2022 (7) TMI 1205 - AT - Income Tax

ITAT Upholds Decision on Share Transactions: Genuine Documentation & Banking Channels

The ACIT, Circle-4 Nagpur Versus Shri Vinod Balbhadra Goenka

The ACIT, Circle-4 Nagpur Versus Shri Vinod Balbhadra Goenka - TMI Issues Involved:1. Whether the transaction of sale of shares of 'M/s. Out of City Travel Solutions Ltd.' is genuine.2. Ignoring findings of the Investigation Wing, Calcutta regarding share transfers at nominal prices and price rigging.3. Ignoring SEBI's findings on the modus operandi of laundering money.4. Whether transactions are genuine based on payment through banking channels and demated shares.5. Assessing humongous gains from penny scrips as per the Apex Court's decision in CIT vs. Durga Prasad More.6. Deleting the addition made u/s. 69C on account of unexplained expenditure.7. Treating the sale of land as 'Capital Gain' instead of business income.8. Relying on a decision of the Hon'ble ITAT, Nagpur Bench with different facts.Detailed Analysis:1. Whether the transaction of sale of shares of 'M/s. Out of City Travel Solutions Ltd.' is genuine:The learned CIT(A) found substantial force in the appellant's submission that the transaction of sale of shares was genuine. The shares were purchased through preferential allotment, recorded in the books of account, and sold on the Bombay Stock Exchange through registered brokers with proper documentation, including contract notes and demat account entries. The CIT(A) concluded that the transaction was genuine based on the evidence provided, such as the allotment letter, bank statements, and contract notes, which were not impeached by the Assessing Officer (A.O.).2. Ignoring findings of the Investigation Wing, Calcutta regarding share transfers at nominal prices and price rigging:The A.O. referred to the investigation by the Directorate of Investigation, Kolkata, and the findings of price rigging and modus operandi for arranging long-term capital gain. However, the CIT(A) noted that the A.O. did not bring any specific credible evidence on record to discredit the share transaction of the appellant. The CIT(A) relied on legal precedents and found that the transaction was supported by credible evidence, and the adverse inference drawn by the A.O. was based on general observations without specific evidence.3. Ignoring SEBI's findings on the modus operandi of laundering money:The A.O. referred to SEBI orders regarding price rigging and laundering of money. However, the CIT(A) noted that the SEBI orders did not implicate the appellant or the company in which the appellant invested. The CIT(A) relied on the decision of the ITAT Nagpur Bench in the case of Shri Kamal Kumar Agrawal, which held that SEBI orders cannot be conclusive regarding the genuineness of transactions. The CIT(A) concluded that the SEBI orders did not have any adverse impact on the appellant's case.4. Whether transactions are genuine based on payment through banking channels and demated shares:The CIT(A) found that the transactions were genuine as they were conducted through proper banking channels, and the shares were demated. The contract notes indicated that security transaction tax was paid, and the transactions were supported by credible evidence. The CIT(A) concluded that the onus to explain the transaction was satisfactorily discharged by the appellant, and the A.O. did not bring any material evidence to impeach the genuineness of the transactions.5. Assessing humongous gains from penny scrips as per the Apex Court's decision in CIT vs. Durga Prasad More:The CIT(A) noted that the A.O. made observations about the financial analysis of the company and general information in the stock market. However, the CIT(A) found that none of the documentary legal evidence placed on record by the appellant was found to be false or incorrect. The CIT(A) relied on legal precedents and concluded that the transaction of sale of shares could not be doubted or disputed on mere inferences without credible evidence.6. Deleting the addition made u/s. 69C on account of unexplained expenditure:The CIT(A) deleted the addition made by the A.O. u/s. 69C, noting that there was no evidence of expenditure incurred by the appellant. The A.O. made an adverse inference without any material evidence on record. The CIT(A) held that the onus was on the A.O. to show that the expenditure was incurred, and in the absence of such evidence, the addition was unjustified and unsustainable.7. Treating the sale of land as 'Capital Gain' instead of business income:The CIT(A) held that the surplus arising from the sale of land was correctly declared as long-term capital gain. The properties were held for more than 36 months, recorded as investments in the books of account, and the appellant's statement indicated that he was an investor. The CIT(A) concluded that the intention of acquisition was to hold the properties as capital assets, and the surplus was assessable under the head 'long-term capital gain.'8. Relying on a decision of the Hon'ble ITAT, Nagpur Bench with different facts:The CIT(A) relied on the decision of the ITAT Nagpur Bench in the case of Shri Kamal Kumar Agrawal, which had similar facts and legal issues. The CIT(A) found that the ratio laid down in the said decision applied to the appellant's case, and the addition made by the A.O. was unjustified and unsustainable.Conclusion:The ITAT upheld the order of the CIT(A), dismissing the Revenue's appeal. The ITAT agreed with the findings and reasoning of the CIT(A), concluding that the addition made by the A.O. was unjustified and unsustainable. The appeal of the Revenue was dismissed in its entirety.