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2024 (6) TMI 1200 - AT - Income TaxIssues involved: Appeal against disallowance of long-term capital gain under section 10(38) of the Income Tax Act. Analysis: 1. Issue: Disallowance of long-term capital gain - The assessee contested the disallowance of long-term capital gain amounting to Rs.10,07,722 under section 10(38) of the Income Tax Act. - The assessee purchased shares of Sulabh Engineers & Services Ltd., which were later sold, resulting in a claimed long-term capital gain. - The Assessing Officer disallowed the claim, alleging that the company was a paper entity with manipulated stocks, leading to undue benefits for investors. - The CIT (Appeals) upheld the disallowance, prompting the appeal to the Tribunal. 2. Arguments by the assessee: - The assessee argued that the long-term capital gain was genuine, citing precedents from various ITAT benches supporting similar cases. - The assessee highlighted that the shares' sale price was not abnormally high compared to the purchase price, indicating innocent investment. - Emphasis was placed on the lack of evidence implicating the assessee or the broker in price manipulation activities. 3. Revenue's stance: - The revenue relied on a High Court judgment in a similar case to support disallowance, claiming no distinguishable features. 4. Tribunal's decision: - The Tribunal considered the High Court's judgment on manipulated shares and the unreliability of the investee company. - It rejected the argument that a lower profit indicated innocence, emphasizing that profit magnitude does not determine genuineness. - The Tribunal dismissed the appeal, stating that the assessee's investment could not be deemed genuine based on profit amount alone. 5. Conclusion: - The Tribunal upheld the disallowance of long-term capital gain, emphasizing the unreliability of the investee company and the lack of distinguishing features in the case. - The decision highlighted that profit magnitude does not establish the legitimacy of an investment, leading to the dismissal of the appeal.
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