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 Tax Act due to share price manipulation reports. The issues regarding the addition based on an interest entry in Form No. 26AS and the Section 68 addition were remanded to the AO for further verification, granting the assessee an opportunity to provide supporting evidence. The order was pronounced on 09th March, 2023.

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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. 26AS
The 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 68
The 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.

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