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2017 (11) TMI 1075 - AT - Income TaxLong term capital gains arising out of sale of quoted equity shares assessed as unexplained cash credit u/s 68 - AO assessed the transaction as doubtful high rise in the stock price - Held that - The transactions of sale of shares by the assessee was duly backed up by material/evidence including contract notes, demat statement, bank account reflecting transactions, the stock brokers have confirmed the transactions, the shares having been sold on the online platform of the stock exchange and each trade of sale of shares were having unique trade number and trade time. It is not the case of the AO that the shares which were sold on the date mentioned in the contract note were not the traded price on that particular date. The AO doubted the transactions due to the high rise in the stock price and for that the assessee cannot be blamed unless there was any material/evidence to prove that the assessee or any one on his behalf has rigged the stock price. It should be noted that the Stock Exchange and SEBI are the statutory authorities appointed by the Govt. of India to ensure that there is no stock rigging or manipulation. There is absolutely no adverse material to implicate the assessee to the entire gamut of unfounded/unwarranted allegations leveled by the AO against the assessee, which in our considered opinion has no legs to stand and therefore has to fall. We take note that the ld. DR could not controvert the facts which are supported with material evidences furnished by the assessee which are on record and could only rely on the orders of the AO/CIT(A). We note that the allegations that the assesse/brokers got involved in price rigging/manipulation of shares must therefore consequently fail. The assessee had furnished all relevant evidence in the form of bills, contract notes, demat statement and bank account to prove the genuineness of the transactions relevant to the purchase and sale of shares resulting in long term capital gain. Neither these evidences were found by the AO nor by the ld. CIT(A) to be false or fictitious or bogus. The facts of the case and the evidence in support of the evidence clearly support the claim of the assessee that the transactions of the assessee were genuine and the authorities below was not justified in rejecting the claim of the assessee exempted u/s 10(38) of the Act on the basis of suspicion, surmises and conjectures. It is to be kept in mind that suspicion how so ever strong, cannot partake the character of legal evidence. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore direct the AO to delete the addition. - Decided in favour of assessee.
Issues Involved:
1. Whether the long-term capital gains (LTCG) of ?24,87,605 arising from the sale of quoted equity shares can be assessed as unexplained cash credit under Section 68 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Assessment of LTCG as Unexplained Cash Credit Facts of the Case: - The assessee, a resident individual, filed a return declaring an income of ?7,70,950 for AY 2013-14, including LTCG of ?24,87,605 from the sale of shares of M/s Tuni Textile Mills Ltd. - The shares were purchased on 06/04/2011 in an off-market transaction and sold through a registered broker with all transactions reflected in the demat account and bank statements. - The AO noted an investigation report indicating that several companies, including Tuni Textile Mills Ltd, were involved in providing bogus capital gains. The AO concluded that the assessee's transactions were part of these bogus transactions and assessed the gains as unexplained cash credit under Section 68. Appellate Proceedings: - The CIT(A) upheld the AO's decision, relying on the company's poor financials and the statement recorded during a survey under Section 133A, which implicated the company in bogus transactions. Assessee's Arguments: - The assessee argued that the AO's addition was based on surmises, presumptions, and suspicion without concrete evidence. - Documentary evidence such as the balance sheet, purchase bills, demat statement, contract notes, and bank statements were provided to prove the genuineness of the transactions. - The assessee contended that the transactions were legal and conducted through account payee cheques, and the sale was made on the online platform of the stock exchange, making it impossible to know the buyers. - The AR cited multiple judicial precedents to argue that suspicion alone cannot be the basis for addition and that the burden of proof lies on the revenue to disprove the genuineness of the transactions. Revenue's Arguments: - The DR supported the AO's and CIT(A)'s findings, arguing that the transactions were part of a scheme to convert unaccounted money into LTCG. Tribunal's Findings: - The Tribunal noted that the assessee's transactions were backed by substantial documentary evidence and conducted through registered brokers. - The Tribunal held that the statement recorded during the survey under Section 133A lacks evidentiary value as per the Supreme Court's decision in CIT vs. Khader Khan Sons. - The Tribunal found no material evidence to link the assessee with the alleged bogus transactions or the entry operator. - The Tribunal emphasized that the AO's conclusions were based on suspicion and not on concrete evidence. Conclusion: - The Tribunal concluded that the AO and CIT(A) were not justified in treating the LTCG as unexplained cash credit under Section 68. - The Tribunal directed the AO to delete the addition, allowing the assessee's appeal. Order: - The appeal of the assessee is allowed, and the addition of ?24,87,605 as unexplained cash credit is deleted. Pronouncement: - The order was pronounced in the open court on 15th November, 2017.
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