2019 (1) TMI 1459 - AT - Income Tax

Bogus LTCG on share transactions - addition u/s 68 - disallowance of exemption claimed u/s.10(38) - Held that - Transactions done through recognized stock exchanges where payments were made through bank cannot be doubted or disbelieved based on an investigation report of the Department, which at the best can be strong reason to suspect the veracity of the claim but not good enough to disbelieve it. Therefore of the opinion that there is nothing concrete brought on record by the Department to show that transactions entered by the assessee in the shares of SMIL were bogus or sham. No reason to uphold the orders of the lower authorities. Such orders are set aide and the addition is deleted. - Decided in favour of assessee

Summary

Issues: Disallowance of exemption claimed u/s.10(38) on capital gains from sale of shares.

Analysis:
1. The appeal was filed against the disallowance of exemption claimed under section 10(38) of the Income Tax Act, 1961, regarding capital gains from the sale of shares in a company.
2. The assessee had acquired shares through a recognized stock exchange and received bonus shares, increasing the holding. The contention was that the purchases were on-market transactions through a registered stockbroker and payments were made through a bank.
3. The Departmental Representative argued for reconsideration of taxing capital gains, citing similar cases sent back for reassessment. A decision of a Co-ordinate Bench was referenced.
4. The Assessing Officer had relied on an investigation report to disbelieve the transactions, alleging artificial price movements and bogus claims. However, documents provided by the assessee proved on-market transactions, bonus shares issuance, and legitimate sale through a stock exchange and bank.
5. The Tribunal referenced a previous case to support the legitimacy of transactions done through recognized stock exchanges and payments via bank. The decision highlighted that suspicion from an investigation report is not enough to disbelieve transactions. The orders disallowing the exemption were set aside, and the addition was deleted.
6. The appeal of the assessee was allowed, emphasizing the legitimacy of the transactions in question.

This detailed analysis of the judgment showcases the dispute, arguments presented by both sides, the Tribunal's assessment, and the final decision in favor of the assessee regarding the disallowance of exemption claimed on capital gains from the sale of shares.