2023 (5) TMI 1060 - AT - Income Tax

Bogus LTCG - Share transactions - undisclosed income - Denying the claim of long term capital gain - HELD THAT - It is the date of broker s note that should be treated as date of transfer in cases of sale transactions of securities, provided such transactions are followed up by delivery of shares and also transfer deeds. Similarly, in respect of purchasers of securities, holding period shall be reckoned from the date of broker s note for purchases on behalf of investors. Contract notes clearly show the date of purchase as 04.05.2005 and 10.05.2005. Purchases are duly reflected in the financial accounts for F.Y. 2005-06 ending on 31.03.2006. Merely because payments were made to the brokers on subsequent dates would not make the entire gains as income from undisclosed sources, not by any stretch of imagination. Since the purchases and sales of shares have not been disputed, and are supported by demonstrative evidences, we do not find any logic/ justification in treating the gain as income from undisclosed sources. We direct the Assessing Officer to consider the gains as long term capital gains as per provisions of law. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are related to the denial of the claim of long term capital gain and the addition of undisclosed income by the Assessing Officer.

Details of the Judgment:

Issue 1: Denial of long term capital gain claim
The appellant challenged the order of the NFAC confirming the assessment order denying the claim of long term capital gain and adding Rs. 80,32,765 as undisclosed income. The Tribunal directed the Assessing Officer to pass a fresh order after necessary inquiries and providing an opportunity to the assessee. The Assessing Officer once again dismissed the claim of long term capital gains, which was confirmed by the ld. CIT(A).

Issue 2: Payment date discrepancy
The dispute revolved around the fact that although the shares were purchased on specific dates, the payments were made on different dates. The Revenue questioned the acceptance of payments by brokers much after the date of purchase, raising concerns about the payment dates. The Tribunal clarified that the law does not require the performance of an impossible act and highlighted that dematerialized shares do not have distinctive numbers. The Tribunal directed the Assessing Officer to consider the gains as long term capital gains based on the contract notes and financial accounts reflecting the purchases and sales.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to consider the gains as long term capital gains in accordance with the provisions of the law. The judgment was pronounced on 24.05.2023.