The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) decision to uphold the genuine nature of Sunrise Asian share sales resulted in granting Long Term Capital Gain (LTCG) claims under Section 10(38) of the Income Tax Act.
Brief facts are that the assessee of an individual had filed her return of income for AY. 2014-15 on 28.02.2015 declaring total income of Rs.9, 91,970/-. Later, the case of the assessee was selected for scrutiny. And the AO observed that the assessee’s source of income were from weaving of cloth by the aid of power looms for private parties, contract income; and had declared her income under Section 44AD of the Income Tax Act, 1961 (hereinafter “the Act”).
The AO has disbelieved the claim of the assessee only on the basis of the investigation report of the department which identified the script of M/s. Sunrise as a penny stock. And after taking note of the contents of the investigation report (modus operandi) of unscrupulous entry operators, the AO was of the opinion that the assessee is a beneficiary of such modus operandi; and according to him, assessee has made bogus claim of LTCG, to convert her unaccounted income to white by bringing it into regular books (accounted income).
Assessing Officer further concluded that with the help of the above parties, the Assessee acquired 18,000 shares of Sunrise Asian by Merger Method which and sold the same at artificially increased price in Patch 2 to earn tax exempt LTCG by way of pre-arranged transactions. Thus, introducing unaccounted income in the books as capital receipts/gains.
The bench noted that the Assessing Officer and the CIT (A), both, had moved on the incorrect premise that the Assessee was not involved in trading of shares or that the Assessee only dealt with the script of Sunrise Asian. The Assessee has been registered as a sub-broker affiliated with Mangal Kseshav Securities limited since 2007.
The coram of S. Rifafur Rahman (Accountant member) and Aby. T. Varkey (Judicial member) allowed the appeal of the assessee. And directed the AO to allow the LTCG claim of the assessee and delete the addition of Rs 25,12,070/
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