2017 (11) TMI 206 - AT - Income Tax

Treating the Long Term Capital Gains (LTCG) as unexplained cash credit u/s 68 - Held that - In Shyam R. Pawar (2014 (12) TMI 977 - BOMBAY HIGH COURT), it has been held by the Hon ble Bombay High Court that where DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income u/s 68. In the case of Arun Kumar Agarwal (HUF) (2012 (8) TMI 398 - JHARKHAND HIGH COURT), the Hon ble Jharkhand High Court has held that where assessee s broker share transaction was bone fide in all respect, merely because share broker was tainted violating SEBI regulations, would not make assessee s share transactions bogus. Also see M/s Indravadan Jain HUF 2016 (7) TMI 16 - ITAT MUMBAI - Decided in favour of assessee.

Summary

Issues:
- Appeal against deletion of addition of Long Term Capital Gains (LTCG) as unexplained cash credit under section 68 of the Income Tax Act for the assessment year 2005-06.

Analysis:
1. The Revenue appealed against the deletion of the addition of ?44,43,680 made by the Assessing Officer (AO) regarding LTCG treated as unexplained cash credit under section 68 of the Income Tax Act. The AO reopened the assessment based on information received, alleging the LTCG declared by the assessee was from penny stocks and accommodation entries. The AO brought the LTCG to tax, leading to the appeal.

2. The Ld. CIT(A) upheld the AO's reopening of the assessment, citing a Delhi High Court decision. The AR of the assessee argued that proper opportunities for cross-examination were not provided, and presented evidence of legitimate share transactions with supporting documentation like bank passbook, broker bills, and STT payments. The Ld. CIT(A) found no evidence to deem the share sales as bogus and deleted the addition based on precedents and evidence presented.

3. During the appeal, the Ld. DR contended that the broker involved in the transactions had a history of market manipulation and issued false contract notes, indicating non-genuine transactions. Conversely, the Ld. counsel of the assessee referenced various ITAT decisions supporting the legitimacy of share transactions even when brokers were under scrutiny.

4. The ITAT analyzed a similar case involving the same broker and shares, where the CIT(A) had ruled in favor of the assessee, emphasizing that the assessee's transactions were genuine despite the broker's questionable activities. The ITAT upheld the CIT(A)'s decision based on the lack of evidence proving the transactions as bogus and cited relevant High Court decisions supporting their stance.

5. Ultimately, the ITAT dismissed the appeal, following the precedent set in a similar case and upholding the CIT(A)'s order, as the facts and legal principles were comparable. The decision was based on the lack of concrete evidence to declare the transactions as non-genuine, aligning with previous judicial interpretations and supporting the assessee's position.

This detailed analysis outlines the progression of the case, the arguments presented by both parties, and the final judgment rendered by the ITAT, providing a comprehensive understanding of the legal nuances and precedents involved in the matter.