2023 (6) TMI 1116 - AT - Income Tax

Tribunal rules in favor of taxpayer, overturns Income Tax Act additions

The Tribunal overturned the additions made by the Assessing Officer under Sections 68 and 69C of the Income Tax Act. The Tribunal found that the ... Addition u/s 68 - addition of notional commission (2% of the accommodation entry) - HELD THAT:- Respectfully following the decision in the case of Sohanraj Uttamchand [2018 (2) TMI 2087 - ITAT CHENNAI] in which it was held that since the transaction of scrips of M/s. PFL Infotech Ltd took place in recognized stock-exchange which is not under the control of assessee; [viz the shares were purchased and sold in Bombay Stock Exchange in the open market from unknown and unconnected persons;] and the transactions are supported by contract notes and consideration has passed through the banking channel, merely based on the abnormal ups and down in the share market of this scrip cannot be a ground to disallow the LTCG claim of the assessee. Therefore, the impugned action of the Ld. CIT(A) is set aside and the addition made by the AO u/s 68 and 69C of the Act are directed to be deleted. Decided in favour of assessee. Issues Involved:1. Addition under Section 68 of the Income Tax Act, 1961.2. Addition of notional commission under Section 69C of the Income Tax Act, 1961.Summary:Issue 1: Addition under Section 68 of the Income Tax Act, 1961The main grievance of the assessee is against the action of the Ld. CIT(A) in upholding the addition of Rs.24,67,900/- made by the AO u/s 68 of the Income Tax Act, 1961 ('the Act'). The case of the assessee was reopened u/s 147 of the Act based on information that the assessee transacted in shares of M/s. PFL Infotech Ltd, deemed a penny stock used to introduce unaccounted income. The AO added Rs.24,67,900/- to the total income, which was confirmed by the Ld. CIT(A). The assessee provided primary documents proving the transaction occurred online through the Bombay Stock Exchange and received the sale consideration through banking channels. The Tribunal noted that similar additions in other cases had been deleted, and there was no material evidence to establish the transactions as dubious. It was held that the mere abnormal rise in share prices could not justify disallowing the LTCG claim. The Tribunal directed the AO to delete the addition made u/s 68 of the Act.Issue 2: Addition of Notional Commission under Section 69C of the Income Tax Act, 1961The AO also added a notional commission of Rs.49,358/- (2% of the accommodation entry) u/s 69C of the Act, which was upheld by the Ld. CIT(A). The Tribunal found that the assessee had provided sufficient evidence, including contract notes and bank statements, to substantiate the transactions. The Tribunal referred to various judicial precedents, emphasizing that transactions routed through banking channels and supported by contract notes should not be doubted. Consequently, the Tribunal directed the AO to delete the addition made u/s 69C of the Act.Conclusion:Respectfully following the decision of the Co-ordinate Bench of this Tribunal in the case of Sohanraj Uttamchand Vs. DCIT, it was held that since the transactions of M/s. PFL Infotech Ltd took place in a recognized stock exchange and were supported by contract notes and banking channels, the abnormal ups and downs in the share market could not be grounds to disallow the LTCG claim. Therefore, the impugned action of the Ld. CIT(A) was set aside, and the additions made by the AO u/s 68 and 69C of the Act were directed to be deleted. In the result, the appeal of the assessee was allowed.Order pronounced in the open court on 30/05/2023.