ITAT Rules LTCG from AGIL Shares Genuine, Deletes Addition Under Section 68 for Unaccounted Income

The ITAT Mumbai held that the LTCG earned from transactions in the scrip AGIL on BSE were genuine and not the result of price rigging or black money circulation. No adverse findings or allegations were made by SEBI, and the AO did not discredit the primary evidence, including DEMAT statements and contract notes. Following precedent, the tribunal found no basis to treat the capital gains as unaccounted income under section 68. Consequently, the addition under section 68 was deleted and the assessee's appeal was allowed.

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ISSUES:

Whether the re-opening of assessment by issuance of notice under section 148 without satisfying jurisdictional conditions precedent to assuming jurisdiction under section 147 is valid.Whether the sale proceeds of shares amounting to Rs. 90,01,433 can be treated as unexplained cash credit under section 68 of the Income-tax Act, 1961.

RULINGS / HOLDINGS:

The re-opening of assessment under section 148 without satisfying the jurisdictional conditions precedent to assuming jurisdiction under section 147 is "without jurisdiction and bad-in-law," and any assessment made on such basis is liable to be annulled.The addition of Rs. 90,01,433 as unexplained cash credit under section 68 was deleted because the assessee had substantiated share transactions with DEMAT account statements and broker's contract notes; the Assessing Officer failed to prove such transactions as bogus, and there was no evidence of irregularities or price rigging concerning the shares in question.

RATIONALE:

The Court applied the statutory provisions of sections 147, 148, and 68 of the Income-tax Act, 1961, emphasizing the necessity of satisfying jurisdictional conditions before re-opening assessments under section 147.The Court relied on precedent that when share transactions are substantiated by DEMAT account statements and contract notes, and the Assessing Officer fails to prove the transactions as bogus, capital gains cannot be treated as unaccounted income under section 68.The Court noted absence of adverse findings or regulatory directions from SEBI regarding the shares, and accepted the coordinate bench decision allowing exemption on LTCG from the same scrip, reinforcing the conclusion that no price rigging or circulation of black money was involved.

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