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| The Tax Publishers2020 TaxPub(DT) 3132 (Mum-Trib) INCOME TAX ACT, 1961
Section 68
Where the assessee reported long-term capital gain as transfer of shares and claimed exemption thereof and produced various documents to substantiate that the amount credited to the bank was sale proceeds of shares then authorities below were not justified in invoking section 68 particularly where the authorities below have not doubted the documentary evidence produced by the assessee to prove the genuineness of the transaction of sale and purchase of the shares in question.
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Income from undisclosed sources - Addition under section 68 - Bogus LTCG on sale of share - Benefit of exemption under section 10(38)
Assessee was trader in shares and during the relevant assessment year sold shares of M/s. S. The aforesaid amount was directly credited to bank account of assessee. LTCG on sale of shares was claimed as exempt under section 10 (38). AO in scrutiny assessment proceedings held the aforesaid amount as unexplained credit and made addition under section 68 read with section 115BBE. Assessee pointed that he had furnished various documents to substantiate that the amount credited to the bank was sale proceeds of shares of M/s. S. AO rejected all the submissions of the assessee. The benefit of exemption under section 10(38) was denied to assessee for similar reasons and addition under section 68 was made holding sale of shares as bogus and sham transaction. Held: The authorities below have not doubted the documentary evidence produced by the assessee to prove the genuineness of the transaction of sale and purchase of the shares in question. Further, the authorities below have not pointed out any evidence on record to hold that the assessee has obtained bogus entries in connivance with entry operators and brokers etc., in order to claim bogus LTCG. The assessee was not given an opportunity to cross examine the witnesses whose statements were relied upon and on the basis of their statements it was concluded that the transaction in question was a part of penny stock scam. So, in view of the cases discussed in the foregoing paras, particularly the ratio laid down by the Hon'ble Supreme Court in the case of M/s Andaman Timber Industries v. CCE 2015 TaxPub(DT) 5186 (SC) the CIT(A) has wrongly confirmed the assessment order passed by the AO in violation of the principles of natural justice. Order passed by the CIT(A) is set aside and the AO was directed to allow the claim of the assessee.
Followed:Narayan Ramchandra Rathi v. ITO [ITA No. 4811/MUM/2018, dt. 8-8-2019]
REFERRED :
FAVOUR : In assessee's favour.
A.Y. :
IN THE ITAT, MUMBAI BENCH
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