2019 (11) TMI 1230 - AT - Income Tax

ITAT Chennai: Remittance of Long Term Capital Gain assessment for re-adjudication

The ITAT Chennai remitted the case involving the assessment of Long Term Capital Gain back to the Assessing Officer for re-adjudication. The tribunal ... Bogus LTCG - Addition u/s 68 - AO selected the case based on the computerized selection of cases due to suspicious transaction identified through data analysis - HELD THAT:- Assessee has not been given a fair opportunity to prove the genuineness but the assessment has been made primarily, based on the evidences collected by the Revenue in the course of the investigation conducted by them on the brokers / share broking entities etc. This is not permissible. This being so, in the interests of natural justice, the issue of the genuineness of the transactions require re-adjudication. Since, the right to exemption must be established by those who seek it, the onus therefore lies on the assessee. In order to claim the exemption from payment of income tax, the assessee had to put before the Income Tax authorities proper materials which would enable them to come to a conclusion. As relying on SHRI HEERACHAND KANUNGA VERSUS THE INCOME TAX OFFICER, CHENNAI [2018 (6) TMI 1329 - ITAT CHENNAI] remit the issue of exemption in this appeal back to the file of the Assessing Officer for re-adjudication on the lines indicated above. Therefore, the Assessing Officer shall require the assessee to establish who, with whom, how and in what circumstances the impugned transactions were carried out etc., to prove that the impugned transactions are actual, genuine etc. Assessee’s appeal is treated as partly allowed for statistical purposes. Issues:Assessment of Long Term Capital Gain under section 10(38) based on suspicious transactions identified through data analysis. Lack of fair opportunity for assessee to prove genuineness. Onus of proving exemption on the assessee. Reliance on internal communications of Revenue. Comparison with a similar case for re-adjudication.Analysis:The appeal involved the assessment of Long Term Capital Gain under section 10(38) by the Assessing Officer due to suspicious transactions identified through data analysis. The assessee claimed Long Term Capital Gain on the sale of shares, which the Assessing Officer deemed as artificial gains generated through engineered transactions. The Assessing Officer held the transactions as not genuine and conducted the assessment under section 68. The Commissioner of Income Tax (Appeals) upheld the assessment, leading to the appeal before the ITAT Chennai. The tribunal noted that the assessee was not given a fair opportunity to prove the genuineness of the transactions, emphasizing that the onus of proving the exemption rested on the assessee. The tribunal stressed that the Assessing Officer must provide evidence to the contrary and allow the assessee to rebut it, highlighting the importance of natural justice in such cases. The tribunal also pointed out that internal communications of the Revenue could not be the final evidence. The tribunal referenced a similar case for re-adjudication, emphasizing the need for proper materials to establish the right to exemption from income tax.The tribunal referred to a specific case where suspicions were raised regarding the transactions and highlighted the lack of concrete facts to support the assessment. The tribunal emphasized the importance of evidence and the need for the assessee to substantiate the transactions. Various questions were raised regarding the purchase of shares, cash transfers, possession of shares, and the holding period, indicating the depth of scrutiny required in such cases. The tribunal stressed the necessity for the assessee to provide detailed evidence and explanations to support the claim of exemption under section 10(38). The tribunal directed the Assessing Officer to re-adjudicate the issue, granting the assessee adequate opportunity to substantiate the transactions and comply with the requirements of the law. The tribunal allowed the appeal partly for statistical purposes, indicating the need for a thorough reassessment based on proper evidence and examination.In conclusion, the tribunal emphasized the importance of providing a fair opportunity to the assessee to prove the genuineness of transactions and establish the right to exemption from income tax. The case highlighted the need for concrete evidence, detailed explanations, and compliance with legal requirements to support claims of Long Term Capital Gain exemption. The tribunal's decision to remit the issue back to the Assessing Officer for re-adjudication underscored the significance of thorough examination and proper substantiation in such cases.