The Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) while deleting the addition made by the assessing officer the two member bench held that the revenue authority failed
The assessee Bharatkumar Gangaram Patel, after filing the return of income assessee case was selected for scrutiny. The Reason for scrutiny selection is “Suspicious Long Term Capital Gains on shares”.
During the proceedings the Assessing Officer pointed out from the Investigation Wing report that shares of Surabhi Chemicals & Investment Limited is reflected in the list at Sl. No.16 and, therefore, the said share was utilized with the sole objective of entering unaccounted cash of beneficiaries into regular books of account.
Hence after analyzing the shares purchased by the assessee The Assessing Officer observed that the assessee failed to submit the following relevant evidences regarding purchase and sale of 2000 shares of Surbhi Chemicals & Investment Limited which was purchased off market from M/s Akriti Advisor Marketing Limited and thereafter received 18,000 bonus shares.
Thus, the Assessing Officer made an addition of Rs.52,59,778/- being sale consideration shown as received from bogus sale of shares and treated the same as unexplained and unaccounted cash receipt which has been channelized through book entry and banking system.
Aggrieved by the addition made by the assessing officer the assessee filed appeal before the CIT(A(). The CIT(A) dismissed the appeal of the assessee. Accordingly the assessee filed another appeal before the tribunal.
When the matter was considered before the tribunal Assessee Representative (AR) Keyur Bhavishi, argued that the documents and evidence furnished by the assessee were neither found to be false nor fabricated and genuineness of the transactions was never doubted.
Further the AR submitted that the assessee provided the certificate of shares, application form for converting into demat, procedure of M/s Surabhi Chemicals and Investment Limited, saudachitthi regarding purchase and sales of the said shares and therefore, the observations made by the Assessing Officer as well as CIT(A) was not justified.
The Department representative supported the Assessment Order and the order of the CIT(A).
The tribunal during the adjudication observed that The element of bogus sale of shares as unexplained and unaccounted cash receipt was not established by the Assessing Officer as the assessee has given all the details at the time of Assessment Order.
Therefore the bench determined that the independent verification of the transactions was limited by the Assessing Officer to the extent of investigation report but the same has not doubted purchase of the shares off-market and, therefore, the same cannot be made bogus sale of shares at the available period when the assessee sold the shares was not involving the assessee to manipulate the price of the scrip then the entire case of the Revenue fails. However, while processing the return of income, the entire amount of Rs.8,10,00,000/- was adjusted against the income tax liability, thereby, creating liability of FBT demand of Rs.73,45,724/- along with interest charged of Rs.18,38,871/- under section 115WJ of the Income Tax Act.
Therefore the two-member bench of Suchitra Kamble, ( Judicial Member ) and Waseem Ahmed, ( Accountant Member ) allowed the appeal filed by the assessee.
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