|The Tax Publishers2021 TaxPub(DT) 0943 (Sur-Trib)
INCOME TAX ACT, 1961
Where assessee by furnishing necessary evidences proved genuineness of long-term capital gains (LTCG) on sale of shares, AO was not justified to make addition under section 68 alleging that share prices were artificially raised on the stock exchange in order to book bogus claims of LTCG.
Income from undisclosed sources - Addition under section 68 - Long-term capital gains on sale of shares -
Assessee declared long-term capital gains (LTCG) on sale of shares as exempt under section 10(38). AO, based on information emanated from investigation wing treated LTCG as bogus and made addition under section 68 alleging that share prices were artificially raised on the stock exchange in order to book bogus claims of LTCG. Held: There was no dispute regarding date of purchase of shares. Price of share of Rs. 2, instead of Rs. 0.55 per share, was confirmed from the party. The shares which assessee had acquired, were later on demated and then assessee sold the shares at stock exchange through registered stock broker after making payment of STT. Neither Stock Exchange or SEBI had disputed assessee's transaction nor was any action against the assessee's broker was taken by BSE or SEBI. The assessee's dealings in shares were supported by the contract notes issued by broker as well as demat account. Genuineness of contract notes or demat accounts had not been disputed even in the show cause notice by AO. The payments were received through account payee cheques and transaction was done through recognized stock exchange. The inflow of shares was reflected by way of physical share certificate and demat account. The shares were transferred through demat account. There was no evidence that the cash was recycled back to assessee. Assessee merely acted on the basis of market information and happened to get phenomenal gain. It could have been otherwise as well. The rags to riches story in the stock market are galore. Accordingly, addition made on the basis of mere surmises, suspicions and conjectures could not be upheld.
Relied:Mohamed Sait (1959) (37 ITR 151) (SC) : 1959 TaxPub(DT) 148 (SC) and CIT(Central) and Kolkata v. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC) : 1973 TaxPub(DT) 323 (SC).
FAVOUR : In assessee's favour.
A.Y. : 2013-14 & 2014-15
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