Tribunal Overturns AO Decision, Deletes Additions u/s 68 for Unexplained Cash Credit and Commission Payments.

The Tribunal allowed the appeal of the assessee, directing the deletion of the additions made by the AO under section 68 of the Act. The Tribunal found the facts of the case similar to a previous decision by a co-ordinate bench, leading to the deletion of the unexplained cash credit and the commission paid for procuring long-term capital gain.

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Issues:
Confirmation of addition of unexplained cash credit and commission paid for sourcing long term capital gain.

Detailed Analysis:

Issue 1: Addition of Unexplained Cash Credit
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the addition of Rs. 98,93,959 as unexplained cash credit by treating long term capital gain on sale of shares as exempt under section 10(38) and Rs. 66,948 on account of commission paid. The Assessing Officer (AO) observed suspicious long term capital gain on shares of M/s. Jolly Plastic Industries Ltd. The AO concluded that the share prices were manipulated without any financial fundamentals, leading to an increase in price by 22 times. The AO found evidence of share price rigging to create non-genuine long term capital gain. The AO treated the long term capital gain as unexplained cash credit under section 68 of the Act and made the addition. The Commissioner of Income Tax (Appeals) upheld the AO's order, stating that the long term capital gain was earned through a racket as established by the director of investigation, Kolkata.

Issue 2: Commission Paid for Sourcing Long Term Capital Gain
The appellant argued that a co-ordinate bench of the Tribunal had decided in favor of the assessee in a similar case involving the same company. The Tribunal held that the shares were fully explained, purchased through brokers, and sold after paying due taxes. Relying on this decision, the appellant requested a favorable decision. The Department argued that it was a big racket involving manipulation of share prices on the stock exchange. However, the Tribunal observed that the facts of the present case were similar to the case decided by the co-ordinate bench. Therefore, the Tribunal directed the AO to delete the addition made under section 68 of the Act and also to delete the additional amount of Rs. 66,948 added as commission paid for procuring long term capital gain.

In conclusion, the Tribunal allowed the appeal of the assessee based on the decision of the co-ordinate bench, directing the deletion of the additions made by the AO.

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