2020 (11) TMI 641 - AT - Income Tax

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

M/s. Uttung Hitendra Thakur Versus Income Tax Officer, Ward 4 (5), Thane

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 ... Addition u/s 68 - bogus LTCG - HELD THAT:- Issue involved in the present appeal is squarely covered in favour of the assessee by the decision of AKSHAY JAIN [2019 (1) TMI 1404 - ITAT DELHI] as held that from the perusal of the nature of credit, it is seen that the same has come through sales of shares which fact has also not been doubted by the Department. The source of money is through broker who has undertaken the transaction of the shares lying with the assessee purchased in the earlier years and same has been sold after paying due taxes in the form of STT. Thus, nature of the credit stands fully explained. If it is to be held that assessee has routed his own unaccounted money, then there has to be some material to provide live link nexus to show that the unaccounted money has been routed under the garb of transaction of purchase and sale of shares. If the availability of shares is not in doubt then the sale of the same also cannot be doubted in wake of the evidences as discussed above. Even for the sake of repetition, it is reiterated that it is not a case here that any such information or material was found or discovered that the assessee beneficiary of any accommodation entry nor there is any such statement or material either from the broker or from the stock exchange or from elsewhere. Thus, no reason to sustain the addition made u/s.68. - Decided in favour of assessee. Addition of commission paid for procuring the long term capital gain - HELD THAT:- As we have already adjudicated the main issue in favour of the assessee by holding that the addition of long term capital gain was wrong and directed the AO to delete the same. Therefore, this being consequential ground and AO is also directed to delete the addition - Appeal of the assessee is allowed. 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 CreditThe 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 GainThe 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.