2020 (3) TMI 1323 - AT - Income Tax

Appeal partly allowed, exemption claim remitted for re-adjudication. Importance of genuine transactions emphasized.

Smt. Pinky Devi Versus The Income Tax Officer, Non-Corporate Circle -5 (4), Chennai.

The appeal was partly allowed for statistical purposes, and the issues regarding the exemption claim under section 10(38) were remitted back to the ... Bogus LTCG - exemption u/s. 10(38) denied - certain companies listed in the Bombay Stock Exchange by a group of persons acting as a syndicate in order to provide entries of tax exempt long term capital gains to a large number of persons (beneficiaries) in lieu of unaccounted cash - HELD THAT:- As noticed that the 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 readjudication. 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. See RAMAKRISHNA DEO. [1958 (10) TMI 9 - SUPREME COURT] 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 Khatr [2018 (12) TMI 1652 - ITAT CHENNAI] - Assessee’s appeal is treated as partly allowed for statistical purposes. Issues:1. Exemption claim u/s 10(38) - Genuineness of transactions and fair opportunity to prove the same.Analysis:Exemption claim u/s 10(38) - Genuineness of transactions and fair opportunity to prove the same:The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the addition made by the Assessing Officer in treating the purchase and sale of shares as penny stock transactions. The Assessing Officer completed the assessment under Section 143(3) treating the entire sale consideration as an unexplained cash credit based on evidence collected during an investigation revealing market price manipulation. The appellant claimed exemption u/s 10(38), but the genuineness was questioned. The Tribunal emphasized that the onus of proving exemption lies on the assessee, and the Assessing Officer must provide a fair opportunity to prove the genuineness of transactions. The Tribunal cited previous judgments highlighting the importance of proper materials to establish exemption claims. It was noted that internal communications of the Revenue are not final evidence, and the onus remains on the assessee to substantiate the claim. The Tribunal referred to relevant case laws where matters were remitted back to the Assessing Officer for re-examination due to lack of conclusive evidence and the need for a fair opportunity for the assessee to present their case. Consequently, the issues of exemption claim u/s 10(38) were remitted back to the Assessing Officer for re-adjudication, emphasizing the need for the assessee to establish the genuineness of transactions and comply with the requirements of the law.In conclusion, the appeal was treated as partly allowed for statistical purposes, and the issues of exemption claim u/s 10(38) were directed to be re-adjudicated by the Assessing Officer, ensuring a fair opportunity for the assessee to present evidence and establish the genuineness of transactions. The Assessing Officer was instructed to consider all aspects, conduct appropriate inquiries, and decide the matter in accordance with the law, following the directions provided by the Tribunal and relevant legal precedents.