TaxTMI 
TaxTMI 
2025 (4) TMI 1810
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....ion 10(38) of the Income Tax Act, 1961 (hereinafter called "the Act') to the tune of Rs. 31,87,048/-. From the documents furnished by the assessee, the AO noticed that during the year under consideration, the assessee had sold 5000 shares of Gold Line International Finvest Ltd. @ Rs. 490/- and 3000 shares of Kappac Pharma @ Rs. 270/- and had earned Long Term Capital Gains to the tune of Rs. 31,87,048/-. After considering the detailed reply furnished by the assessee, and relying upon various case laws (as reproduced by the AO at pages 4 to 10 of his order), and other materials placed on record, the AO held that the transactions entered into by the assessee were sham transactions and aimed only to bring in unaccounted money in the guise of exempted Long Term Capital Gains and that the paper work was managed merely to give a colour of authenticity to the transactions and by creating a façade of legitimate transactions. He, accordingly, disallowed the exemption claimed by the assessee and added the same to the income of the assessee under section 68 of the Act. 3. Aggrieved by the order passed by the AO, the Assessee preferred an appeal before NFAC. Howeve....
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....trates that the genuineness of purchase of shares of Gold Line International Finvest Ltd. and Kappac Pharma Ltd. was nowhere in dispute or in debate, and consequently the Ld. "CIT(A)" should have deleted the addition of Rs. 31,87,048/- as had been erroneously made by the Assessing Officer. 7. BECAUSE on a due consideration of facts and circumstances of the case, particularly that- a) the shares purchased by the assessee in earlier years were held in D-mat account; b) the shares so held in demat account were sold during the year under consideration through demat account; c) actual sale price was supported by sales bills/contract notes issued by the brokers and the corresponding movement in demat account referred to above; d) the price at which consideration had been realised were in conformity with the price ruling at the relevant time at the Stock Exchange; e) security transaction tax was paid on sale of such shares; f) the consideration realized by the appellant had originated from the bank account of the broker, which found way into the regular bank account of the "appellant"; and g) other relevant mater....
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.... below have not disputed the fact that the assessee had purchased 10000 shares of M/s Goldline International Finvest Ltd. on 28.01.2014 and 3000 shares of Kappac Pharma Ltd. on 25.06.2012 and, therefore, once the purchases had been accepted, the sale and the assessee's claim of resultant Long Term Capital Gain on such sale could not be denied without there being any evidence brought on record to negate the claim. The Ld. A.R. further submitted that the Department had relied on the report of the investigation carried by the Investigation Wing of the Income Tax Department while denying the claim of exemption under section 10(38) of the Act, but such report was never brought to the notice of the assessee during the course of assessment proceedings and, therefore, reliance on any such document or report behind the back of the assessee, without the assessee being given an opportunity to refute the same, was bad in law. 5.1 The Ld. A.R. further submitted that the facts which were completely ignored by the lower authorities are that (1) the shares in question were purchased by the assessee in earlier years and were held in Demat account; (2) even the sales of these shares were made thr....
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....e books of the assessee as exempt income. 6.1 The Ld. Sr. D.R. also placed heavy reliance on numerous judicial precedents, which have been duly produced in the written submissions filed by him and while placing reliance on the same, it was submitted that tax planning can be legitimate only if it is provided within the framework of law and that colourable devices can never be a part of tax planning. The Ld. Sr. D.R. submitted that the appeal of the assessee deserved to be dismissed. 7. I have heard the rival submissions and have also perused the material on record. The facts are not in dispute. The reason for selection for scrutiny of assessee's case under CASS guidelines was suspicious sale transactions in shares and exempt Long Term Capital Gain. The assessee had claimed income exempt under section 10(38) of the Act to the tune of Rs. 31,87,048/- and the assessee was required to justify the claim of exemption. The assessee filed detailed replies and evidences, but the same did not find favour with the AO and he went on to hold that the transactions entered into by the assessee were sham in nature and that the assessee was trying to introduce unaccounted money in the gui....
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....1072;с Pharma Ltd. (10) Contract Note-cum-Bill dated 12.11.2014 for sale of 3000 shares of M/s Kapрас Pharma Ltd. (11) Sale consideration of Rs. 8,13,391/- credited in the bank account of the assessee on 13.11.2014. 8. Apparently, the authorities below have not considered the above evidences filed by the assessee in the right perspective and have proceeded to deny the claim of exemption entirely on the basis of one investigation report of the Department, which was never even shown to the assessee nor was she ever allowed any opportunity to refute the same. It is also a case in point that the entire foundation for denial of exemption is the report of the Investigation Wing and the claim in such report that tax evaders claim Long Term Capital Gain through existing entry providers, because in all probability the price of shares do not rise in that proportion, as is claimed by the tax evaders. It is also to be seen that the lower authorities have placed heavy reliance in the case of Sumati Dayal vs. CIT reported in 214 ITR 801 (SC) which underlines the principles of preponderance of probability. It will not be out of place to mention he....
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....ast fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order." 9. Respectfully following the above observations of the Hon'ble Delhi High Court, I also have no hesitation in holding that where the assessee has provided ample documentary evidences, his/her claim cannot be denied only on the basis of preponderance of probability. In the present case, there is no dispute that the shares of the two companies were purchased with full disclosures and the payments were made through banking channels, the shares were dematerialized and the sales were also routed through Demat account and sale consideration had also been received through banking channels. Disregarding all these evidences, the AO got carried away by the report of the Investigation Wing of the Department and the entire assessment was framed by the AO without conducting any enquiry from the relevant parties or independent source or collecting evidences to negate the claim of the assessee. In fact, the information requi....