2025 (4) TMI 857 - AT - Income Tax

Addition u/s.68 - long term capital gain earned on sale of listed shares on rejecting the appellant s claim of exemption u/s 10(38) denied - AO disallowed the entire Long-Term Capital Gain (LTCG) on the grounds that there was a substantial price increase approximately 200% - HELD THAT -As reflected in the balance sheet as of 31st March 2012 the assessee had investments in equity shares and mutual funds amounting to Rs. 2, 22, 59, 604/- which increased to Rs. 4, 31, 76, 951/- as of 31stMarch 2013. This indicates consistent investment activity in the equity market. Importantly the documents submitted by the assessee during the assessment proceedings were neither challenged nor discredited by the Revenue authorities. Therefore the assessee has discharged the primary onus of proving the genuineness of the transactions. Furthermore confirmations from the stock brokers are placed on record. The LTCG proceeds were received by the assessee through regular banking channels. The purchased shares were credited to the assessee s demat account and the entire transaction was routed through the BSE. No evidence has been brought on record by the Revenue to demonstrate that the assessee was involved in any price manipulation or rigging with respect to the shares of KDJ. We also note that the co-ordinate bench of the ITAT has taken a similar view in relation to the same scrip KDJ in favour of the assessee. Accordingly we respectfully rely on the decisions of of Mrs. Karishma Ajay Agarwal 2023 (8) TMI 136 - ITAT MUMBAI and Manoj Kumar Agarwal 2024 (8) TMI 1553 - ITAT MUMBAI . A similar view was also taken by the ITAT in the case of ITO vs. Jimeet Vipul Modi 2021 (8) TMI 110 - ITAT MUMBAI The additions made by the Ld. AO under Section 68 on account of LTCG and under Section 69C on account of alleged commission are hereby deleted. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in the judgment include:

1. Whether the addition of Rs. 4,66,63,794/- under Section 68 of the Income-tax Act, 1961, for the long-term capital gain (LTCG) on sale of shares of M/s KDJ Holidayscapes & Resorts Ltd. was justified, given the assessee's claim for exemption under Section 10(38) of the Act.

2. Whether the addition of Rs. 23,33,190/- under Section 69C of the Act, as unexplained commission expenditure, was warranted.

ISSUE-WISE DETAILED ANALYSIS

1. Addition under Section 68 for LTCG

Relevant Legal Framework and Precedents: Section 68 of the Income-tax Act allows the addition of unexplained credits to the income of an assessee. Section 10(38) provides exemption for LTCG arising from the sale of equity shares subject to certain conditions. The Tribunal considered precedents from similar cases, including decisions involving the same company, M/s KDJ Holidayscapes & Resorts Ltd.

Court's Interpretation and Reasoning: The Tribunal noted that the addition was based on the report of the Investigation Wing, which alleged price manipulation. However, the Tribunal found that the assessee had provided sufficient documentary evidence to support the genuineness of the transactions, including demat statements, bank statements, and confirmations from stock brokers.

Key Evidence and Findings: The assessee submitted evidence such as sale bills, confirmation from stock brokers, bank statements, and demat account statements. The Tribunal found that these documents were neither challenged nor discredited by the Revenue authorities.

Application of Law to Facts: The Tribunal applied the law by evaluating the documentary evidence provided by the assessee, which demonstrated the genuineness of the transactions. The Tribunal also considered the consistent investment activity of the assessee and the legal process involved in the amalgamation of companies.

Treatment of Competing Arguments: The Revenue argued that the transactions were a sham and involved price manipulation. However, the Tribunal found no evidence to support these claims and noted that similar transactions had been upheld in favor of the assessee in other cases.

Conclusions: The Tribunal concluded that the addition under Section 68 was not justified, as the assessee had adequately demonstrated the genuineness of the transactions and the primary onus of proof was discharged.

2. Addition under Section 69C for Unexplained Commission

Relevant Legal Framework and Precedents: Section 69C deals with unexplained expenditure, which can be added to the income of an assessee if not satisfactorily explained. The Tribunal referred to similar cases where such additions were deleted.

Court's Interpretation and Reasoning: The Tribunal found that the addition of commission was based on assumptions without any supporting evidence. The Revenue failed to prove that any commission was paid by the assessee.

Key Evidence and Findings: The Tribunal noted the lack of evidence from the Revenue to substantiate the claim of commission payment. The assessee had not made any such payment, as evidenced by the documents submitted.

Application of Law to Facts: The Tribunal applied the law by considering the lack of evidence for the alleged commission payment. The Tribunal emphasized the need for concrete evidence to support such additions.

Treatment of Competing Arguments: The Revenue's argument that the commission was unexplained was not supported by evidence. The Tribunal found the assessee's documentation and explanations sufficient to refute the addition.

Conclusions: The Tribunal concluded that the addition under Section 69C was unwarranted and should be deleted.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The assessee has discharged the primary onus of proving the genuineness of the transactions." The Tribunal emphasized the importance of documentary evidence and the consistency of the assessee's investment activities.

Core Principles Established: The Tribunal reinforced the principle that documentary evidence and consistent investment behavior can substantiate the genuineness of transactions. The Tribunal also highlighted the necessity of concrete evidence for additions under Sections 68 and 69C.

Final Determinations on Each Issue: The Tribunal set aside the order of the Ld. CIT(A) and deleted the additions made by the Ld. AO under Section 68 for LTCG and Section 69C for alleged commission.

In conclusion, the appeal of the assessee was allowed, and the additions under Sections 68 and 69C were deleted. The Tribunal's decision was based on the thorough examination of evidence and the application of established legal principles. The order was pronounced in open court on April 7, 2025.

← Previous Next →