Tribunal rules in favor of assessee, rejects addition of Long Term Capital Gains, emphasizes reliance on evidence

The Tribunal ruled in favor of the assessee, deleting the addition of Long Term Capital Gains on shares and allowing the appeal against the Commissioner of Income Tax-(A)-10's order for the assessment year 2014-15. The Tribunal emphasized the importance of relying on evidence rather than generalizations or suspicions, citing support from various case laws and dismissing the reliance on a Supreme Court judgment due to lack of adverse orders from SEBI. The decision was pronounced on 05.10.2018.

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Issues:
1. Rejection of claim of Long Term Capital Gains on shares.

Analysis:
The appeal was filed against the Commissioner of Income Tax-(A)-10's order regarding the assessment year 2014-15. The main issue was whether the Assessing Officer was correct in rejecting the claim of the assessee regarding Long Term Capital Gains on the purchase and sale of shares of M/s Kailash Auto Finance Ltd. The AO concluded that the assessee's claim was bogus based on general observations and a report, adding the entire sale proceeds of the shares as income and denying the exemption under section 10(38) of the Income Tax Act, 1961. The evidence presented by the assessee supporting the genuineness of the transaction was dismissed.

The assessee appealed, but the ld. CIT(A)-10, Kolkata upheld the addition. The CIT(A) relied on "circumstantial evidence" and "human probabilities" to support the AO's findings, along with the so-called "rules of suspicious transaction." Despite no direct material contradicting the evidence provided by the assessee, the conclusions were based on a general report from the Director of Investigation, Kolkata, not specific to the assessee. The Tribunal emphasized that decisions should rely on evidence rather than generalizations, suspicions, or conjectures, deleting similar additions in other cases.

The Tribunal referred to various case laws that support the assessee's position, stating that the issue aligns with decisions from High Courts and the ITAT. The Departmental Representative's reliance on a Supreme Court judgment was dismissed since there was no surviving adverse order from SEBI against the assessee or the company involved in the transactions. Consequently, the addition was deleted, and the assessee's appeal was allowed.

In conclusion, the Tribunal ruled in favor of the assessee, deleting the addition and allowing the appeal. The decision was pronounced in court on 05.10.2018.

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