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2024 (8) TMI 491 - AT - Income TaxBogus LTCG - Addition u/s 68 and 69A - treating the transaction in shares by the assessee as bogus - basis of the information received from Investigation Unit, Kolkata that the assessee is a beneficiary of bogus entries of long term capital gain proceedings u/s 147 were initiated in the case of the assessee - HELD THAT - Evidences were furnished by the assessee to prove the genuineness of the share transaction before the AO. AO without commenting on any of the evidence submitted by the assessee placed reliance upon the report of the Investigation Wing, Kolkata, and the price fluctuation of shares of the entities in which the assessee has transacted. The findings of the Investigation Wing, appears to be mere general findings of the investigation without any adverse observation regarding the assessee or the scripts in which the assessee has transacted. Revenue has failed to prove as to how the said findings have any relevance to the present case in view of the facts and circumstances as noted in the foregoing paragraph. There is also no reference to the any portion of sworn statements, wherein any adverse observation against the assessee has been noted by the Investigation Wing. The price fluctuation of shares of the entities in which the assessee has transacted also does not support the case of the Revenue, as no material has been brought on record to show that the assessee was involved in such price manipulation even after purchasing and selling the shares on the stock exchange through a SEBI registered stock-broker. Therefore, in the present case, it is sufficiently evident that the AO without finding any fault with the evidence submitted by the assessee proceeded to treat the transaction as non-genuine and the long-term capital gains earned by the assessee as bogus. AO did not issue any summons to the BSE or examine the broker of the assessee, despite specific request by the assessee vide its letters. Therefore, we find no merits in the impugned order upholding the addition made u/s 68 and disallowing the exemption of long-term capital gains claimed by the assessee. Similarly, we also do not find any merit in the disallowance of the investment made by the AO under section 69A - Decided in favour of assessee.
Issues Involved:
1. Ex-parte order by CIT(A) without considering written submissions and evidence. 2. Addition of exempted long-term capital gain under section 68 based on information from DDIT (Investigation) Kolkata. 3. Non-provision of reports and statements relied upon for addition. 4. Non-consideration of evidence submitted by the assessee. 5. Addition under section 69A for unexplained investment in shares. 6. Validity of reopening the assessment under section 147. Issue-wise Detailed Analysis: 1. Ex-parte Order by CIT(A): The assessee contended that the CIT(A) erred in passing the appeal order ex-parte without considering the written submissions and evidence submitted during the physical hearing and uploaded on the income-tax portal. The tribunal noted that the CIT(A) dismissed the appeal without addressing the evidence provided by the assessee. 2. Addition of Long-term Capital Gain under Section 68: The assessee challenged the addition of Rs. 27,38,020 under section 68, arguing that it was based merely on information from DDIT (Investigation) Kolkata without corroborative evidence. The tribunal observed that the AO relied on general findings from the Investigation Wing, which alleged that the assessee was part of a scheme to generate bogus long-term capital gains through penny stocks. However, the AO did not provide specific evidence linking the assessee to such activities. 3. Non-provision of Reports and Statements: The assessee argued that the ITO did not provide the reports and statements relied upon for making the addition, thereby denying the opportunity for rebuttal or cross-examination. The tribunal found that the AO failed to furnish these documents, which was a procedural lapse. 4. Non-consideration of Evidence Submitted: The assessee submitted various documents, including trade details, contract notes, demat account statements, and confirmations from the Bombay Stock Exchange, to prove the genuineness of the share transactions. The tribunal noted that the AO did not comment on these evidences and instead relied on the investigation report without substantiating the allegations against the assessee. 5. Addition under Section 69A: The assessee challenged the addition of Rs. 4,17,980 under section 69A, arguing that the investment in shares was recorded in the books of account and supported by evidence. The tribunal found that the AO's assumption of unexplained investment was not backed by corroborative evidence, and the assessee had provided sufficient documentation to prove the genuineness of the transactions. 6. Validity of Reopening the Assessment under Section 147: The assessee contended that the reopening of the assessment under section 147 was without reasonable belief that income had escaped assessment. The tribunal did not adjudicate this ground separately as the relief was granted on merits. Conclusion: The tribunal concluded that the AO's reliance on the investigation report without specific evidence against the assessee was unjustified. The assessee provided sufficient documentation to prove the genuineness of the share transactions. Therefore, the additions under sections 68 and 69A were deleted, and the appeal was allowed in favor of the assessee. The tribunal also left open the ground challenging the initiation of jurisdiction under section 147 due to the relief granted on merits.
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