2016 (7) TMI 1282 - AT - Income Tax

Denial of long term capital gain - assessee was not able to give reply as to why the shares were purchased and how the shares had risen so many times - Held that - We find that the assessee had purchased shares in the month of April/ May, 2006 as noted by the learned CIT(A). The shares were purchased in Asst. Year 2006-07. Further the shares were got dematerialized and the same were created in the account of assessee maintained with HDFC bank. The assessee also received dividend on such shares on 23.10.2007 and such dividend was claimed as exempt and Assessing Officer did not raise any objection against the claim of such dividend. CIT(A) has noted in his order that in the remand report Assessing Officer was not able to contradict any of the facts regarding purchase of shares and regarding sale of shares. It is further observed that assessee had paid STT on the sale of such shares and this fact has been noted by learned CIT(A) in his order. Further, we find that while making out the addition on account of capital gain the Assessing Officer himself gave credit to assessee for indexed cost of acquisition to the extent of ₹ 11,67,821/- taking the purchase price at ₹ 11,00,000/-. Further, we find that assessee had sold shares through MTL shares and Stock Borkers Ltd. as is noted by Assessing Officer in reply to question No.24 which is a SEBI registered Stock Broker. Furthermore the payment for sale of shares was received through Banking Channels. All these documentary evidences in favour of the assessee were rejected by Assessing Officer merely on the basis of some casual replies given by assessee to the Assessing Officer. However, the fact remains that all the documentary evidences are in favour of assessee and learned CIT(A) has passed a very reasoned and speaking order and we do not find any infirmity in the same. - Decided against revenue

Summary

Issues:
Appeal against deletion of addition on account of long term capital gain.

Analysis:
1. The Revenue appealed against the deletion of addition of ?2,78,26,685 made by the Assessing Officer on the grounds of denial of long term capital gain.
2. The case involved the reopening of the assessee's case under section 153A after a search was conducted at the assessee's premises.
3. The Assessing Officer doubted the claim of long term capital gain declared by the assessee on the sale of shares of a company and made the addition based on the suspicion that the transaction was not genuine.
4. The Assessing Officer's decision was primarily based on the lack of satisfactory replies from the assessee regarding the purchase of shares, rise in share value, and the source of funds used for the purchase.
5. The Assessing Officer concluded that the transaction was non-genuine, leading to the addition of ?2,78,26,685 to the assessee's income.
6. The CIT(A), after considering the submissions and evidence presented by the assessee, deleted the addition by emphasizing the documentary evidence supporting the purchase and sale of shares, the receipt of dividends, and compliance with tax regulations.
7. The CIT(A) highlighted that the shares were physically transferred, dematerialized, and sold through recognized stock brokers, with dividends received and recorded in the income tax return.
8. The CIT(A) criticized the Assessing Officer for relying on suspicion rather than concrete evidence, especially considering the lack of incriminating evidence found during search proceedings.
9. The Tribunal upheld the CIT(A)'s decision, noting that the documentary evidence and compliance with tax regulations supported the genuineness of the transaction, dismissing the Revenue's appeal.

This comprehensive analysis covers the issues involved in the legal judgment, detailing the arguments presented by both parties and the reasoning behind the decisions made by the authorities involved.