2016 (2) TMI 1261 - AT - Income Tax

High Court orders Tribunal to rehear appeal, determine nature of capital gains

The High Court directed the Tribunal to recall its order dismissing the assessee's appeal and rehear the case. The ITAT remitted the issue of verification ... Bogus purchases of shares - Addition u/s 68 - HELD THAT:- The assessee has received the money on sale of shares as the said sale of shares is at the Stock Exchange, which fact is not in dispute. The Tribunal has sent the matter back to the file of AO to ascertain the date of purchase, so as to decide as to whether the assessee has earned short term capital gain or long term capital gain. In the present proceedings, out of the two scripts, for one scrip, the Tribunal has already sent the matter to the AO and, the Hon’ble High Court [2014 (7) TMI 643 - BOMBAY HIGH COURT] has held finding of the Tribunal’s order dated 20/10/2010 in regular assessment proceeding would have direct relevance/ bearing on the Tribunal deciding the appeal arising from the assessment under section 143(3) and 153 A of the Act for the same assessment year and thus directed to recall the order of the Tribunal and directed to rehear the appeal. The department has not challenged the order of the Tribunal [2010 (10) TMI 762 - ITAT, MUMBAI] before the High Court, the said order has become final,with regard to order under section 143(3) wherein the issue was restored to the AO. It may be noted that the assessee could not prove the purchases of penny stock shares of M/s Shalimar Agro Ltd. and M/s G.Tech Info Training Ltd., however, assessee submitted before us that the entire purchase and sale of shares are fully supported by necessary documents/evidences. Therefore, we also restore the issue to the file of AO to avoid the conflicting assessment order in respect of same AY and direct the AO to verify and examine the actual date of purchase in both the cases and thereby to determine the short term capital gains or long term capital gains, or it may be added in income of the assessee u/s 68 on the basis of the alleged incriminating material found during the search as the case may be, and pass fresh assessment order after giving opportunity of being heard to the assessee and decide the same in accordance with law. - Appeal of assessee is allowed for statistical purposes. Issues Involved:1. Recall of Tribunal's order dated 30-1-2013.2. Verification of the sale and purchase transactions of shares of M/s Shalimar Agro Products Ltd. and M/s G-Tech Info Training Ltd.3. Determination of the nature of capital gains (short-term or long-term) from the sale of shares.4. Addition of unexplained cash credit and unexplained expenditure under Section 68 and Section 69C of the Income Tax Act.Issue-wise Detailed Analysis:1. Recall of Tribunal's Order Dated 30-1-2013:The Tribunal initially dismissed the assessee's appeal on 30-1-2013. The assessee filed a miscellaneous application (MA No.139/M/2013) to recall this order, which was also dismissed on 18-10-2013. The assessee then filed a Writ Petition before the jurisdictional High Court. The High Court, in its order dated 24-6-2014 (Writ Petition No.126 of 2014), directed the Tribunal to recall the order dated 30-1-2013 and rehear the appeal. The High Court emphasized that the application for rectification was filed within the permissible time and that the Tribunal's findings in its order dated 20-10-2010 should be considered in the rehearing.2. Verification of Sale and Purchase Transactions:The assessee disclosed income from various sources, including the sale of shares of M/s Shalimar Agro Products Ltd. The AO made an addition of Rs. 45,55,979/- under Section 68 regarding the sale proceeds of these shares. The CIT(A) allowed the assessee's appeal, but the Revenue appealed to the ITAT. The ITAT, in its order dated 20-10-2010, remitted the issue back to the AO for verification of the actual date of purchase and the genuineness of the transactions. The AO was directed to examine the records and establish the nature of the capital gains.3. Determination of Nature of Capital Gains:During the search and seizure action on 18-07-2007, documents related to the purchase and sale of shares of M/s Shalimar Agro Products Ltd. and M/s G-Tech Info Training Ltd. were found. The AO, in the assessment order dated 30-12-2008, added the long-term capital gains shown by the assessee as income from artificial long-term capital gains. The AO also added 5% of the sale consideration as unexplained money. The CIT(A) confirmed these additions. The ITAT was directed by the High Court to rehear the appeal and verify the actual date of purchase to determine whether the gains were short-term or long-term.4. Addition of Unexplained Cash Credit and Expenditure:The assessee argued that the purchase and sale transactions were fully supported by contract notes and routed through the demat account. The AO's presumption that the transactions were bogus was challenged. The ITAT noted that the Tribunal's previous order dated 20-10-2010 had accepted the assessee's contention regarding the sale of shares at the Stock Exchange. The Tribunal directed the AO to verify the actual date of purchase and determine the nature of the capital gains. The AO was also directed to consider the alleged incriminating material found during the search and pass a fresh assessment order after giving the assessee an opportunity to be heard.Conclusion:The ITAT allowed the appeal of the assessee for statistical purposes, directing the AO to verify and examine the actual date of purchase of shares and determine the nature of the capital gains. The AO was instructed to pass a fresh assessment order in accordance with the law, ensuring no conflicting assessments for the same assessment year. The assessee was directed to produce all necessary documents for verification. The appeal was thus allowed for statistical purposes.Order Pronounced:The order was pronounced in the open court on 17/02/2016.