2010 (12) TMI 713 - AT - Income Tax

Tribunal directs capital gain treatment, allows section 54EC exemption, deletes commission addition.

The Tribunal allowed the appeal, directing the AO to treat the capital gain as long term and allow the exemption under section 54EC. The addition of Rs. ... Condonation of delay - LTCG or STCG - Exemption u/s. 54EC - Addition - Principles of natural justice - after purchasing the shares they were sent to the company for transfer of shares in assessee's name and the said company transferred the shares on 30-6-2000. - the evidence on record indicate that assessee has purchased the shares in April, 2000 and sold in December, 2001 - Held that:- The only action of the Assessing Officer is doubting the purchase in April, 2000 but the Assessing Officer has not doubted the transaction as such as he has accepted the same as well as purchase cost. - assessee has discharged the onus in proving the date of purchase in April 2000 and there is no reason to deny the benefit of capital gains to the assessee as long term capital gains. - AO directed to treat the capital gain as long term capital gain and not as short term capital gain. Issues Involved:1. Condonation of delay in filing the appeal.2. Treatment of long term capital gain as short term capital gain.3. Addition of alleged commission paid.4. Violation of principles of natural justice due to lack of opportunity to cross-examine the stock broker.Issue-wise Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The assessee filed an appeal with a delay of 6 days, explaining the delay due to the leave of an Articled Clerk and a marriage in the Authorized Representative's family. Considering the smallness of the delay and the reasons provided, the Tribunal condoned the delay and admitted the appeal.2. Treatment of Long Term Capital Gain as Short Term Capital Gain:The Assessing Officer (AO) treated the long term capital gain declared by the assessee as short term capital gain, thereby disallowing the exemption under section 54EC of the Income Tax Act. The assessee sold 10,500 shares of Rashel Agro Tech Ltd. and declared a long term capital gain after taking indexation benefits. The AO doubted the date of purchase due to the lack of payment on the so-called purchase date from a broking firm, M/s. Gold Star Finvest P. Ltd., whose director, Mr. Mukesh Chokshi, was allegedly involved in issuing bogus bills. The AO treated the capital gain as short term and added a commission of Rs. 8138/- as unexplained expenditure. The CIT(A) upheld the AO's decision, stating that there was no proof of purchase or payment for the shares, suggesting the transaction was fictitious.The Tribunal, however, found that the assessee had provided sufficient evidence, including purchase bills, transfer confirmations, and balance sheet entries, indicating the shares were purchased in April 2000 and sold in December 2001, resulting in a long term capital gain. The Tribunal noted that the AO did not question the transfer of shares by the company nor disproved the transfer of share certificates. The Tribunal held that the assessee had discharged the onus of proving the date of purchase and directed the AO to treat the capital gain as long term and allow the exemption under section 54EC.3. Addition of Alleged Commission Paid:The AO added Rs. 8138/- as commission paid to Mr. Mukesh Chokshi based on his statement. The Tribunal found no evidence of the assessee paying or the broker receiving this amount. The addition was made without any basis, and the Tribunal held that there was no need for this addition.4. Violation of Principles of Natural Justice:The assessee contended that the AO did not provide an opportunity to cross-examine Mr. Mukesh Chokshi. The Tribunal noted that the assessee was present for cross-examination, but Mr. Chokshi was not available. The Tribunal emphasized that the statement of Mr. Chokshi, which was not subjected to cross-examination, could not be the sole basis for denying the benefit of long term capital gain. The Tribunal found that the documentary evidence provided by the assessee outweighed the unsupported oral statement of Mr. Chokshi.Conclusion:The Tribunal allowed the appeal, directing the AO to treat the capital gain as long term and allow the exemption under section 54EC. The addition of Rs. 8138/- as commission was also deleted. The appeal was pronounced in the open court on 15.12.2010.