2019 (8) TMI 610 - AT - Income Tax

Tribunal upholds deletion of additions in long-term capital gains case emphasizing concrete evidence

Dy. Commissioner of Income-tax, Circle-3, Jaipur. Versus Shri Ghanshyam Agarwal

Dy. Commissioner of Income-tax, Circle-3, Jaipur. Versus Shri Ghanshyam Agarwal - TMI Issues Involved:1. Deletion of addition made by the AO treating long-term capital gains as bogus transactions.2. Deletion of additions based on corroborative information from the Investigation Wing.3. Deletion of additions related to commission for acquiring cash accommodation entry.Detailed Analysis:Issue 1: Deletion of Addition Treating Long-Term Capital Gains as Bogus TransactionsThe revenue challenged the deletion of the addition made by the AO, who treated the long-term capital gain declared by the assessee on the sale of shares of M/s. Trinity Tradelink Ltd. as a bogus transaction. The AO's decision was based on information from the Investigation Wing, which uncovered a scam involving bogus accommodation entries. The AO referenced a statement by Shri Vikrant Kayan, who admitted to providing such entries. Despite the assessee providing documentation and dematerialized account details to support the genuineness of the transactions, the AO added Rs. 1,48,50,672/- under section 68 as unexplained cash credit and a notional commission of Rs. 9,00,340/-.The CIT (A) accepted the assessee's evidence, including the purchase consideration paid through banking channels, dematerialization of shares, and sale through the stock exchange, and deleted the addition. The Tribunal upheld this decision, noting the assessee's regular trading activities and the lack of direct evidence from the AO to prove the transactions were bogus. The Tribunal emphasized that suspicion alone cannot justify an addition without concrete evidence.Issue 2: Deletion of Additions Based on Corroborative Information from Investigation WingThe revenue argued that the CIT (A) erred in deleting the additions based on information from the Investigation Wing, which falls under the exception clause 10(e) of Circular 03 of 2018. The AO relied on the statement of Shri Vikrant Kayan, who described the modus operandi of providing accommodation entries. However, the Tribunal found that the AO did not conduct an independent investigation and solely relied on the Investigation Wing's report. The Tribunal noted that the assessee's transactions were supported by verifiable documents, such as bank statements and demat accounts, which the AO did not disprove.Issue 3: Deletion of Additions Related to Commission for Acquiring Cash Accommodation EntryThe AO added a notional commission of Rs. 9,00,340/- for acquiring cash accommodation entries, assuming the long-term capital gains were bogus. Since the Tribunal upheld the CIT (A)'s decision that the long-term capital gains were genuine, the addition of notional commission was also dismissed. The Tribunal reiterated that the AO's findings were based on suspicion without substantial evidence, and the assessee had provided all necessary documentation to support the genuineness of the transactions.Conclusion:The Tribunal dismissed the revenue's appeal, affirming the CIT (A)'s deletion of the additions. The Tribunal emphasized the importance of concrete evidence over mere suspicion and upheld the genuineness of the assessee's transactions based on the provided documentation and independent verifiability. The Tribunal also highlighted the procedural lapse in not allowing cross-examination of key witnesses, which further weakened the AO's case.