2024 (6) TMI 1056 - AT - Income Tax

Addition u/s 68 - bogus LTCG - Disallowing deduction claimed u/s 10(38) - off market purchase in physical form by paying cash - exemption claimed on Long Term Capital Gain from transactions on which STT is paid - As argued the case in hand a perusal of the bills of purchase and sale shows that the shares have been held for more than one year, the same has been sold on the recognized stock exchange and necessary STT has been paid to Government treasury and therefore the exemption u/s 10(38) cannot be denied - as per DR that the purchase payments were made in cash and not through the normal banking channel, therefore, the same were non verifiable from the authentic supporting details, such as bank accounts/documents and assessee has failed to furnish the proof of source for the purchase transactions HELD THAT - Perusal of the order Ld CIT(A) reveals that assessee is an individual and he purchased the share M/s. Kappa Pharma Ltd in physical form and thereafter the same have been converted into electronic mode. The purchase payments were made in cash and not through the normal banking channel, therefore the same were not verifiable the authentic supporting details such as bank account /documents. The assessee is not a regular investor in shares. The assessee has failed to furnish the proof of source for the purchase transactions. The entire transactions are against human probability. See UDIT KALRA C/O DEV RAJ SHARMA 2019 (4) TMI 543 - ITAT DELHI . CIT(A) has rightly confirmed the addition in dispute, which does not need any interference on our part. - Decided against assessee.

Issues Involved:
1. Whether the findings of the Commissioner of Income Tax (Appeals) were based on speculation and impermissible assumptions.
2. Relevance of the findings of the Commissioner of Income Tax (Appeals) in deciding the issue of exemption of Capital Gain.
3. Allegation of the appellant bringing out black money as legitimately earned LTCG.
4. Reliance on judgments of other cases by the Commissioner of Income Tax (Appeals).
5. Violation of principles of natural justice.
6. Addition of Rs. 46,01,445/- as unexplained cash deposit under section 68.

Summary:

Issue 1: Speculation and Assumptions
The appellant contended that the findings of the Commissioner of Income Tax (Appeals) were speculative and based on impermissible assumptions, such as the appellant being part of a scheme to provide entries of LTCG for a commission and benefiting from transactions to convert unaccounted money into white. The appellant argued that there was no evidence linking them to any syndicate or operator, making the findings contrary to facts and law.

Issue 2: Relevance of Findings
The appellant argued that the findings regarding the credibility of the company in which they invested, the abrupt movement of share prices, and the bogus nature of the sale of shares were irrelevant. The appellant claimed to have fulfilled all requirements under section 10(38) of the Income Tax Act, 1961, by providing necessary documents and evidence of transactions through a recognized stock exchange and payment of Securities Transaction Tax (STT).

Issue 3: Allegation of Black Money
The appellant contested the finding that their motive was to bring out black money as legitimately earned LTCG, stating that there was no material on record to support the possession of black money. The appellant viewed this as an abuse by the Assessing Officer and CIT(A), arguing that no adverse inference should be drawn from such findings.

Issue 4: Reliance on Other Judgments
The appellant challenged the reliance on judgments from other cases, arguing that the addition of Rs. 46,01,445/- was incorrect in light of other ITAT decisions, specifically a detailed judgment of the SMC Bench of Delhi. The appellant contended that the addition was contrary to law and should be deleted.

Issue 5: Violation of Natural Justice
The appellant claimed that the addition was based on third-party documents, such as departmental investigation reports and SEBI reports, which were not made available to them for rebuttal, thus violating the principles of natural justice. The appellant argued that this warranted the deletion of the addition.

Issue 6: Addition as Unexplained Cash Deposit
The appellant argued that the addition of Rs. 46,01,445/- as unexplained cash deposit under section 68 was based on mere suspicions and speculations. The appellant maintained that they fulfilled all conditions for claiming exemption under section 10(38) and provided all necessary documents, which were not contradicted or found defective by the authorities.

Judgment:
The Tribunal upheld the findings of the lower authorities, noting that the transactions were against human probability and involved purchase payments made in cash, which were non-verifiable. The Tribunal found that the appellant failed to furnish proof of source for the purchase transactions and that the entire transactions were against human probability. Consequently, the appeal of the assessee was dismissed.

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