2018 (12) TMI 576 - AT - Income Tax

Appeal allowed: Unexplained cash credit and commission expenditure additions deleted. Lack of concrete evidence.

Swati Mall Versus ITO, Ward-36 (2), Kolkata.

The Tribunal allowed the appeal, deleting both the addition towards unexplained cash credit under Section 68 and the addition towards unexplained ... Bogus long term capital gain - addition made towards unexplained cash credit u/s 68 - Held that:- Both the lower authorities have adopted identical line of reasoning in treating the sale consideration received on transfer of shares in STIL to be bogus thereby treating the LTCG on sale of such shares as unexplained cash credit u/s 68 of the Act. DR drew our attention to a voluminous exercise undertaken by the AO involving a long drawn process of stock market prices rigging in collusion with the various entry operators. DR drew our attention to the assessment order indicating the assessee to have allegedly invested the money in M/s TTL (since merged with STIL) not having any sound financial position or business activity so as to justify the LTCG in issue. The cases of Sumati Dayal vs. CIT (1995 (3) TMI 3 - SUPREME COURT) and CIT vs. Durga Prasad More (1971 (8) TMI 17 - SUPREME COURT) were quoted in support to plead that both the lower authorities have made it clear in their respective order(s) about the assessee having acted in collusion with various entry operators for the purpose of bogus LTCG in issue We find that the revenue did not indicate any specific evidence against the assessee in above terms qua the LTCG derived from transfer of share in STIL. We therefore adopt the above extracted reasoning mutatis mutandis to delete the impugned bogus LTCG addition. Consequently the addition made towards unexplained expenditure on account of commission also stands automatically deleted - decided in favour of assessee. Issues Involved:1. Whether the CIT(A) was justified in confirming the addition made towards unexplained cash credit under Section 68 of the Income Tax Act by treating the Long Term Capital Gain (LTCG) derived from the sale of shares as bogus.2. Whether the CIT(A) was justified in confirming the addition made towards unexplained expenditure on commission.Issue-wise Detailed Analysis:1. Addition towards Unexplained Cash Credit under Section 68:The primary issue in this appeal was whether the CIT(A) was justified in confirming the addition of Rs. 96,36,783/- as unexplained cash credit under Section 68 of the Income Tax Act, treating the LTCG derived from the sale of shares of Trinity Trademark Ltd (merged with Sharp Trading & Investing Ltd) as bogus. The assessee filed a return of income for the Assessment Year 2014-15, declaring total income of Rs. 10,19,740/-, and claimed exempt income under Section 10(38) for LTCG from the sale of shares of STIL. The assessee provided comprehensive evidence, including purchase and sale documents, demat statements, bank statements, and contract notes, to substantiate the transactions.The Assessing Officer (AO) disbelieved the market prices, alleging that the share prices were artificially rigged and manipulated, and treated the LTCG as unexplained cash credit under Section 68. The CIT(A) upheld this view. The Tribunal, however, found that both lower authorities had adopted an identical line of reasoning without specific evidence against the assessee. The Tribunal referred to various judicial precedents, including decisions from the Calcutta High Court and other Tribunals, which supported the assessee's claim that the transactions were genuine and could not be dismissed based on suspicion or conjecture.The Tribunal emphasized that the AO and CIT(A) failed to provide concrete evidence showing that the assessee engaged in any manipulation or collusion. The Tribunal also noted that the assessee had furnished all relevant documents, which were not found to be false or fictitious. The Tribunal concluded that the addition made under Section 68 was not justified and directed the AO to delete the addition.2. Addition towards Unexplained Expenditure on Commission:The interconnected issue was whether the CIT(A) was justified in confirming the addition of Rs. 48,184/- towards unexplained expenditure on commission. This addition was made by the AO at the rate of 0.5% on the alleged bogus LTCG amount, treating the sale consideration as bogus. Since the Tribunal found the addition towards unexplained cash credit under Section 68 to be unjustified, it automatically followed that the addition towards unexplained expenditure on commission also stood deleted. The Tribunal held that without the primary addition being sustained, the consequential addition for commission could not be upheld.Conclusion:The Tribunal allowed the appeal of the assessee, deleting both the addition towards unexplained cash credit under Section 68 and the addition towards unexplained expenditure on commission. The Tribunal's decision was based on the lack of concrete evidence against the assessee and the genuine nature of the transactions as supported by the provided documentation. The Tribunal relied on various judicial precedents to conclude that suspicion, however strong, could not replace concrete evidence in making additions under the Income Tax Act.