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2024 (12) TMI 107 - AT - Income TaxBogus LTCG - Addition u/s 68 - denial of exemption u/s 10(38) - HELD THAT - We reiterate that the Assessee by producing the relevant documents referred to above before the authorities below as well as before us has duly discharged the onus cast upon him u/s 68 of the Act and admittedly there is no adverse order/penalty order against the Assessee. Even otherwise, no role has been attributed and/or established qua rigging of the shares upon the Assessee. Hence, we are inclined to allow the claim of the Assessee u/s 10(38) of the Act, by deleting the additions under consideration. Hence, the additions under consideration are deleted. Appeals filed by the Assessee are allowed.
Issues Involved:
1. Legitimacy of Long-Term Capital Gain (LTCG) claimed by the Assessee under Section 10(38) of the Income Tax Act, 1961. 2. Addition of sale proceeds as income under Section 68 of the Income Tax Act, 1961. 3. Imposition of additional income on account of alleged commission under Section 69C of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Legitimacy of Long-Term Capital Gain (LTCG): The Assessee claimed LTCG on the sale of shares of M/s. JMD Tele Films Industry Ltd. under Section 10(38) of the Income Tax Act, 1961. The Assessing Officer (AO) questioned the legitimacy of these gains based on an investigation by the Kolkata Investigation Directorate into penny stocks, including M/s. JMD Tele Films Industry Ltd. The Assessee provided comprehensive documentation to substantiate the genuineness of the transactions, including contract notes, bank statements, and Dmat statements. However, the AO, relying on the findings of the investigation wing and the unusual rise in share prices, disallowed the LTCG claim, adding the entire sale proceeds to the Assessee's income under Section 68 of the Act. 2. Addition of Sale Proceeds as Income under Section 68: The AO added the entire sale proceeds of Rs. 1,84,38,566/- to the income of the Assessee under Section 68, citing the Assessee's failure to discharge the onus of proving the transaction's genuineness. The Assessee challenged this addition before the Commissioner of Income Tax (Appeals), who upheld the AO's decision, relying primarily on a judgment by the Kolkata High Court. However, the Tribunal found that the Assessee had adequately discharged the onus under Section 68 by providing all necessary documentation and that there were no allegations or investigations against the Assessee regarding price rigging. The Tribunal noted that the transactions were conducted through legitimate banking channels and the Bombay Stock Exchange, and thus, the addition under Section 68 was unwarranted. 3. Imposition of Additional Income on Account of Alleged Commission: The AO also added Rs. 10,89,815/- to the Assessee's income as alleged commission for facilitating the transactions, calculated at 6% of the capital gain. The Tribunal found no evidence to support this addition, as the Assessee had demonstrated the genuineness of the transactions through documentary evidence and no role in share price rigging was attributed to the Assessee. Consequently, the Tribunal vacated this addition. Conclusion: The Tribunal allowed the Assessee's appeals, deleting the additions made under Sections 68 and 69C of the Income Tax Act, 1961. The Tribunal emphasized that the Assessee had adequately substantiated the genuineness of the transactions and that there was no adverse evidence or findings against the Assessee. The decision was consistent with precedents set by higher courts, including the Jurisdictional High Court and the Supreme Court, which had addressed similar issues. Both appeals filed by the Assessee were allowed, and the additions were deleted.
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