2022 (1) TMI 85 - AT - Income Tax

Addition u/s 68 - HELD THAT - In this case AO has made addition u/s. 68 only on the basis of surmise and conjunctures. CIT(A) has given a finding that all transactions are routed through the demat account. The transactions are through banking channels, the gain is also a small amount. AO has not even bothered to find out what is the gain and what is the cost price. Without any application of mind he has added the entire amount an addition u/s. 68. CIT(A) on the other hand given a finding that the gain from this scrip of SVC Resource Ltd is amounting to only ₹ 1,329/-. Moreover, nowhere AO has mentioned that assessee has been named by the SEBI for penalizing or any order has been passed against the assessee. In these circumstances addition on the basis of conjunctures and surmise has been rightly deleted by the Ld. CIT(A). - Decided against assessee.

Issues:
1. Assessment of transactions in penny stock as genuine.
2. Entertaining appeal despite tax effect below prescribed limit.
3. Addition u/s. 68 based on information from DDIT regarding trading in SVC Resource Ltd.
4. Deletion of addition by CIT(A) based on appellant's submission and supporting documents.
5. Appeal by revenue against CIT(A) order.
6. ITAT's analysis of the case and decision to uphold CIT(A) order.

Issue 1: Assessment of transactions in penny stock as genuine
The appeal pertained to the authenticity of transactions in penny stock by the assessee. The AO had added a certain amount under section 68 based on information received regarding trading in a specific scrip. However, the CIT(A) deleted the addition after considering the appellant's submission and supporting documents. The appellant demonstrated that the transactions were genuine, conducted through a Demat account, and supported by relevant financial records. The CIT(A) emphasized the need to analyze each case individually and concluded that the addition made by the AO was incorrect.

Issue 2: Entertaining appeal despite tax effect below prescribed limit
The appellant requested the ITAT to entertain the appeal despite the tax effect being below the monetary limit specified in a circular. The appellant argued that the case involved organized tax evasion, as highlighted in another circular. The ITAT considered the nature of the case, which was related to a tax evasion scam, and decided to proceed with the appeal, making an exception to the prescribed monetary limit.

Issue 3: Addition u/s. 68 based on information from DDIT regarding trading in SVC Resource Ltd
The AO had added a certain amount under section 68 concerning trading in SVC Resource Ltd based on information received from the DDIT. The AO linked the transactions to a larger scheme involving manipulation of scrips for tax evasion purposes. However, the CIT(A) overturned this addition after reviewing the appellant's evidence, which included detailed financial records and transaction history through a Demat account.

Issue 4: Deletion of addition by CIT(A) based on appellant's submission and supporting documents
The CIT(A) deleted the addition made by the AO after the appellant provided supporting documents during the appellate proceedings. The appellant demonstrated that the transactions were genuine, backed by financial records such as global statements and Demat account details. The CIT(A) noted that the gain from the specific scrip in question was minimal, and there was no evidence of manipulation or wrongdoing by the appellant.

Issue 5: Appeal by revenue against CIT(A) order
The revenue filed an appeal challenging the CIT(A)'s decision to delete the addition made by the AO under section 68. The revenue contested the authenticity of the transactions and sought to reverse the CIT(A)'s ruling based on the information received from the DDIT regarding the trading activities in the specific scrip.

Issue 6: ITAT's analysis of the case and decision to uphold CIT(A) order
The ITAT reviewed the case and upheld the CIT(A)'s decision to delete the addition made by the AO under section 68. The ITAT found that the AO's actions were based on conjecture and lacked proper assessment of the transactions. The ITAT noted that the transactions were conducted through legitimate channels, such as Demat accounts and banking channels, and the gain was minimal. The ITAT concluded that there was no evidence linking the appellant to any wrongdoing or penalization by regulatory authorities, supporting the CIT(A)'s decision to delete the addition.

This detailed analysis of the judgment covers all the issues involved, providing a comprehensive understanding of the legal proceedings and decisions made by the authorities.

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