2023 (3) TMI 1431 - AT - Income Tax

Off-market share purchases not sham if held in demat and sold properly, section 68 compliance proven

The Asst. Commissioner of Income Tax, Central Circle-5 (4), Mumbai Versus Smt. Priyanka Ankit Miglani, Smt. Archana Anuj Miglani, Shri Anuj Rajinder Miglani, Shri Ankit Rajinderkumar Miglani

The Asst. Commissioner of Income Tax, Central Circle-5 (4), Mumbai Versus Smt. Priyanka Ankit Miglani, Smt. Archana Anuj Miglani, Shri Anuj Rajinder ... Issues Involved:1. Delay in filing appeals by the revenue.2. Justification of the CIT(A) in deleting the addition made by the AO by denying the exemption claimed under section 10(38) of the Income Tax Act.3. Justification of the CIT(A) in deleting the addition made by the AO on account of estimated commission expenditure as unexplained under section 69C of the Income Tax Act.4. Validity of reassessment under section 147 of the Income Tax Act.Summary:1. Delay in Filing Appeals by the Revenue:The Tribunal noted a delay of 291 days in filing the appeals by the revenue due to the Covid-19 pandemic. Citing the relaxation granted by the Hon'ble Supreme Court regarding the limitation for preferring appeals, the Tribunal condoned the delay and admitted the appeals for adjudication.2. Justification of the CIT(A) in Deleting the Addition Made by the AO by Denying the Exemption Claimed Under Section 10(38) of the Income Tax Act:The core issue was whether the CIT(A) was justified in deleting the addition made by the AO by denying the exemption claimed under section 10(38) for long-term capital gains derived from the sale of shares of Pine Animation Limited. The AO categorized the shares as 'Penny Stock' and treated the gains as bogus. The Tribunal found that the assessee had provided substantial documentary evidence supporting the purchase and sale of shares, including demat statements, bank statements, and broker's contract notes. The CIT(A) had relied on the final SEBI order dated 19/09/2017, which acquitted the assessee from any involvement in price manipulation. The Tribunal upheld the CIT(A)'s decision, stating that the AO's conclusions were based on suspicion and lacked corroborative evidence.3. Justification of the CIT(A) in Deleting the Addition Made by the AO on Account of Estimated Commission Expenditure as Unexplained Under Section 69C of the Income Tax Act:The Tribunal also addressed the connected issue of whether the CIT(A) was justified in deleting the addition made by the AO on account of estimated commission expenditure as unexplained under section 69C. The AO had added an estimated commission expenditure for arranging the alleged bogus LTCG. The Tribunal found no evidence proving that the assessee paid any commission to entry operators. The CIT(A) correctly deleted the addition, and the Tribunal upheld this decision.4. Validity of Reassessment Under Section 147 of the Income Tax Act:In the cross objections, the assessee challenged the validity of the reassessment under section 147. The Tribunal found that the AO had received prima facie information from the investigation wing about the assessee's involvement in transactions with Pine Animation Ltd, categorized as Penny Stock. This information constituted a valid basis for the AO to form a belief that income had escaped assessment. The Tribunal held that the reassessment was validly reopened as the AO had prima facie material to form the belief, dismissing the assessee's objections.Conclusion:All the appeals of the revenue were dismissed, and all the cross objections of the assessee were dismissed. The Tribunal upheld the CIT(A)'s decisions, emphasizing the lack of evidence and reliance on suspicion by the AO. The reassessment under section 147 was deemed valid.