2021 (11) TMI 320 - AT - Income Tax

Tribunal allows assessee's appeal, vacates disallowance of LTCG exemption & commission expenditure addition. Genuine transactions supported by evidence.

Shri Ganpat Pukhraj Jain Versus Income Tax Officer-19 (1) (3), Mumbai

Shri Ganpat Pukhraj Jain Versus Income Tax Officer-19 (1) (3), Mumbai - TMI Issues Involved:1. Declining of the assessee's claim for exemption under Section 10(38) of the Income Tax Act on Long Term Capital Gain (LTCG).2. Addition of the entire sale consideration as unexplained credit under Section 68 of the Act.3. Addition under Section 69C for unaccounted commission.Issue-Wise Detailed Analysis:1. Declining of the Assessee's Claim for Exemption under Section 10(38) of the Act on LTCG:The controversy in the present appeal revolves around the declining of the assessee's claim for exemption under Section 10(38) of the Income Tax Act on the Long Term Capital Gain (LTCG) of Rs. 23,23,344/- from the sale of shares of M/s Sunrise Asian Ltd. The assessee had claimed to have sold 5000 shares of M/s Sunrise Asian Ltd. for Rs. 24,48,344/- after holding them for approximately 2¼ years. The Assessing Officer (A.O) concluded that the assessee's claim of LTCG was an accommodation entry to evade taxes and added the entire sale consideration as unexplained credit under Section 68 of the Act. The A.O also made a further addition under Section 69C for unaccounted commission allegedly paid for obtaining the accommodation entry.2. Addition of the Entire Sale Consideration as Unexplained Credit under Section 68 of the Act:The A.O, after considering various investigations and statements, concluded that the assessee had booked LTCG through a pre-arranged method to launder money. The A.O's observations included the mode of acquisition of shares, the unusual rise in share prices, findings from the Investigation Wing, analysis of transactions, failure of the assessee to discharge the onus, financial analysis of the penny stock companies, cash trail in the accounts of entry providers, and arranged transactions. The A.O asserted that the transactions were not commercially motivated but were structured to create artificial gains and evade taxes. However, the assessee provided substantial documentary evidence to substantiate the genuineness of the transactions, including debit notes, bank statements, demat statements, amalgamation orders, contract notes, and demat statements of the broker. The tribunal found that the A.O's conclusions were based on assumptions and unsubstantiated statements rather than concrete evidence.3. Addition under Section 69C for Unaccounted Commission:The A.O made an addition under Section 69C for Rs. 92,933/- towards unaccounted commission, assuming that the assessee would have paid this amount to obtain the accommodation entry. The tribunal, however, found no evidence to support this claim and noted that the assessee had provided sufficient documentary evidence to prove the genuineness of the transactions. The tribunal referred to the judgment of the Hon'ble High Court of Delhi in the case of Pr. CIT & Ors. Vs. Krishna Devi & Ors., which emphasized that conclusions based on suspicion and conjecture without concrete evidence cannot be sustained. The tribunal also referred to a similar case where the ITAT, 'SMC', Mumbai had held that the assessee's claim for exemption under Section 10(38) of LTCG arising from the sale of shares of M/s Sunrise Asian Ltd. could not be held to be bogus.Conclusion:Based on the substantial documentary evidence provided by the assessee and the lack of concrete evidence from the department to refute the genuineness of the transactions, the tribunal allowed the appeal of the assessee. The disallowance of the assessee's claim for exemption of LTCG under Section 10(38) of the Act was vacated, and the addition under Section 69C for commission expenditure was also vacated. The tribunal concluded that the assessee had carried out genuine transactions of purchase/sale of shares, and the appeal was allowed accordingly.