2021 (8) TMI 110 - AT - Income Tax

Addition u/s 68 - purchase of shares of penny stock - HELD THAT - Purchase as well as sale transactions have taken place on stock exchange through stock-broker. There is movement of shares in assessee s demat statement. The transactions have taken place through banking channels and duly supported by broker s contract notes, demat statements, ledger statements as well as bank statements. The assessee is regular investor in shares. The assessee has always maintained that the transactions were genuine. As against this, the only adverse material in the armory of Ld. AO is the investigation findings - assessee has not been named in any of the statement. The assessee has denied having known Shri Nikhil Jain Shri Bidyoot Sarkar whose statements form the very basis of doubting the assessee s transactions. The assessee, as rightly pointed out by Ld. CIT(A), had duly discharged the onus to establish the genuineness of the transactions and the onus was on AO to dislodge them. Except for mere allegations, there is no adverse material against the assessee and the additions are based merely on conjectures and surmises. Another aspect is that the provisions of Sec.68, as invoked by Ld. AO, had no applicability to the fact of the case. The invoking of wrong provisions would make the additions unsustainable in the eyes of law - Decided in favour of assessee.

Summary

Issues:
1. Deletion of addition of purchase of shares of penny stock Gomti Finlease.
2. Disallowance of commission paid on account of purchase of shares.
3. Failure to substantiate the genuineness of share transaction.
4. Applicability of Sec.68 in adding back purchase price of shares.

Analysis:
1. The appeal by the revenue contested the deletion of addition of ?3,21,31,930 for the purchase of shares of Gomti Finlease. The revenue argued that information from the Kolkata investigation directorate was not considered. The tribunal noted that the assessee suffered a Short-Term Capital Loss (STCL) on the sale of shares, which raised suspicion due to investigation findings on penny stock scrips. The tribunal found that the assessee had purchased and sold shares through recognized stock brokers on the stock exchange, supported by documents. The tribunal concluded that the addition made by the Assessing Officer was based on conjectures and surmises, and the assessee had substantiated the genuineness of the transactions.

2. The revenue also challenged the disallowance of commission paid on the purchase of shares. The tribunal observed that the assessee had made payments through banking channels, and all transactions were supported by documentary evidence. The tribunal found that the provisions of Sec.68 were wrongly invoked by the Assessing Officer, making the addition unsustainable. The tribunal relied on previous court decisions to support the deletion of the impugned additions.

3. The issue of failure to substantiate the genuineness of the share transaction was addressed by the tribunal by examining the documentary evidence provided by the assessee. The tribunal noted that the assessee had fulfilled the onus to prove the transactions were genuine, and the Assessing Officer failed to provide concrete evidence against the assessee. The tribunal emphasized that the transactions were conducted through recognized channels and banking systems, supporting the legitimacy of the transactions.

4. The tribunal also analyzed the applicability of Sec.68 in adding back the purchase price of shares. The tribunal found that the invoking of Sec.68 by the Assessing Officer was incorrect, as the transactions were conducted through recognized stock brokers and banking channels. The tribunal upheld the decision of the CIT(A) to delete the impugned additions based on the established genuineness of the transactions and the lack of concrete evidence against the assessee.

In conclusion, the tribunal dismissed the appeal by the revenue, upholding the decision to delete the additions made by the Assessing Officer. The tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the share transactions, conducted through recognized channels, and the additions were deemed unsustainable under the law.