2025 (12) TMI 353 - AT - Income Tax

Addition for unexplained expenditure under section 69C deleted; documented long-term capital gains accepted as genuine income

Income-Tax Officer Ward- 1 (2) (3) Versus Jasmine Jayantibhai Sanghavi, Ahmedabad

ITAT Ahmedabad upheld the order of CIT(A) deleting the addition made u/s 69C and dismissing the Revenue's appeal. It was noted that the assessee had ... Validity of reassessment proceedings - 'borrowed satisfaction' - information received from the investigation Wing, which was specific, reliable and based on material unearthed during a survey u/s. 133A, constituted sufficient 'tangible material' for the formation of a bona fide belief that income had escaped assessment - unexplained expenditure u/s. 69C - HELD THAT:- CIT(A) has categorically mentioned that the assessee has submitted all the relevant documents which was also reflected in para 4 of the assessment order i.e. capital gain/loss computation statement, demat account statement, transaction statement, Axis bank account statements, details of share and the other relevant documents which was totally ignored by the AO during the assessment proceedings. The assessee in fact has proved the genuinity and the creditworthiness of the sale transaction of long term capital gain and, in fact, has given the details of trading in shares. There is categorically mentioned in the assessment order that the assessee has mentioned this transaction in computation of capital gain through its computation statement for F.Y. 2015-16 i.e. relevant A.Y. 2016-17. This cannot negate the fact that the assessee has rightly taken the same by filing the income tax return. Thus, on the legal aspect as well as on the merits, the Ld. CIT(A) has taken a proper cognizance and there is no need to interfere with the findings of the Ld. CIT(A). Appeal of the Revenue is dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether reassessment proceedings initiated under sections 147/148 on the basis of information from the Investigation Wing, alleged as 'borrowed satisfaction', were legally valid. 1.2 Whether addition under section 69A treating the declared long term capital gain from sale of shares of Nobel Polymers Limited as unexplained money, and consequential addition under section 69C towards alleged commission for accommodation entries, were sustainable on facts and in law. --- 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of reassessment based on Investigation Wing information ('borrowed satisfaction') Interpretation and reasoning 2.1 The Tribunal noted that the appellate authority had held the reassessment proceedings to be invalid on the ground that they were based on 'borrowed satisfaction'. 2.2 The Tribunal observed that all relevant primary documents and evidences supporting the impugned share transactions and capital gains were on record and had been duly considered by the appellate authority but ignored by the Assessing Officer. 2.3 The Tribunal held that, considering both the legal challenge to reassessment and the merits of the additions, the appellate authority had taken proper cognizance of the material and there was no justification to interfere with its findings. Conclusions 2.4 The Tribunal upheld the finding that the reassessment proceedings initiated under section 148, being based on 'borrowed satisfaction', were not sustainable and did not warrant interference. --- Issue 2: Sustainability of additions under sections 69A and 69C in respect of share transactions in Nobel Polymers Limited Legal framework (as discussed) 2.5 The additions made by the Assessing Officer were: (i) Rs. 1,98,723/- as alleged bogus long term capital gain treated as unexplained money under section 69A, on the footing that it represented accommodation entries in penny stock transactions; and (ii) Rs. 1,987/- under section 69C as unexplained expenditure, being estimated commission at 1% for arranging the alleged accommodation entry. Interpretation and reasoning 2.6 The Tribunal recorded that the assessee had furnished before the Assessing Officer, inter alia, capital gain/loss computation statement, demat account statement, transaction statement, bank account statements, and share details relating to the impugned transactions. 2.7 It was specifically noted that these documents and details were also acknowledged in paragraph 4 of the assessment order but were ignored by the Assessing Officer while making the additions. 2.8 The Tribunal accepted the appellate authority's finding that the assessee had proved the genuineness and creditworthiness of the sale transaction resulting in long term capital gain, and had provided complete trading details in shares. 2.9 The Tribunal highlighted that the assessee had already reflected the impugned transaction in the computation of capital gain for the relevant financial year 2015-16 (assessment year 2016-17), and held that such reflection in the computation could not be negated to treat the amount as unexplained money. 2.10 In these circumstances, the Tribunal considered that the allegation of the assessee being a beneficiary of accommodation entries in penny stock transactions was not substantiated in the face of the documentary evidence produced and accepted by the appellate authority. Conclusions 2.11 The Tribunal affirmed the deletion of the addition of Rs. 1,98,723/- made under section 69A as alleged unexplained money/bogus long term capital gain. 2.12 The Tribunal also upheld the deletion of the consequential addition of Rs. 1,987/- under section 69C towards alleged commission for arranging accommodation entries. 2.13 Overall, both on legal grounds and on merits, the Tribunal found no reason to interfere with the order of the appellate authority and consequently dismissed the Revenue's appeal.