2022 (11) TMI 655 - AT - Income Tax

Appellate Tribunal rules in favor of assessee, exempting Long Term Capital Gain under section 10(38)

The Appellate Tribunal ruled in favor of the assessee, setting aside the Assessing Officer's treatment of Long Term Capital Gain as Short Term Capital ... LTCG on gain on sale of shares - treatment of Long Term Capital Gain earned on sale of shares and claimed as exempted u/s 10(38) as Short Term Capital Gain brought to tax by the ld. AO - HELD THAT:- AO has called for various documentary evidences and details, all of which have been placed on record by the assessee as referred by the ld. Counsel in his submission. AO has acknowledged and confirmed the submission of all the relevant documentary evidences stated in the order itself. We also note that ld. AO has observed that shares have been purchased in cash. Despite the documentary evidences placed on record in respect of purchase of shares, ld. AO noted that no documentary evidences have been produced to support the claim that shares were purchased in F.Y. 2011-12 and thus he arrived at a conclusion that the year of purchase is the current year under the consideration and not the financial year 2011-12. By considering the purchases as made during the year which in our observation is without any basis, ld. AO treated the Long Term Capital Gain on sale of shares as Short Term Capital Gain and brought it to tax under the Act. Considering the facts and circumstances of the case and the material placed on record which has not been doubted or disputed by the ld. AO, we find it proper to treat the profit on sale of shares as Long Term Capital Gain. It has been claimed as exempt u/s 10(38) of the Act by the assessee and thus we set aside the treatment given by the AO of Short Term Capital Gain. Accordingly, the appeal of the assessee is allowed. Issues:Treatment of Long Term Capital Gain as Short Term Capital Gain under section 10(38) of the Income-tax Act, 1961.Analysis:The appeal before the Appellate Tribunal involved the treatment of Long Term Capital Gain earned by the assessee on the sale of shares, claimed as exempt under section 10(38) of the Act but assessed as Short Term Capital Gain by the Assessing Officer (AO). The grounds of appeal raised by the assessee challenged the jurisdiction and fairness of the orders passed by the authorities. The key contention was that the AO incorrectly characterized the Long Term Capital Gain as Short Term Capital Gain without proper basis or consideration of documentary evidence provided by the assessee.The assessee, through their counsel, presented detailed arguments and submitted all relevant documents to support the claim that the shares were purchased in the financial year 2011-12, not in the year under consideration. The counsel highlighted that all necessary documents, including share transfer deeds, certificates, ledger extracts, and STT payment details, were furnished before the AO. The counsel emphasized that the AO's conclusion that the shares were purchased in the current year was unfounded, and the recharacterization of the gain was erroneous.The Assessing Officer, in the assessment order, acknowledged the submission of various documentary evidence but questioned the lack of proof regarding the purchase year of the shares. Despite the documentary evidence provided by the assessee, the AO concluded that the shares were purchased in the current year, leading to the treatment of Long Term Capital Gain as Short Term Capital Gain. However, the Appellate Tribunal, after considering the facts and the unchallenged material on record, overturned the AO's decision. The Tribunal found no basis for the AO's treatment and allowed the appeal, considering the profit on the sale of shares as Long Term Capital Gain exempt under section 10(38) of the Act.In conclusion, the Appellate Tribunal ruled in favor of the assessee, setting aside the AO's treatment of the gain as Short Term Capital Gain and allowing the claim of exemption under section 10(38) for the Long Term Capital Gain. The decision was based on the thorough examination of the documentary evidence and the lack of valid reasoning by the AO for recharacterizing the nature of the gain.