2024 (8) TMI 754 - AT - Income Tax

Bogus LTCG - denial of exemption u/s. 10(38) - HELD THAT - We notice that the assessee has purchased the shares from the market in physical form, got it transferred to his name and later dematerialised the same. The payment for purchase of shares was made through banking channels. Assessee has sold the shares in the stock exchange platform through a registered broker and received the sale consideration through banking channels. Assessee has furnished copy of demat statement, which shows entry and exit of the shares. As observed by the CIT(A), AO has not found fault with any of the documents furnished by the assessee evidencing the purchase and sale of shares - AO has also not carried out any independent enquiry with regard to the transactions carried on by the assessee, i.e. he has simply relied upon the generalised the report given by the Investigation wing. Appeal filed by the Revenue is dismissed.

Summary

Issues:
Challenge to relief granted on Long Term Capital Gain by the Ld.CIT(A) in AY 2014-15.

Detailed Analysis:

1. Background and Facts:
The appeal was filed by the Revenue against the order passed by the Ld.CIT(A) relating to AY 2014-15. The issue pertained to the treatment of Long Term Capital Gain declared by the assessee as bogus by the AO. The assessee had earned Long Term Capital Gain on the sale of shares of a company and claimed it as exempt u/s. 10(38) of the Income Tax Act, 1961.

2. AO's Action and Assessment:
The AO reopened the assessment based on information regarding accommodation entries in Long Term Capital Gains provided by a third party. The AO treated the Long Term Capital Gain declared by the assessee as bogus and assessed the sale proceeds as the assessee's income. The AO relied on an investigation report without conducting independent verification.

3. Decision of Ld.CIT(A):
In the appellate proceedings, the Ld.CIT(A) deleted the addition made by the AO. The Ld.CIT(A) found that the AO did not find any fault with the documents provided by the assessee regarding the purchase and sale of shares. The Ld.CIT(A) also cited a Tribunal decision and other similar cases to support the deletion of the addition.

4. ITAT's Analysis and Decision:
The ITAT examined the documents provided by the assessee, which showed the purchase and sale of shares through legitimate channels, including banking transactions. The ITAT noted that the AO did not conduct any independent inquiry into the transactions and relied solely on the investigation report. Referring to a Bombay High Court decision, the ITAT found no fault with the Ld.CIT(A)'s decision and upheld the deletion of the addition.

5. Conclusion:
The ITAT dismissed the Revenue's appeal, concluding that the Ld.CIT(A)'s decision was in line with established legal principles and supported by relevant case law. The ITAT's decision was based on the proper analysis of facts and application of the correct legal tests, in accordance with the decisions cited in the judgment.