The Income Tax Appellate Tribunal (ITAT), Delhi Bench deleted the addition made on account of disallowing long-term capital gains.
The revenue has challenged the order of the CIT(A) in deleting the addition of Rs.1,60,98,447 made on account of disallowing long-term capital gains exemption claimed under section 10(38) of the Income Tax Act, 1961.
The return of income for the assessment year under appeal was filed declaring income of Rs.13,17,580/- which was processed under section 143(1) of the Act. In the return of income, the assessee had claimed Long Term Capital Gain of Rs.1,60,98,447 exempt under section 10(38) of the Act on account of trading in shares of M/s. Eins Eductech Ltd., on BSE.
The transactions were STT paid, therefore the gain was claimed exempt under section 10(38). The assessee had invested Rs.22,50,000 by two cheques in the purchase of 1,50,000 equity shares of M/s Eins Eductech Ltd in the month of July 2013 through preferential allotment at the rate of Rs.15/- per share. These shares were credited in the Demat Account of the assessee. These shares remained in lock-in by order of the SEBI. Out of these shares, 34,451 shares were sold out by the assessee for a total consideration of Rs.1,27,42,768/- through her brokers M/s. SMP Securities Ltd and M/s SS Corporate Securities Ltd. Thereafter, the shares of Eins Edutech Ltd were split to Rs.1 per share.
Thus, the remaining 1,15,519 shares were split into 11,55,490 shares of Rs.1/- each. Out of these shares 86,000 shares were sold-out through her broker M/s SS Corporate Securities Ltd for a total consideration of Rs.40,64,289. The total sale consideration of all the shares of Eins Edutech Ltd was therefore Rs.1,68,02,668/- which includes STT of Rs.16,842/-.
The purchase value of these shares was Rs.6,45,765. The indexed cost of the purchase was Rs.7,04,221. The LTCG claimed exemption under section 10(38) was Rs.1,60,98,447. The purchase cost of the balance shares with the assessee had been Rs.16,04,235. The AO after a detailed findings in his order considered these transactions as ‘sham’ and disallowed the exemption claimed under section 10(38) of the Act and added total LTCG of Rs.1,60,98,447/- to the income of the assessee. The income was assessed at Rs.1,74,06,030 against the returned income of Rs. 13,07,583.
The assessee challenged the addition before the CIT(A). The detailed written submissions of the assessee are reproduced in the appellate order in which the assessee briefly explained that assessee had discharged the onus that lay upon her to prove the nature and source of the number of sale proceeds of equity shares sold by her in the recognized stock exchange through SEBI registered Broker/Member of the Stock Exchange.
The CIT(A) considered the issue in detail in the light of facts explained by the assessee and deleted the entire addition.
The coram of B.R.R.Kumar and Bhavnesh Saini while dismissing the appeal of the revenue held that no evidence has been brought on record by the A.O. as to how the assessee’s transactions were not genuine. It was also brought on record that the assessee is a habitual investor as is evident from the Demat Statement with the Bank.