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2025 (3) TMI 1372 - AT - Income TaxUnexplained cash credit u/s 68 - assessee has submitted that no benefit of long-term capital gains exemption u/s 10(38) has been claimed in respect of the profit derived from the alleged shares - also there is no evidence on record to establish that the assessee was involved in price rigging - HELD THAT - We respectfully rely on the decision of Aadesh Commodities Pvt. Ltd 2024 (8) TMI 1539 - ITAT MUMBAI as held that if the sale transactions are treated as bogus they must be removed from the Profit Loss Account turnover which would consequently result in a loss. Such a loss would then be adjustable against the addition made u/s 68 of the Act rendering the entire exercise tax neutral. Furthermore once the assessee has duly disclosed the amount in the Profit Loss Account it cannot be subjected to double taxation. In view of the foregoing we find that the impugned appellate order is well-reasoned and does not warrant any interference. Accordingly the grounds raised by the revenue are dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are: 1. Whether the Ld. CIT(A) erred in not appreciating the Assessing Officer's finding that the scrip of JRI Industries Infrastructure Limited (JRIIIL) was manipulated to increase its volume artificially, thereby providing accommodation entries in the form of Long-Term Capital Gains (LTCG) to various beneficiaries, including the assessee. 2. Whether the Ld. CIT(A) erred in relying on the decision of the ITAT, Jaipur in the case of DCIT v. Shri Sandeep Chhabra and others, despite the department's non-acceptance of that decision and its appeal to the Hon'ble Jaipur High Court. ISSUE-WISE DETAILED ANALYSIS Issue 1: Alleged Manipulation of JRIIIL Scrip Relevant Legal Framework and Precedents: The relevant legal framework involves Section 68 of the Income-tax Act, 1961, which deals with unexplained cash credits. The Assessing Officer (AO) relied on information from the Investigation Wing, suggesting that JRIIIL shares were artificially rigged. The CIT(A) referenced the ITAT, Jaipur Bench decision in DCIT v. Sandeep Chhabra & Others, which dealt with similar issues. Court's Interpretation and Reasoning: The Tribunal noted that the assessee had engaged in substantial share trading, with JRIIIL transactions amounting to Rs. 27,19,277/-. The Tribunal found no evidence that the assessee was involved in price rigging. The CIT(A) relied on previous ITAT decisions, which concluded that if transactions are treated as bogus, they should be removed from the Profit & Loss Account, resulting in a loss that offsets the addition under Section 68, making the exercise tax-neutral. Key Evidence and Findings: The assessee had disclosed the sale consideration in the Profit & Loss Account and paid taxes on the net profit from trading activities. The Tribunal found no evidence of the assessee claiming LTCG exemptions under Section 10(38) for JRIIIL shares. Application of Law to Facts: The Tribunal applied the principle that disclosed amounts in the Profit & Loss Account cannot be taxed again, avoiding double taxation. The Tribunal also considered the ITAT, Mumbai Bench decision in Aadesh Commodities Pvt. Ltd., which supported the view that treating transactions as bogus should result in a tax-neutral outcome. Treatment of Competing Arguments: The Tribunal considered the revenue's argument that the CIT(A) erred by relying on a decision under appeal. However, the Tribunal found the CIT(A)'s reliance on ITAT precedents to be appropriate, given the lack of evidence of manipulation by the assessee. Conclusions: The Tribunal concluded that the CIT(A)'s order was well-reasoned and upheld the deletion of the addition made under Section 68 for JRIIIL transactions. Issue 2: Reliance on ITAT, Jaipur Decision Relevant Legal Framework and Precedents: The Tribunal considered the CIT(A)'s reliance on the ITAT, Jaipur decision in DCIT v. Sandeep Chhabra & Others, which dealt with similar issues of alleged share manipulation. Court's Interpretation and Reasoning: The Tribunal found that the CIT(A) appropriately relied on the Jaipur Bench decision, as it addressed similar factual scenarios and legal questions. Key Evidence and Findings: The Tribunal noted that the CIT(A) had considered the assessee's submissions and relevant ITAT precedents before making its decision. Application of Law to Facts: The Tribunal applied the legal principle that reliance on judicial precedents is valid unless overturned by a higher court. The Tribunal found no such overturning in this case. Treatment of Competing Arguments: The Tribunal acknowledged the revenue's contention that the Jaipur decision was under appeal but found no fault in the CIT(A)'s reliance on it, given its applicability to the facts at hand. Conclusions: The Tribunal upheld the CIT(A)'s decision, finding it consistent with established ITAT jurisprudence. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal reinforced the principle that disclosed amounts in the Profit & Loss Account should not be subject to double taxation. It also upheld the view that treating transactions as bogus should result in a tax-neutral outcome when the amounts are removed from the Profit & Loss Account. Final Determinations on Each Issue: The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s decision to delete the addition under Section 68 for JRIIIL transactions. The Tribunal found the CIT(A)'s reliance on ITAT precedents appropriate and concluded that the appeals lacked merit. In conclusion, the Tribunal dismissed all three appeals filed by the revenue, affirming the CIT(A)'s orders for the assessment years in question.
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