2017 (10) TMI 168 - AT - Income Tax

Tribunal directs LTCG treatment and exemption, deems transactions genuine, rejects income addition. Assessment validity not raised.

Ketulkumar D. Jaiswal Versus Income Tax Officer, S.K. Ward – 4, Modasa

The Tribunal allowed the appeal, directing the AO to treat the surplus as Long Term Capital Gain (LTCG) and grant the exemption claimed by the assessee. ... Addition as Income from other sources by CIT-A - Income tax Officer has added as a unexplained credit u/s. 68 and also not granted Long Term capital gain u/s.10(38) of I. T. Act - Held that:- As no direct or material evidence against the assessee to hold that the share transactions were not genuine, we respectfully following the above decisions of the Tribunal, hold that additions made by the AO u/s.68 are not warranted and are accordingly deleted. In this case, transaction are made for the D-mat account and STT has also been paid. Assessee has sold his shares to authorized stock exchange and received Invoice duly paid STT on his selling shares. In our opinion, the order of the CIT(A) is not sustainable. - Decided in favour of assessee. Issues Involved:1. Addition of Rs. 5,26,782 as Income from Other Sources under Section 68 of the Income Tax Act.2. Validity of the assessment made under Section 143(3) read with Section 147 of the Income Tax Act, beyond the period of limitation.Detailed Analysis:1. Addition of Rs. 5,26,782 as Income from Other Sources under Section 68 of the Income Tax Act:Background:The assessee claimed Long Term Capital Gain (LTCG) of Rs. 5,26,782 on the sale of shares of Talent Infoways, which was processed through Mahasagar Group of companies. A search and seizure action under Section 132 of the Income Tax Act was conducted on Mahasagar Group, revealing that these companies were issuing bogus bills for providing LTCG/Loss, among other things.Assessment Officer's Findings:The AO found that the assessee had obtained fake share transaction bills from Mahasagar Group and treated the claimed LTCG as unexplained credit under Section 68 of the Act. The AO issued a show-cause notice to the assessee, who failed to provide a satisfactory explanation, leading to the addition of Rs. 5,26,782 to the total income.Assessee's Defense:The assessee argued that the transactions were genuine, supported by broker notes, and the shares were sold through a demat account. The assessee requested cross-examination of Shri Mukesh Choksi, which was granted by the AO.Tribunal's Analysis:The Tribunal referred to several judgments where similar issues were adjudicated. It was noted that the transactions were supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels, and demat account statements. The Tribunal emphasized that the AO's conclusions were based on presumptions and surmises rather than direct evidence.Cited Judgments:- Shri Pratik Suryakant Shah: The Tribunal held that transactions were genuine and directed the AO to treat the surplus as LTCG and allow the exemption claimed by the assessee.- Shri Jatin P. Ajmera vs. ITO: The Tribunal found that the transactions were backed by contract notes and demat account statements, and there was no direct evidence against the assessee.- ACIT vs. Shri Ravindrakumar Toshniwal: The Tribunal upheld the genuineness of the transactions, noting that the AO failed to consider the documentary evidence provided by the assessee.Conclusion:The Tribunal concluded that the assessee's transactions were genuine and directed the AO to treat the surplus as LTCG and allow the exemption under Section 10(38) of the Act.2. Validity of the Assessment under Section 143(3) read with Section 147:Assessee's Argument:The assessee contended that the assessment was made beyond the period of limitation laid down in Section 153 of the Act.Tribunal's Decision:The Tribunal noted that this ground was not pressed by the assessee during the hearing.Conclusion:The Tribunal did not address the issue of the validity of the assessment under Section 143(3) read with Section 147, as it was not pressed by the assessee.Final Judgment:The appeal filed by the assessee was allowed, with the Tribunal directing the AO to treat the surplus as LTCG and allow the exemption claimed by the assessee. The issue regarding the validity of the assessment was not considered as it was not pressed by the assessee.