×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
1. This appeal by the assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-10, Kolkata [in short the ld CIT(A)] in Appeal No.169/CIT(A)- 10/Wd-34(2)/14-15/2016-17/Kol dated 31.05.2018 against the order passed by ITO, Ward-34(2), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 29.12.2016 for the Assessment Year 2014-15.
2. Though the assessee had raised various grounds before us, the only effective issue involved in this appeal is as to whether the ld CITA was justified in confirming the addition made towards unexplained cash credit u/s 68 of the Act by treating the sale consideration of shares of Nikki Global Finance Ltd of Rs 48,94,000/- and sale consideration of shares of S R K Industries Ltd of Rs 47,23,065/- in the facts and circumstances of the case. The interconnected issue involved is as to whether the ld CITA was justified in confirming the addition made towards unexplained expenditure on commission amounting to Rs 48,085/- since the sale consideration was treated as bogus. in the facts and circumstances of the case.
3. The brief facts of this appeal are that the assessee filed return of income for the Asst Year 2014-15 on 27.12.2014 declaring total income of Rs 4,85,840/-. The assessee claimed exempt income u/s 10(38) of the Act in respect of long term capital gains derived on sale of listed company shares where Securities transaction tax (STT in short) was duly suffered by the assessee. The workings of the same are as under:-
The assessee purchased 6000 shares of Nikki Global Finance Ltd for Rs 8,12,158/- during the period from 1 6 2012 to 4.6.2012 and sold the same in Asst Year 2014-15 for Rs 48,94,000/- during the period from 24.7.2013 to 25.7.2013. Both the purchase and sale of shares were effected in the stock exchange through a registered share broker after duly suffering STT.
The assessee purchased 25000 shares of Transcend Commerce Ltd for Rs 2,50,000/- on 17.12.2012. Later this company was merged with M/s S R K Industries Ltd pursuant to the scheme of arrangement effected and approved by the Hon’ble High Court. Pursuant to this merger and pursuant to diminution in share price from Rs 10 to Rs 5 per share, the assessee was allotted 111000 shares in M/s S R K Industries Ltd. Out of this, the assessee sold 71000 shares during Asst Year 2014-15 for Rs 47,23,065/- at prevailing market prices on various dates from 15.1.2014 to 27.3.2014 in 8 phases. Since the total cost of purchase for assessee was only Rs 2,50,000/- , the proportionate cost of 71000 shares was worked out as under:- Rs 250000 / 111000 shares * 71000 shares = Rs 1,59 910/-
The sale transactions of shares were effected in the stock exchange through a registered share broker after duly suffering STT. Hence the assessee claimed total long term capital gains as exempt u/s 10(38) in the return of income to the tune of Rs 87 39,829/-.
4. The ld AO treated the sale consideration on sale of shares of aforesaid companies as bogus on the ground that the said company does not deserve such a huge hike in sale price and accordingly disbelieved the market prices. The ld AO also alleged that these shares prices were artificially rigged and manipulated beyond its normal pricing with connivance of share brokers and stock exchange with the guidance of various entry operators wherein the illegal money was converted into legal money in the form of long term capital gains. The ld AO accordingly brought the sale consideration received on sale of shares of aforesaid companies totaling to Rs 96,17,065/- as unexplained cash credit u/s 68 of the Act. The ld AO also made addition towards commission as unexplained expenditure at the rate of 0.5% on Rs 96,17,065/- and made addition of Rs 48,085/-. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee
is in appeal before us.
5. We have heard the rival submissions. It emerges at the outset that both the lower authorities have adopted identical line of reasoning in treating the sale consideration received on transfer of shares in aforesaid companies to be bogus thereby treating the same as unexplained cash credits u/s 68 of the Act. The ld DR drew our attention to a voluminous exercise undertaken by the ld AO involving a long drawn process of stock market prices rigging in collusion with the various entry operators. The ld DR argued that the assessee had made investment in shares of the aforesaid companies not having any sound financial position or business activity so as to justify the long term capital gains to this extent. The cases of Sumati Dayal vs. CIT 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR (SC) were quoted in support to plead that both the lower authorities have made it clear in their respective order(s) about the assessee having acted in collusion with various entry operators for the purpose of bogus long term capital gains in issue. There is no dispute that assessee having derived the Long Term Capital Gains (LTCG in short) on transfer of shares held in Nikki Global Finance Ltd and S R K Industries Ltd. The ld DR did not controvert the findings given by the co-ordinate bench deci ion of this tribunal in assessee’s favour in the case of Smt Madhu Killa vs ACIT in ITA No. 834/Kol/2018 for Asst Year 2014-15 dated 2.11.2018 in respect of shares of Nikki Global Finance Ltd, wherein it was held as under:-
“3. Before us the Ld. AR submitted that the addition made by the AO and upheld by the Ld. CIT(A) was based on presumption and suspicion alone and, therefore, perverse in the eyes of law. In the course of hearing of the case, the Ld. AR referred to various documentary evidences furnished in the paper book in support of the claim of the assessee to prove the genuineness of the transactions relating to LTCG on sale of shares. The Ld. AR drew our attention to the order of the AO wherein the AO has erroneously recorded at para 3.1 that the assessee had purchased the shares of M/s. NFGL off market (not through established stock exchange) whereas the assessee had purchased the shares of M/s. NFGL through M/s. M. Prasad & Co. Ltd. which is a recognized stock broker of Bombay Stock Exchange (BSE), through whom the assessee had made several investments in various scrips/shares and drew our attention to page
5 of paper book wherein the details of investment made by the assessee for the previous AY 2013-14 is given which shows that assessee has dealt with 30 nos. of different shares of companies including Reliance, Infosys, L & T etc. and it was thus contended that this transaction with M/s. NFGL was not the single investment which assessee