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2025 (4) TMI 347 - AT - Income TaxAddition u/s 68 and 69C - treating the transaction in shares by the assessee as bogus - HELD THAT - There is no reference to any portion of sworn statements wherein any adverse observation against the assessee has been noted by the Investigation Wing. The price fluctuation of shares of the entities in which the assessee has transacted also does not support the case of the Revenue as no material has been brought on record to show that the assessee was involved in such price manipulation even after purchasing and selling the shares on the stock exchange through a SEBI registered stock-broker. Therefore in the present case it is sufficiently evident that the AO without finding any fault with the evidence submitted by the assessee proceeded to treat the transaction as non-genuine and the long-term capital gains earned by the assessee as bogus. We also find that the AO did not issue any summons or examine the broker of the assessee i.e. Anand Rathi Securities Ltd. Therefore no merit in the impugned order upholding the addition made u/s 68 and disallowing the exemption of long-term capital gains claimed by the assessee. Consequently we also do not find any merit in the addition on account of the alleged commission payment. Accordingly the additions made by the AO are deleted and the Grounds raised in assessee s appeal are allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Additions under Section 68 - Unexplained Cash Credit Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act allows the AO to add unexplained cash credits to the income of the taxpayer if the taxpayer fails to provide a satisfactory explanation regarding the nature and source of the credit. Court's Interpretation and Reasoning: The Tribunal analyzed whether the AO had sufficient grounds to treat the share transactions as bogus. The AO relied heavily on the findings of the Investigation Wing, which alleged that the shares of M/s Paneta Industries Ltd. were used for accommodation entries to generate bogus long-term capital gains. Key Evidence and Findings: The assessee presented substantial evidence, including broker contract notes, ledger accounts, DEMAT statements, and bank passbooks, to substantiate the genuineness of the transactions. The Tribunal noted that these documents demonstrated that the transactions were conducted on the stock exchange through a registered broker. Application of Law to Facts: The Tribunal found that the AO did not adequately address or refute the evidence presented by the assessee. Instead, the AO relied on generalized findings from the Investigation Wing without specific evidence against the assessee. Treatment of Competing Arguments: The Tribunal considered the Department's reliance on the Investigation Wing's report but found it insufficient to override the direct evidence provided by the assessee. Conclusions: The Tribunal concluded that the AO's addition under section 68 was not justified as the transactions were genuine, and the assessee provided adequate evidence to support the claim. 2. Additions under Section 69C - Unexplained Expenditure Relevant Legal Framework and Precedents: Section 69C pertains to unexplained expenditure, where the taxpayer is unable to account for the source of the expenditure. Court's Interpretation and Reasoning: The AO made an addition for notional cash commission, assuming a 2% commission for accommodation entries. The Tribunal scrutinized whether there was any evidence of such commission being paid. Key Evidence and Findings: The assessee argued that no cash commission was paid, and the AO failed to provide evidence to the contrary. Application of Law to Facts: The Tribunal found that the AO's assumption of commission payment lacked evidentiary support, as no direct evidence of such payments was presented. Treatment of Competing Arguments: The Tribunal noted the lack of any examination of the broker or any direct evidence linking the assessee to the alleged commission payments. Conclusions: The Tribunal found the addition under section 69C to be without merit, as the AO's conclusions were based on assumptions rather than concrete evidence. 3. Confirmation of Additions by CIT(A) Relevant Legal Framework and Precedents: The role of CIT(A) is to review the AO's findings and ensure that the conclusions are based on sound legal and factual grounds. Court's Interpretation and Reasoning: The Tribunal assessed whether the CIT(A) appropriately evaluated the evidence and arguments presented by the assessee. Key Evidence and Findings: The Tribunal found that the CIT(A) upheld the AO's findings without adequately addressing the evidence provided by the assessee. Conclusions: The Tribunal concluded that the CIT(A) erred in confirming the additions, as the evidence provided by the assessee was not sufficiently considered. 4. Interest and Penalty under Sections 234 and 271(1)(c) Relevant Legal Framework and Precedents: Section 234 pertains to the levy of interest for defaults, while section 271(1)(c) deals with penalties for concealment of income or furnishing inaccurate particulars. Court's Interpretation and Reasoning: The Tribunal noted that the issue of interest was consequential to the main findings, and the initiation of penalty proceedings was premature. Conclusions: The Tribunal did not find it necessary to adjudicate on the interest issue separately and dismissed the penalty initiation as premature. SIGNIFICANT HOLDINGS The Tribunal's significant holdings include:
In conclusion, the Tribunal found in favor of the assessee, allowing the appeal and setting aside the additions made by the AO.
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