2023 (5) TMI 459 - AT - Income Tax

Tribunal upholds LTCG exemption disallowance, remands issues for further verification.

The Tribunal partly allowed the appeal by upholding the disallowance of Long Term Capital Gain (LTCG) exemption claimed under Section 10(38) of the Income ... Disallowance of exemption claimed u/s. 10(38) - Bogus LTCG - Penny stock transactions - HELD THAT:- Investigation Wing surveyed SMC global securities Ltd. and the concerned person of the said entity accepted their role in providing Accommodation Entry on syndicate. Further, the SEBI which is a premier regulatory body of share market directed BSE to suspend trading of 28 penny stock companies amongst which NCL Research & finance Ltd. is one therefore, the A.O discussed the issue in detail like that of report of Investigation wing, statement of concerned person who provided accommodation entry. The order of SEBI in suspending penny stock of those companies, who involved in ragging of prices of penny stocks companies. Therefore, as relying on case of Abhishek Ashok Lohade [2022 (11) TMI 1061 - ITAT PUNE], we find the order of CIT(A) is justified and in confirming the order of AO in denying exemption u/s. 10(38) of the Act. Thus, ground No. 1 raised by the assessee is dismissed. Addition made on account of entry of interest in Form No. 26AS - AR submits that the assessee does not know M/s. Rukmini Impex Pvt. Ltd. nor the assessee dealt any business transaction with the said company - HELD THAT:- DR did not report any objection in remanding the issue to the file of AO for verification in terms of submissions of ld. AR. Therefore, taking into consideration the facts and circumstances of the case and in the interest of justice, we deem it proper to remand the matter to the file of AO for its fresh consideration. Addition u/s. 68 - AR submits that the assessee could not identify the individual transaction - AO proceeded to add the said amount to the income of the assessee in the absence of any evidence that the same is credited in the books of accounts of the assessee - HELD THAT:- We find force in the arguments of ld. AR and without there being entry in the books of accounts, the addition made u/s. 68 of the Act is not maintainable. Therefore, in the interest of justice, we deem it proper to remand the issue to the file of AO for its fresh consideration. Issues Involved:1. Disallowance of exemption claimed under Section 10(38) of the Income Tax Act.2. Addition made on account of entry of interest in Form No. 26AS.3. Addition made under Section 68 of the Income Tax Act.Summary:Issue 1: Disallowance of Exemption Claimed Under Section 10(38)The assessee, a company engaged in the business of ginning and pressing of raw cotton, challenged the disallowance of Long Term Capital Gain (LTCG) exemption claimed under Section 10(38) of the Income Tax Act. The AO denied the exemption based on reports from the Kolkata and Bangalore Investigation wings and an order from SEBI regarding share price manipulation by M/s. NCL Research & Financial Services Ltd. The assessee argued that the reports were not confronted with them, violating principles of natural justice. However, the Tribunal noted that the AO had detailed the modus operandi and the reports were available in the public domain. The Tribunal found that the AO had made separate and independent enquiries and upheld the disallowance, referencing similar cases and the principle that fraud vitiates all transactions.Issue 2: Addition Made on Account of Entry of Interest in Form No. 26ASThe assessee contended that they had no transactions with M/s. Rukmini Impex Pvt. Ltd., and the AO arbitrarily made an addition based on Form No. 26AS. The Tribunal remanded the matter to the AO for fresh consideration, allowing the assessee to provide evidence to support their claim.Issue 3: Addition Made Under Section 68The assessee could not identify an individual transaction of Rs.1,53,230/-, leading to its addition under Section 68 by the AO. The Tribunal found merit in the assessee's argument that without an entry in the books of accounts, the addition was not maintainable. The issue was remanded to the AO for fresh consideration, allowing the assessee to submit supporting evidence.Conclusion:The appeal was partly allowed, with the Tribunal upholding the disallowance of the LTCG exemption but remanding the issues regarding the interest entry and the Section 68 addition for further verification by the AO. The order was pronounced on 09th March, 2023.