2015 (12) TMI 1014 - AT - Income Tax

Eligibility to claim long term capital gains on sale of shares at a concessional rate of 10% during Asst Years 2001-02 to 2004-05 - exemption u/s 10(38) for Asst Year 2005-06 in respect of sale transactions routed through recognized stock exchange - Held that - When purchase and sale of shares were supported by proper Contract Notes, deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognised broker and the sale considerations were received by Account Payee Cheques, the transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. In the assessment orders under consideration the AO has not considered any of these facts. He has treated the transactions as bogus only on the basis of the suspicion that the difference in purchase and sale price of these shares are unusually high. It is a settled law that assessment cannot be made on the basis of suspicion or surmise. The AO has not brought any material on record to support his finding that there has been collusion/connivance between the broker and the appellant for the introduction of its unaccounted money. In view of the decisions of Sri Anil Kr. Khemka (husband of the appellant) thus hold that the AO is not justified in treating the long term capital gain as bogus. Direct the AO to treat the long term capital gain as claimed by the appellant and tax them at the rates applicable for assessment years 2001-02 to 2003-04 and for assessment year 2005-06 exemption u/s. 10(38) should be allowed - Decided in favour of assessee

Summary

Issues Involved:
Whether the assessee is eligible to claim long term capital gains on sale of shares at a concessional rate of 10% and exemption u/s 10(38) for the Asst Year 2005-06 in respect of sale transactions routed through recognized stock exchange.

Analysis:

Issue 1: Eligibility to Claim Long Term Capital Gains at Concessional Rate
The appeals of the revenue challenged the order of the Learned CITA regarding the eligibility of the assessee to claim long term capital gains on the sale of shares at a concessional rate of 10%. The assessee had sold shares of various companies and declared capital gains for different assessment years. The revenue contended that the shares were sold at rates not in line with prevailing market rates and alleged that the long term capital gains were bogus, suggesting the involvement of unaccounted money. However, the assessee provided evidence of purchase and sale transactions, payments through account payee cheques, and payment of Securities Transaction Tax (STT). The Learned CITA, relying on a tribunal decision related to the husband of the assessee, found no justification to treat the transactions as bogus. The CITA directed the AO to treat the long term capital gains as claimed by the assessee. The tribunal upheld the CITA's decision, emphasizing the proper documentation of transactions and lack of evidence supporting the revenue's suspicions.

Issue 2: Exemption u/s 10(38) for Asst Year 2005-06
The second aspect of the issue involved the exemption u/s 10(38) for the Asst Year 2005-06 in relation to the sale of shares of a specific company. The revenue disputed the allowance of this exemption by the Learned CITA, alleging that the income was unaccounted money presented as long term capital gain. However, the CITA, considering the original contract notes, bank statements, and other supporting documents provided by the assessee, concluded that the transactions were genuine and met the requirements for exemption. The tribunal concurred with the CITA's decision, citing relevant case law and emphasizing the lack of concrete evidence to support the revenue's claims of collusion or connivance. The tribunal dismissed the revenue's appeals, upholding the CITA's order to allow the exemption u/s 10(38) for the Asst Year 2005-06.

In conclusion, the tribunal's judgment upheld the assessee's eligibility to claim long term capital gains at a concessional rate and allowed the exemption u/s 10(38) for the relevant assessment year. The decision was based on the proper documentation of transactions, adherence to legal requirements, and the absence of substantial evidence to prove the revenue's allegations of illegitimacy.