2018 (7) TMI 46 - AT - Income Tax

Tribunal overturns tax assessment based on suspicion, emphasizes need for concrete evidence

Prakash Chand Bhutoria Versus ITO, Ward-35 (1), Kolkata

The Tribunal concluded that the Assessing Officer's addition under Section 68 of the Income Tax Act was based on mere suspicion without concrete evidence. ... Addition u/s 68 - addition towards consideration received for sale of shares as unaccounted income - application of rules of ‘Suspicious Transaction’ - Held that:- There cannot be any doubt about the transaction as has been observed by the Assessing Officer. The transactions were as per norms under controlled by the Securities Transaction Tax, brokerage service tax and cess, which were already paid. They were complied with. All the transactions were through bank. There is no iota of evidence over the above transactions as it were through d-mat format. See CIT, Kolkata-III vs. Smt. Shreyashi Ganguli reported in [2012 (9) TMI 1113 - CALCUTTA HIGH COURT] - Decided against revenue. Issues Involved:1. Addition under Section 68 of the Income Tax Act, 1961.2. Validity of evidence provided by the assessee.3. Allegations of suspicious transactions and price manipulation.4. Reliance on findings from the Directorate of Income Tax (Investigation), Kolkata.5. Legal precedents and their applicability.Issue-wise Detailed Analysis:1. Addition under Section 68 of the Income Tax Act, 1961:The Assessing Officer (AO) made an addition under Section 68 of the Income Tax Act, treating the sale consideration of shares as unaccounted income. This decision was based on the significant rise in the share price of Unno Industries Ltd., which the AO found suspicious. The First Appellate Authority confirmed this addition, considering the transaction as a 'Suspicious Transaction'.2. Validity of evidence provided by the assessee:The assessee provided extensive documentation to support the genuineness of the transactions, including bank statements, demat account statements, contract notes, and communication from the Bombay Stock Exchange. The AO, however, did not refer to these evidences in his order. The Tribunal noted that the AO made general statements without confronting the assessee with any specific evidence collected during the investigation.3. Allegations of suspicious transactions and price manipulation:The AO's suspicion was based on the extraordinary increase in the share price of Unno Industries Ltd. The Tribunal emphasized that suspicion, however strong, cannot replace concrete evidence. The AO's reliance on the price rise alone was deemed insufficient to justify the addition under Section 68.4. Reliance on findings from the Directorate of Income Tax (Investigation), Kolkata:The AO referred to findings from the Directorate of Income Tax (Investigation), Kolkata, which suggested the involvement of a syndicate manipulating share prices. However, the Tribunal pointed out that the AO did not provide any specific evidence from these findings to the assessee or the Tribunal. The generalizations made by the AO were not supported by concrete evidence.5. Legal precedents and their applicability:The Tribunal cited several legal precedents where similar additions under Section 68 were deleted due to lack of evidence. Notable cases included CIT vs. Smt. Shreyashi Ganguli, where the transactions were found genuine despite the AO's suspicion, and CIT vs. Lakshmangarh Estate & Trading Co. Limited, which held that suspicion cannot replace proof. The Tribunal also referred to decisions where the genuineness of transactions was upheld based on documentary evidence, despite allegations of price manipulation.Conclusion:The Tribunal concluded that the AO's addition under Section 68 was based on mere suspicion without concrete evidence. The evidence provided by the assessee was sufficient to prove the genuineness of the transactions. The Tribunal directed the AO to delete the addition, allowing the appeal of the assessee. The judgment emphasized the importance of concrete evidence over suspicion and upheld the legal principles established in previous cases.