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Addition u/s 68 by alleging LTCG as bogus is not justified, the legal position is well settled, and still tax authorities are making additions |
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Addition u/s 68 by alleging LTCG as bogus is not justified, the legal position is well settled, and still tax authorities are making additions |
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Additions u/s 68: Addition u/s 68 is being made by tax authorities just due to suspicion, doubt and wrong application of probability in wrong manner. When an investor sells shares on platform of stock exchange and realises sale proceeds through his broker who in turn realises money from stock exchange, there should not be any doubt. Transactions are all supported by legal and prescribed documents like contract note, evidence of delivery, payment by cheque etc. Lot of additions are made, huge demands are raised and assesse are put on harassment. It is well settled that when a transaction is supported by statutory and customary documents, including third party documents, and payments are through proper banking channel, there should not by addition merely due to suspicion, doubt, surmise and conjecture. Unless there is definite evidence that one has paid cash against cheque received, an addition for money received by a holder in due course of cheque should not be doubted. A cheque received and held as holder in due course and realised by banker of holder on presentation to the drawee bank need no more evidence about genuineness of amount realised on presentation of cheque held in due course and paid by drawee bank as payment in due course. Issuing a cheque involves legal obligation to pay for same on presentation. In case a cheque is dishonoured, the drawer will be liable to pay for the same. In case of failure, the drawer can be prosecuted and sent to jail. Therefore, tax authorities are wrongly applying probability theory and making additions u/s 68 even when there is valid consideration for the cheque received and realised. Human Probability: Tax authorities are ignoring legal obligations of a drawer of cheque and also obligations of person who receives cheque. In case of cheque, there is presumption of consideration. When such consideration is well supported by legal documents which constitute agreement between drawer of cheque and payee of cheque, there is no scope to doubt genuineness of the payment received. In such cases, the cheque is source of money received as it is cleared by drawee bank against available balance in account of drawer of cheque. The nature of receipt is supported by documents and transaction for which payment is made by drawer of cheque and money is received by the payee of cheque. Regarding transactions in securities simplified scheme of taxation was introduced by GOI by introduction of Security Transaction Tax. In case of LTCG earned on sale of shares and units exemption is allowed when transaction has suffered levy of Security Transaction tax. However, tax authorities are making additions just due to doubt, presumption and conjecture. Settled legal position: Many High Courts have decided the issue in favour of assesse. In one case SLP of revenue has also been dismissed. In many cases revenue has not challenged judgment of High Court. In many cases revenue has not challenged judgment of Tribunal. Therefore, the legal position is settled in favour of assesses. Herein below I place a compilation of some judgments in favour of assesses. I have also added remarks about whether any appeal has been filed by revenue or not so far could be ascertained. I hope the compilation will be useful for readers of this website. Index of judgments compiled (up to page 4) Below are appended judgments of SC, HC and ITAT in cases of C.I.T MUMBAI Versus MUKESH RATILAL MAROLIA 2015 (9) TMI 854 - SUPREME COURT The Commissioner of Income Tax-16. Versus Mrs. Kesar A. Gada 2015 (1) TMI 1220 - BOMBAY HIGH COURT LTCG exempted u/s 10(38) allowed in respect of so called and alleged penny stocks. No SLP of revenue before SC checked for 2015-2018as on 180618 CIT Versus Bhagwati Prasad Agarwal 2009 (4) TMI 138 - CALCUTTA HIGH COURT LTCG added u/s 68 deleted ₹ 34,81,165/- Department has not filed SLP so this case is final and binding and not hit by S. 268A. Commissioner of Income Tax-13 Versus Mr. Shyam R. Pawar 2014 (12) TMI 977 - BOMBAY HIGH COURT Checked SC website on 180618 from years 2012-2018 no appeal by revenue There is no appeal before SC checked on 180618 for years 2012-2018 There is no appeal – checked for 2017 ,2018 as on 180618 2018 (1) TMI 1080 - PUNJAB AND HARYANA HIGH COURT Asst. CIT, Central Circle-II, Jalandhar Versus Hitesh Gandhi 2016 (7) TMI 1282 - ITAT AMRITSAR Appeal of revenue before Calcutta HC is pending but no order found. No appeal before Calcutta High Court as on 060618 No appeal found on website of SC as on 18.06.18 Shri Vivek Agarwal Versus The Income Tax Officer Ward 1 (2) , Jaipur 2018 (4) TMI 453 - ITAT JAIPUR Ananda Paul Versus ACIT, Circle-50, Kolkata 2018 (4) TMI 1179 - ITAT KOLKATA With ITAT Ahmedabad judgement No appeal by revenue before SC checked as on 180618 including for Dhawni Mahendra Shah – followed by ITAT M/s BHORUKA ENGINEERING INDS LTD Versus THE DEPUTY COMMISSIONER OF INCOME TAX, BANGALORE 2013 (7) TMI 543 - KARNATAKA HIGH COURT COMMISSIONER OF INCOME TAX VERSUS PUSHPA MALPANI 2010 (11) TMI 799 - RAJASTHAN HIGH COURT No appeal filed by revenue as per SC website as on 060618 C.I.T MUMBAI Versus MUKESH RATILAL MAROLIA 2015 (9) TMI 854 - SUPREME COURT Unexplained investment under section 69** - sale of the shares - penny stock - ITAT deleted the addition - order of high court was confirmed by HC [2011 (9) TMI 919 - BOMBAY HIGH COURT] - SC dismissed the appeal of the revenue.
By: CA DEV KUMAR KOTHARI - June 21, 2018
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