2024 (2) TMI 527 - AT - Income Tax

Assessment u/s 153A - Bogus LTCG on share transactions - incriminating material found during the course of search or not? - HELD THAT - Assessee is a regular investor as brought to our notice as per the Balance Sheet of the assessee as on 31.03.2013, assessee held shares and Debentures worth of Rs. 26,23,89,205/-. It shows that the assessee is a regular investor and had also made the investment in the scrip under consideration. AO observed that assessee had made huge profit out of this investment because of this, it makes the script as suspicious and penny stock. We cannot agree to the above observation, merely because of huge profit, it does not make the script a penny stock. Further, it is fact on record that the financials of the company are not commensurate with the purchase and sale price in the market. The assessee has purchased the shares from open market, D-mated the scrips and subsequently sold the same in the stock exchange. It clearly raises several doubt on the purchase and sales transactions recorded in this case. There is no discrepancies in the documents filed by the assessee claiming the deductions u/s 10(38) of the Act. At the same time, even though all the characteristics of the penny stock exists in the present case, still the revenue has not brought on record any materials linking the assessee in any of the dubious transactions relating to entry, price rigging or exit providers. Even in the SEBI report, there is no mention or reference to the involvement of the assessee except in the latest SEBI report of 2020, there is only restriction on trading of this script but there is no reference to assessee. We can only presume that the assessee is one of the beneficiary in this transactions merely as an investor who has entered in investment fray to make quick profit. Even the assessing officer has applied the presumptions and concept of human probabilities to make the additions without their being any material against the assessee. Even otherwise, in the cases of Swati Luthra 2019 (7) TMI 526 - ITAT DELHI and Radheyshyam Khandelwal v. ACIT 2021 (7) TMI 493 - ITAT INDORE dealt with identical scrip wherein the assessees have also earned Long Term Capital Gain at the high volume and the Tribunal ultimately decided the issue in favour of assessee. Thus transaction involving the LTCG is genuine - DR submission that this scrip transaction is suspended by the SEBI and he brought to our notice the SEBI order, however, there is no specific findings against the script under consideration or on the assessee. It was also brought to our notice that this script is still traded in the stock exchange. Decided in favour of assessee.

Issues Involved:
1. Jurisdiction of assessment under Section 153A.
2. Treatment of Long-Term Capital Gains (LTCG) on sale of shares as non-genuine.
3. Addition under Section 68 for unexplained cash credit.
4. Addition of commission under Section 69C for alleged bogus share transactions.

Summary:

1. Jurisdiction of Assessment under Section 153A:
The assessee contended that the assessment under Section 153A was invalid in the absence of any incriminating material found during the search. However, this ground was not pressed by the assessee during the hearing, and thus, it was dismissed as not pressed.

2. Treatment of Long-Term Capital Gains (LTCG) on Sale of Shares as Non-Genuine:
The Assessing Officer (AO) concluded that the LTCG claimed by the assessee from the sale of shares of Turbotech Engineering Ltd. was non-genuine. The AO based this on the abnormal rise in share prices, findings from the Investigation Wing, SEBI orders, and statements from alleged entry providers. The AO treated the sale consideration as unexplained cash credit under Section 68.

The assessee argued that the shares were purchased and sold through recognized stock exchanges, with payments made through banking channels and Security Transaction Tax (STT) paid. The assessee provided documentary evidence, including contract notes, bank statements, and demat account statements, to substantiate the transactions. The Tribunal found no discrepancies in these documents and noted that the AO did not bring any material evidence linking the assessee to dubious transactions.

The Tribunal referred to various judicial pronouncements, including decisions from the Bombay High Court and Delhi High Court, which supported the genuineness of similar transactions. The Tribunal concluded that the AO's reliance on suspicion and preponderance of probabilities was insufficient without concrete evidence.

3. Addition under Section 68 for Unexplained Cash Credit:
The AO added the entire sale consideration of Rs. 1,71,91,404 as unexplained cash credit under Section 68. The Tribunal, however, found that the assessee had provided sufficient documentary evidence to prove the genuineness of the transactions. The Tribunal held that the AO's conclusions were based on assumptions and conjectures without any corroborative material.

4. Addition of Commission under Section 69C for Alleged Bogus Share Transactions:
The AO also added Rs. 5,15,733 as commission allegedly paid for obtaining accommodation entries. The Tribunal noted that this addition was consequential to the main issue of LTCG. Since the Tribunal found the LTCG transactions to be genuine, the addition under Section 69C was also deleted.

Conclusion:
The Tribunal allowed the appeals filed by the assessee for both assessment years 2013-14 and 2014-15, deleting the additions made by the AO under Sections 68 and 69C. The Tribunal emphasized the need for concrete evidence rather than assumptions and suspicion to substantiate claims of non-genuine transactions.

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