9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (2) TMI 1201 - AT - Income TaxBogus LTCG - exemption u/s 10(38) - shares of a pre-determined Penny stock company transaction - HELD THAT - Despite lapse of almost four months from the date of direction given by the Bench, the Revenue could not file any document to substantiate that the Investigation carried out by the Directorate of Investigation of Kolkata or SEBI has any link with the instant transactions of the assessee. We further find the report of the SEBI is of 2015, whereas, in the instant case the assessee has purchased the shares in off market dealing in 2012 and sold the same in 2014 through stock exchange, meaning thereby that the transactions are of a date prior to the date of SEBI Report. In view of the above decision of the Tribunal in the case of Smt. Karuna Garg cited 2019 (8) TMI 450 - ITAT DELHI and since the Revenue has failed to comply to the direction of the Bench in furnishing any report from the AO as to in what manner, the investigation carried out by the Directorate of Investigation, Kolkata and report of SEBI has any link with the transactions carried out by the assessee, we allow the claim of Long Term Capital Gain on account of sale of shares of M/s Esteem Bio Organic Food Processing Ltd. and consequently the exemption claimed u/s 10(38) of the Act. The grounds raised by the assessee are accordingly allowed.
Issues Involved:
1. Legitimacy of Long Term Capital Gain (LTCG) claim. 2. Validity of the investigation linking the assessee to bogus LTCG entries. 3. Justification of the additions made by the Assessing Officer (AO) under sections 69A and 69C. 4. Appropriateness of the CIT(A)'s decision to uphold the AO's order. 5. Examination of precedents and their applicability to the current case. Detailed Analysis: Legitimacy of Long Term Capital Gain (LTCG) Claim: The assessee claimed LTCG exemption under section 10(38) of the Income Tax Act, 1961, for the sale of shares of M/s Esteem Bio Organic Food Processing Ltd. The AO rejected this claim, citing that the shares were purchased in an off-market transaction and the price was artificially inflated by operators to generate bogus LTCG entries. The AO noted that the financial health of the company was weak, and the share prices were manipulated to benefit the assessee. The AO's analysis included examining the financials of the company and the pattern of share price movements, concluding that the transactions were not genuine investments but rather an adventure in the nature of trade. Validity of the Investigation Linking the Assessee to Bogus LTCG Entries: The AO relied heavily on a report from the Directorate of Investigation, Kolkata, which unearthed a nationwide racket of generating bogus LTCG entries. The report indicated that various individuals and entities were involved in manipulating share prices of certain penny stocks, including Esteem Bio, to create artificial gains. However, the assessee argued that there was no direct link between his transactions and the investigation findings. The Tribunal noted that despite multiple opportunities, the Revenue failed to provide any concrete evidence linking the assessee's transactions to the investigation findings. Justification of the Additions Made by the AO under Sections 69A and 69C: The AO added ?48,33,944/- to the assessee's income under section 69A, treating the LTCG as unexplained income. Additionally, a 3% commission of ?1,40,796/- was added under section 69C as unexplained expenditure. The AO justified these additions by asserting that the transactions were not genuine and were part of a scheme to generate tax-exempt gains. The AO also initiated penalty proceedings under section 271(1)(c) for concealment of income. Appropriateness of the CIT(A)'s Decision to Uphold the AO's Order: The CIT(A) upheld the AO's decision, agreeing with the findings that the transactions were not genuine and were part of an organized scheme to generate bogus LTCG entries. The CIT(A) dismissed the assessee's appeal, stating that the evidence provided did not sufficiently counter the findings of the AO and the investigation report. Examination of Precedents and Their Applicability to the Current Case: The Tribunal examined several precedents, including the decisions in the cases of Smt. Karuna Garg & Ors. vs. ITO and Smt. Krishna Devi & Ors. vs. ITO. In these cases, the Tribunal had allowed the claim of LTCG on the sale of shares of Esteem Bio, noting that the transactions occurred before the SEBI report and the investigation findings. The Tribunal highlighted that the Revenue had failed to establish a direct link between the assessee's transactions and the investigation findings. The Tribunal also noted that the SEBI report was dated after the assessee's transactions, further weakening the Revenue's case. Conclusion: The Tribunal allowed the assessee's appeal, directing the AO to accept the LTCG declared by the assessee and grant the exemption under section 10(38). The Tribunal emphasized that the Revenue failed to provide any evidence linking the assessee's transactions to the investigation findings. However, the Tribunal allowed the Revenue the liberty to file an application to recall the order if new evidence linking the transactions to the investigation was found. The appeal was thus allowed in favor of the assessee.
|
