2020 (3) TMI 1294 - AT - Income Tax

Assessee's Appeal Partially Allowed with Emphasis on Evidence

The Tribunal partially allowed the assessee's appeal, remitting the exemption claim under section 10(38) back to the Assessing Officer for ... Exemption claim u/s 10(38) - HELD THAT:- Assessee has not been given a fair opportunity to prove the genuineness but the assessment has been made based, primarily, on the evidences collected by the Revenue in the course of the investigation conducted by them on brokers / share broking entities etc. This is not permissible. This being so, in the interests of natural justice, the issue of the genuineness of the transactions require re-adjudication. Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion.Thus, the AO must keep in mind that the onus of proving the exemption rests on the assessee. If the AO does have any evidence to the contrary, it is to be put to the assessee for his rebuttal. The internal communications of the Revenue are evidences for drawing an opinion on possible wrong claims but they are not the final evidence. we deem it fit to remit the issues of exemption claim in this appeal back to the file of the A.O. for readjudication on the lines indicated above. Therefore, the A O shall require the assessee; to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. The assessee shall comply with the A.O’s requirements as per law. The Assessing Officer shall also bring on record the role of the assessee in promoting the company and relationship of the assessee with other promoters, role of the assessee in inflating the price of shares, etc. as had been held by the Co-ordinate Bench of this Tribunal in the case of Shri Aravind Nandial Khatri Vs. I.T.O [2018 (12) TMI 1652 - ITAT CHENNAI]. Assessee’s appeal is treated as partly allowed for statistical purposes. Issues Involved:- Confirmation of addition made by Assessing Officer in treating purchase and sale of shares as penny stock transactions- Claim of exemption under section 10(38) disputed by Assessing OfficerAnalysis:1. The assessee appealed against the Commissioner of Income Tax (Appeals) order for the assessment year 2014-15 regarding the addition made by the Assessing Officer in treating the purchase and sale of shares as penny stock transactions.2. The Assessing Officer found that the assessee was involved in suspicious transactions related to long term capital gains (LTCG) through the purchase and sale of penny stock. An investigation revealed manipulation in market prices to provide tax-exempt gains. The AO treated the entire sale consideration as unexplained cash credit, adding it to the income. The CIT(A) upheld this decision, leading to the current appeal.3. The issue revolved around the genuineness of the transactions and the claim of exemption under section 10(38). The appellant argued that the AO did not provide a fair opportunity to prove the genuineness of the transactions. The Tribunal emphasized that the onus of proving exemption lies on the assessee, requiring proper materials to establish the claim. The Tribunal cited precedents to highlight the importance of evidence and the need for a thorough re-adjudication of the issue.4. Referring to previous cases, the Tribunal stressed the necessity of concrete evidence to support the claim of exemption under section 10(38). The Tribunal highlighted discrepancies in the assessee's case, including the source of funds, purchase details, and possession of shares. It emphasized the need for a detailed examination of the transactions and directed the Assessing Officer to re-evaluate the case, ensuring the assessee's compliance with legal requirements.5. Based on the above analysis, the Tribunal partially allowed the assessee's appeal for statistical purposes, remitting the issue of exemption claim under section 10(38) back to the Assessing Officer for re-adjudication. The Tribunal instructed the AO to conduct a thorough investigation, consider all aspects of the case, and provide the assessee with a fair opportunity to present evidence before making a final decision in accordance with the law.