2018 (7) TMI 43 - AT - Income Tax

Income classification upheld as capital gains; emphasize evidence, precedent judgments. Limited to case facts.

Income Tax Officer, Ward-14 (2), Hyderabad Versus Shri K. Ramakrishna Reddy

The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal regarding the classification of income under capital gains or other ... Income from sale of shares - 'income from capital gains” or “income from other sources” - A.O. was of the opinion that capital gains declared by the assessee was bogus - Held that:- On identical facts, the ITAT Hyderabad Bench in the case of Smt. Sarita Devi vs. ITO and Ms. Nikita Kumar vs. ITO (2017 (5) TMI 1111 - ITAT HYDERABAD) allowed a similar contention of the other assessee's, mainly on the ground that neither the statement of Mr. Mukhesh Choksi was provided to the assessee nor the cross-examination was allowed and it was not even placed on record. Considering the similarity of facts and circumstances and binding nature of decision of the ITAT, the action of the A.O. in treating the LTCG and STCG as income from other sources was held to be not warranted. CIT(A) followed the decision of the ITAT Hyderabad on the ground that the facts are identical and unless it is contradicted by the Revenue, the findings and conclusions cannot be questioned at this stage. - Decided against revenue Issues:1. Classification of income under capital gains or other sources2. Validity of transactions and source of income3. Reliance on precedent judgmentsIssue 1: Classification of income under capital gains or other sourcesThe appeal pertains to the Assessment Year 2007-2008, where the Revenue contested the treatment of income by the Ld. CIT(A) under the head 'income from capital gains' instead of 'income from other sources.' The Revenue argued that the income declared by the assessee was from undisclosed sources, as the demat account did not reflect transactions, and the broker was not recognized by stock exchanges. The A.O. deemed the capital gains declared by the assessee as bogus based on information received about accommodation entries.Issue 2: Validity of transactions and source of incomeThe A.O. received information suggesting that the assessee received accommodation bills on share sales, benefiting Rs. 1.52 Crs, while declaring Long Term Capital Gains of Rs. 25,17,768/- and Short Term Capital Gains of Rs. 7,12,398/-. Despite providing purchase bills and receipts, the A.O. found that the transactions were not genuine as the intermediary was not affiliated with stock exchanges. The Ld. CIT(A) relied on a previous ITAT Hyderabad decision, emphasizing the lack of crucial evidence like statements and cross-examinations, leading to the conclusion that the A.O.'s treatment of LTCG and STCG as income from other sources was unwarranted.Issue 3: Reliance on precedent judgmentsThe Ld. CIT(A) based the decision on the ITAT Hyderabad's ruling in a similar case, highlighting the importance of providing essential evidence and the binding nature of ITAT decisions. The Tribunal upheld the Ld. CIT(A)'s order due to the absence of contradictory material from the Revenue, allowing the Revenue to seek a recall if new evidence contradicts the findings. The judgment emphasized that the decision was limited to the specific case's facts, granting the Revenue the opportunity to challenge alleged bogus purchases in other cases based on Mr. Mukhesh Choksi's statement.In conclusion, the judgment dismissed the Revenue's appeal, affirming the Ld. CIT(A)'s decision based on the existing evidence and the reliance on precedent judgments from the ITAT Hyderabad.