ITAT allows long term capital gains claim, rejects tax authorities' disbelief of share purchases

The ITAT partly allowed the appeals, setting aside the Ld CIT(A)'s orders and directing the AO to accept the claim of long term capital gains for the assessment year in question. The ITAT found the evidence provided by the assessees regarding the purchases and delivery of shares to be sufficient to establish the genuineness of the sales, disagreeing with the tax authorities' assessment that disbelieved the purchases as genuine.

---

---

Issues:
Validity of reopening of assessment; Assessment of long term capital gains as income from other sources.

Validity of Reopening of Assessment:
The appeals were filed against the orders confirming the assessment of long term capital gains as income from other sources by the Ld CIT(A). The AO reopened the assessments based on information from a search and seizure operation revealing bogus transactions. The assessees challenged the validity of the reopening, but the Ld CIT(A) upheld it, stating that the AO had proper reasons. The ITAT upheld the Ld CIT(A)'s decision on this issue, as the returns had only been processed under section 143(1) and the reopening was based on valid information.

Assessment of Long Term Capital Gains:
The assessees purchased shares through a company linked to the group under investigation. The AO disbelieved the purchases as genuine, leading to the assessment of entire sale proceeds as income from other sources. The Ld CIT(A) upheld this decision, citing various reasons including lack of authenticity in payment, non-genuineness of purchases, and unbelievable price rise in shares. The ITAT disagreed with the tax authorities, noting that the assessees provided evidence of purchases and delivery of shares. They found the denial of trade transactions by the stock exchange insufficient to reject the claim. The ITAT also found the proof of delivery of shares sufficient to establish genuineness of sales. They concluded that there was no material to reject the assessees' claim of long term capital gains and directed the AO to accept the claim.

In conclusion, the ITAT partly allowed the appeals, setting aside the Ld CIT(A)'s orders and directing the AO to accept the claim of long term capital gains for the assessment year in question.

---