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of <h1>Tribunal upholds LTCG addition, reduces commission rate, denies interest set-off claim</h1> <h3>Shri Narendra Shrikishan Agrawal Versus The Assistant Commissioner of Income Tax</h3> Shri Narendra Shrikishan Agrawal Versus The Assistant Commissioner of Income Tax - TMI Issues Involved:1. Addition on account of Long Term Capital Gain (LTCG).2. Confirmation of addition made on account of commission charged.3. Set off of interest against professional fee.Issue-wise Detailed Analysis:1. Addition on account of Long Term Capital Gain (LTCG):The primary issue in this case revolves around the addition made by the Assessing Officer (AO) on account of LTCG claimed by the assessee. The AO doubted the genuineness of the LTCG arising from the sale of shares of Lifeline Drugs and Pharma Limited (LD&PL). The AO's investigation revealed that the assessee purchased 25,000 shares of LD&PL for Rs. 15,00,000, which later converted to 2,50,000 shares. The assessee sold 43,000 shares, resulting in a claimed LTCG of Rs. 1,04,02,303. The AO found the LTCG to be unnatural and arranged, suspecting it to be a method to launder black money.The AO's detailed examination included the financials of LD&PL, which showed no substantial corporate investment to justify the price rise of its scrip. The AO noted that the transactions were conducted in a circular fashion, involving related entities, and treated the LTCG as unexplained cash credit under Section 68 of the Income Tax Act. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, deeming the LTCG as manipulated and bogus.The assessee contended that the AO's conclusions were based on presumptions and that all transactions were genuine and supported by documentary evidence. However, the Tribunal found that the scheme adopted by the assessee and related parties, including LD&PL, was predetermined to book LTCG by dubious methods. The Tribunal upheld the AO's view that the transactions were not genuine, considering the lack of business activity of LD&PL during the relevant period and the astronomical increase in share prices without any economic justification.2. Confirmation of addition made on account of commission charged:The AO also made an addition of Rs. 5,20,115 as unexplained expenditure under Section 69 of the Income Tax Act, assuming a commission rate of 5% for arranging the bogus LTCG. The CIT(A) confirmed this addition. The Tribunal, while upholding the bogus nature of the LTCG, reduced the commission rate to 2%, considering the totality of the facts and circumstances, thereby partly allowing this ground of appeal.3. Set off of interest against professional fee:The assessee claimed a set-off of interest expenses amounting to Rs. 5,09,800 against professional receipts from M/s. Sagar Paridhan Pvt. Ltd. The AO treated the receipt as salary, not professional fees, as the assessee was a Director in the said company. The CIT(A) upheld the AO's view, noting that the assessee had admitted the receipt as salary during the assessment proceedings. The Tribunal found no evidence to support the assessee's claim that the receipt was professional income and upheld the disallowance of the set-off of interest expenses.Conclusion:The Tribunal dismissed the assessee's grounds related to the LTCG and set-off of interest against professional fees, while partly allowing the ground related to the commission charged by reducing the rate from 5% to 2%. The appeal was thus partly allowed.
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