Appeal granted, additions for shares and jewelry sales deleted. Genuine transactions supported by evidence. CIT(A) decision overturned.

The Tribunal allowed the appeal, deleting additions of Rs. 33.37 Lacs for the sale of shares and Rs. 17.40 Lacs for the sale of jewelry. The Tribunal found the sale of shares genuine, supported by broker bills and bank statements, and the jewelry sale consistent with customary gifts. The additions were quashed, overturning the CIT(A)'s decision.

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Issues Involved:
1. Addition of Rs. 33.37 Lacs under Section 68 of the Income Tax Act, 1961 on account of sale of shares.
2. Addition of Rs. 17.40 Lacs under Section 68 of the Income Tax Act, 1961 on account of sale of jewelry.

Detailed Analysis:

1. Addition of Rs. 33.37 Lacs under Section 68 on account of Sale of Shares:

1.1 The assessee, a resident individual, was assessed for AY 2010-11 under Section 143(3) read with Section 147, with income determined at Rs. 53.97 Lacs after certain additions, against a returned income of Rs. 3.20 Lacs. The assessee declared Long-Term Capital Gains (LTCG) of Rs. 28.94 Lacs on the sale of 200 shares of MMTC, claiming exemption under Section 10(38).

1.2 Reassessment proceedings were initiated based on information from a search and seizure operation on M/s Mahasagar Securities Private Limited and its group concerns, revealing that the assessee benefited from bogus capital gains on these shares. The shares were allegedly purchased for Rs. 4.43 Lacs using bogus purchase bills.

1.3 During the reassessment, the assessee provided contract notes showing the shares were purchased through M/s Alliance Intermediaries & Network Pvt. Ltd. (AINPL) and sold through M/s Joindre Capital Services Ltd. (JCSL). However, the AO found discrepancies, such as AINPL not being a registered trading member and the shares being de-matted just before their sale.

1.4 The AO concluded that the transactions were accommodation entries to convert unaccounted money into accounted money, and added the sale amount of Rs. 33.37 Lacs as unexplained cash credit under Section 68.

1.5 The CIT(A) upheld the addition, noting that AINPL was not a registered broker and the transactions did not attract Securities Transaction Tax (STT), indicating bogus transactions.

1.6 On appeal, the Tribunal found that the facts were similar to the case of the assessee’s husband, where the Tribunal had allowed the appeal, recognizing the genuineness of the transactions supported by broker bills, contract notes, and bank statements. The Tribunal observed that the sale transactions were through an independent broker, and the purchase transactions were genuine and carried out in AY 2008-09.

1.7 The Tribunal concluded that the purchase transactions were genuine, and the sale transactions could not be doubted. Therefore, the addition of Rs. 33.37 Lacs was deleted.

2. Addition of Rs. 17.40 Lacs on account of Sale of Jewelry:

2.1 The assessee declared LTCG of Rs. 1.60 Lacs on the sale of old jewelry acquired in FY 1986-87 at a cost of Rs. 3.50 Lacs, with an indexed cost of Rs. 15.80 Lacs against a sale price of Rs. 17.40 Lacs.

2.2 During assessment, the AO found that the assessee could not establish possession of jewelry worth Rs. 17.40 Lacs, as no wealth tax return or valuation report was provided, nor were purchase bills submitted. Consequently, the AO treated the entire sale consideration as unexplained cash credit under Section 68.

2.3 The CIT(A) upheld the AO’s decision, noting that confirmatory notices sent to the purchasers were returned undelivered, and only confirmed copies of ITRs were provided.

2.4 On appeal, the Tribunal accepted the assessee’s explanation that the jewelry was acquired as customary gifts on marriage and childbirth, consistent with the status of the assessee. The Tribunal referenced CBDT Instruction No.1916, recognizing that a married lady of reputed family could own 500 grams of ornaments.

2.5 The Tribunal noted that the sale consideration was received through banking channels, and the purchasers’ financial statements and ITRs confirmed the transactions. Therefore, the Tribunal deleted the addition of Rs. 17.40 Lacs.

Conclusion:

The Tribunal allowed the appeal, deleting the additions of Rs. 33.37 Lacs on account of the sale of shares and Rs. 17.40 Lacs on account of the sale of jewelry, thereby quashing the order of the CIT(A). The decision was pronounced through circulation on 05/05/2020.

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