has not brought any material to support his finding that there has been collusion or connivance between the broker and the assessee for the introduction of his own unaccounted money in the sale transaction. Further despite the assessee s specific request, no opportunity of cross examination was provided to the assessee, on the basis of whose statements reliance has been placed to hold that the sale of shares was sham/bogus. Jurisdictional High Court in the case of Himani M. Vakil 2012 (9) TMI 1099 - GUJARAT HIGH COURT held that where assessee duly proved genuineness of share transactions by bringing on record contract notes for sale and purchase, bank statement of broker and demat account showing transfer in and out of shares, Assessing Officer was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. Thus we do not find any infirmity in the order passed by the Ld. CIT(A) in allowing the asessee s appeal and granting the benefit of Section 10(38) of the Act to the assessee. Thus the grounds raised by the Revenue is devoid of merits.
Issues Involved:
1. Deletion of addition of Rs. 1,04,95,968/- being bogus Long Term Capital Gain claimed u/s 10(38) of the Income Tax Act, 1961 from bogus transaction of shares through penny stock. Summary: Issue 1: Deletion of addition of Rs. 1,04,95,968/- being bogus Long Term Capital Gain claimed u/s 10(38) of the Income Tax Act, 1961 from bogus transaction of shares through penny stock The Revenue appealed against the order of the Commissioner of Income Tax (Appeals)-10, Ahmedabad, which deleted the addition of Rs. 1,04,95,968/- made by the Assessing Officer (AO) as bogus Long Term Capital Gain (LTCG) claimed u/s 10(38) from transactions in penny stocks. The assessee, an individual, declared total income of Rs. 4,71,380/- for the Assessment Year 2014-15, including LTCG from the sale of shares of M/s. SRK Industries Ltd., which were purchased through banking channels and recognized stock exchanges. The CIT(A) found that the assessee had provided sufficient evidence such as bank details, share transfer forms, purchase and sale invoices, and demat account statements to prove the genuineness of the transactions. The AO's addition was based on an investigation report without any independent inquiry or opportunity for cross-examination of witnesses. The CIT(A) noted that the AO failed to provide corroborative evidence to prove the transactions were bogus. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO did not dispute the purchase of shares through banking channels or the receipt of sale consideration through RTGS. The Tribunal referred to various judicial precedents, including the Hon'ble Supreme Court's decision in Parasben Kasturchand Kochar, which held that LTCG claimed on the basis of genuine transactions supported by documentary evidence should be allowed u/s 10(38). The Tribunal also highlighted that the AO did not provide any material evidence to support the claim that the transactions were sham or bogus. The Tribunal dismissed the Revenue's appeal, affirming that the assessee had discharged the onus of proving the genuineness of the LTCG and that the addition made by the AO was not justified. The Tribunal directed the AO to delete the addition and allowed the benefit of Section 10(38) to the assessee. Conclusion: The appeal filed by the Revenue was dismissed, and the order of the CIT(A) allowing the assessee's claim for exemption u/s 10(38) was upheld.
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