Tribunal Allows Appeal, Condoning Delay, Deleting Addition, Granting Exemption

The Tribunal allowed the appeal by condoning the delay in filing, deleting the addition under Section 69 for unexplained investment, and granting the exemption under Section 10(38) for Long Term Capital Gains.

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Issues Involved:
1. Condonation of Delay in Filing the Appeal
2. Addition of Rs. 1,65,53,295/- under Section 69 of the Income Tax Act, 1961
3. Disallowance of Claim of Long Term Capital Gain of Rs. 93,34,545/- under Section 68 of the Income Tax Act, 1961

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal
The assessee filed an appeal with a delay of 91 days due to the Covid-19 pandemic and lockdown. The Tribunal considered the rival submissions and relevant material on record. It cited the principle laid down by the Hon’ble Supreme Court in the case of Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471, emphasizing a liberal approach in interpreting ‘sufficient cause’ for condonation of delay to ensure substantial justice. The Tribunal found the reasons for the delay to be bona fide and condoned the delay, admitting the appeal for hearing.

2. Addition of Rs. 1,65,53,295/- under Section 69 of the Income Tax Act, 1961
The assessee challenged the addition of Rs. 1,65,53,295/- made by the Assessing Officer (AO) under Section 69 for unexplained investment in the purchase of immovable property. The AO had determined the total income at Rs. 6,35,62,970/- through an ex-parte assessment under Section 144 due to non-compliance with statutory notices.

The Tribunal noted that the property was purchased by M/s Seven Star Township Pvt. Ltd., where the assessee was a director. The assessee acted as a Power of Attorney (POA) holder for the company for the administrative and legal formalities. The Tribunal emphasized that the company is a separate legal entity distinct from its directors and shareholders, as established in the case of Salomon v Salomon & Co. Ltd and State Trading Corporation of India Ltd. AIR (1963) SC 1811.

The Tribunal observed that the registered sale deed was in the name of the company, and payments were made from the company’s bank accounts. The AO’s remand report confirmed partial payments from the company’s accounts but doubted the creditworthiness of the company for the remaining amount. However, the Tribunal held that the AO’s findings were based on assumptions and lacked documentary evidence to prove that the assessee made the payments personally. Consequently, the Tribunal directed the AO to delete the addition of Rs. 1,65,53,295/-.

3. Disallowance of Claim of Long Term Capital Gain of Rs. 93,34,545/- under Section 68 of the Income Tax Act, 1961
The assessee claimed an exemption under Section 10(38) for Long Term Capital Gains (LTCG) of Rs. 93,34,545/- from the sale of shares of Unisys Software & Holdings Ind. Ltd. The AO disallowed the claim, treating the transactions as bogus based on the report of the Investigation Wing, Kolkata, which listed Unisys Software as a penny stock company involved in accommodation entries.

The Tribunal noted that the assessee had provided documentary evidence, including purchase bills, contract notes, Demat account statements, and bank statements, to substantiate the genuineness of the transactions. It referred to the CBDT Circular No. 6/2016, which clarifies that gains from listed shares held for more than 12 months should be treated as capital gains if the assessee opts for such treatment.

The Tribunal relied on the decision in Vijayrattan Balkrishan Mittal vs. DCIT (ITAT Mumbai), which held that not all transactions in penny stocks could be regarded as bogus without specific evidence. It also referred to the case of Meenu Goel Vs ITO (ITAT Delhi), where similar transactions were held genuine based on documentary evidence.

The Tribunal concluded that the assessee had satisfied all conditions for claiming the exemption under Section 10(38) and directed the AO to grant the exemption, setting aside the addition of Rs. 93,34,545/-.

Conclusion
The Tribunal allowed the appeal, condoning the delay, deleting the addition under Section 69 for unexplained investment, and granting the exemption under Section 10(38) for the LTCG.

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