Tax Department Cannot Disallow Long-Term Capital Gains Exemption Under Section 10(38) Based Solely on Investigation Wing Report

The ITAT ruled that the AO's addition under section 68 and denial of exemption under section 10(38) were untenable. The Tribunal found that the AO relied merely on assumptions from an Investigation Wing report without direct evidence, while ignoring evidence furnished by the assessee. Since the purchase of shares in an earlier year was accepted by revenue, and the sale occurred through the Stock Exchange with consideration received via banking channels, the sale proceeds could not be considered unexplained cash credits under section 68. Additionally, the ITAT deleted the disallowance under section 14A, noting that the AO failed to establish that investments were made using interest-bearing funds, making administrative expenditure disallowance impermissible. .....

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