ITAT deletes additions under sections 68 and 69C for share sale proceeds deemed bogus without direct evidence

The ITAT Surat allowed the appeal and deleted additions made under sections 68 and 69C. The revenue authorities had treated share sale proceeds as bogus unexplained income based on suspicion regarding penny stock transactions. The tribunal held that additions cannot be made merely on suspicion without direct evidence proving transactions as non-genuine. The assessee provided sufficient evidence including contract notes, broker details, and banking records proving identity, nature and source of cash credit. Since transactions occurred on BSE platform with proper settlement system, genuineness was established. Consequential additions under section 69C and tax under section 115BBE were also deleted.

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Issues Involved:
1. Addition of Long Term Capital Gain (LTCG) under Section 68 of the Income Tax Act.
2. Addition of Commission under Section 69 of the Income Tax Act.
3. Application of tax rate under Section 115BBE of the Income Tax Act.
4. Condonation of delay in filing the appeal.

Condonation of Delay:
The assessee's appeal was delayed by 137 days due to the negligence of the Tax Consultant, who failed to check the order on the Income Tax Department's portal. The Tribunal condoned the delay, citing that the assessee should not be penalized for the consultant's mistake, referencing the decision in M/s. Garg Bros. Pvt. Ltd. & Others vs. DCIT.

Issue 1: Addition of LTCG under Section 68:
The Assessing Officer (AO) added Rs. 49,01,840/- as LTCG under Section 68, alleging the transaction was bogus based on information from the Directorate of Investigation, Kolkata, and the abnormal rise in share prices. The assessee provided extensive documentation, including ledger accounts, share certificates, bank statements, and evidence of SEBI-registered broker transactions. The Tribunal noted that the AO did not find any defects in these documents and relied solely on suspicion and third-party reports without providing the assessee an opportunity for cross-examination. The Tribunal cited various judgments, including the Gujarat High Court in Jagat Pravinbhai Sarabhai and Nishant Kantilal Patel, which supported the genuineness of long-term investments substantiated by proper documentation. The addition under Section 68 was deleted.

Issue 2: Addition of Commission under Section 69:
The AO added Rs. 98,037/- as unexplained expenditure under Section 69, assuming a 2% commission on the alleged bogus LTCG. Since the primary addition under Section 68 was deleted, this addition was also deleted as consequential.

Issue 3: Application of Tax Rate under Section 115BBE:
The AO applied a 30% tax rate under Section 115BBE on the alleged unaccounted income. As the primary addition under Section 68 was deleted, this issue did not require further adjudication.

Conclusion:
The Tribunal allowed the appeal, deleting all additions made by the AO under Sections 68 and 69, and negating the application of Section 115BBE. The order emphasized adherence to principles of natural justice and the necessity of concrete evidence over mere suspicion.

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