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2025 Supreme(Online)(ITAT) 7525
INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
G. Manjunatha, A.M, Ravish Sood, J.M
Sudhir Babu Chalasani – Appellant
Versus
The Income Tax Officer – Respondent
I.T.A.Nos.1348 to 1352/Hyd/2025
For the Appellants/Petitioners: Shri A.V. Raghuram
For the Respondents: Shri Mathivanan, S.A. Sr.A.R.
The court emphasized that suspicion cannot substitute for evidence in determining tax assessments, particularly in claims of Long Term Capital Gains.
Headnote:(A) Income Tax Act, 1961 - Sections 10(38) and 69A - Appeal against reassessment and claim of exemption on Long Term Capital Gains - The assessee claimed to be a bona fide investor in shares, with evidence of holding and transactions - The action of the A.O. and CIT(A) to treat the sale consideration as unexplained money was found to be based on suspicion, ignoring supportive evidence - The court set aside the additions made and upheld the assessee's claim. (Paras 11-17)
(B) Reopening of assessment - The A.O.’s reliance on an investigation report without specific connection to the taxpayer's evidence was deemed insufficient, emphasizing the necessity of tangible proof in tax assessments. (Paras 11-15)
Facts of the case:
The assessee filed for assessment years involving the sale of shares, asserting the transactions were made for investment with proper documentation. The A.O. reopened assessment based on allegations of penny stock trading, considering the shares sold as part of a scheme for bogus Long Term Capital Gains.
Findings of Court:
The court noted that the assessee provided thorough documentation regarding the purchase, sale, and transformation of the shares of Brilliant Securities Ltd into Stampede Capital Ltd, proving legitimate investment activity.
Issues: Key issues included the genuineness of the transactions and whether the reassessed amounts were genuinely unexplained income.
Ratio Decidendi: The court asserted that the lack of direct evidence linking the taxpayer to a fraudulent scheme rendered the allegations weak; suspicion does not equate to evidence.
Result: Appeals allowed.
| Table of Content |
|---|
| 1. introduction of appeals and grounds (Para 1 , 2 , 3) |
| 2. assessment and sale of shares (Para 4 , 5) |
| 3. argument against a.o.'s findings (Para 8 , 10 , 12) |
| 4. judicial review of tax evidence (Para 11 , 14) |
| 5. final decision on allowing appeals (Para 15 , 18 , 19) |
ORDER
PER MANJUNATHA G., A.M :
The captioned appeals are filed by a single assessee viz., ‘Sudhir Babu Chalasani’ against the separate orders of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 15.07.2025 relating to the assessment years 2013-14 to 2017-18 respectively. Since common issues are involved in all these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.
2. The assessee has, more or less, raised common grounds of appeal for all the assessment years. Therefore, for the sake of brevity, grounds of appeal filed for the A.Y. 2013-14 in ITA .No.1348/Hyd/2025 (being the lead appeal) are re-produced as under:
“1. The Ld. NFAC erred in sustaining the action of the AO in reopening of assessment for the asst. year 2013-14 which is beyond four years from the end of the relevant asst. year and on a borrowed satisfaction. The Id. NFAC failed to appreciate that the assessment could not have been reopened dehors tangible material and dehors any allegation that the reopening is for the reasons attributable to the Appellant. The NFAC ought to have appreciated that except quoting the alleged investigation report, the AO has not pointed out as to how the said report is relevant to the Appellant's case.
2. Without prejudice to the above grounds, the Ld.NFAC erred in sustaining the action of the AO in denying the benefit of exemption of LTCG of Rs.28,61,127 to the Appellant under section 10(38) of the Income Tax Act, and bringing the LTCG to tax as unexplained money under section 69A of the Act. The Ld.NFAC failed to appreciate the facts, evidences filed by the Appellant, and the evidences available on record in proper perspective and passed a perversed order.
3. The Ld. NFAC failed to appreciate that the Appellant held the shares of Brillant Securities Limited much before the introduction of provisions of section 10(38) of the Act w.e.f. 1.10.2004, and therefore the question of raising doubts on the sale transaction of the Appellant after a period of more than a decade in the previous year under consideration does not arise. On the facts and the circumstances of the case and the evidences filed on record, the Ld. NFAC ought to have held the transactions of the Appellant to be genuine and that the Appellant is a bona fide investor.
4. The Ld. NFAC failed to appreciate that the contents of the alleged investigation report relied does not implicate cither the Appellant or the broker (RLP Securities Pvt. Ltd.) through whom the Appellant sold the shares, or does not even remotely touch upon the Appellant or his broker's role in the alleged illegal transactions, and therefore could not have relied on the said report.
5. On the facts of the present case, the Ld.NFAC failed to appreciate that provisions of section 69A of the Act could not have been invoked in as much as the Appellant has recorded the sale of shares and has produced all the evidence in this regard.
6. The finding of the Ld. NFAC that the Appellant did not explain how the shares of Brilliant Securities were converted to Stampede Capital Ltd. and how the appellant purchased the shares of Stampede Capital Ltd., is incorrect in as much the Appellant got his shareholding in Brilliant Securities demated way back in the year 2008, and subsequently, the name of the Brilliant Securities Ltd., was changed to Stampede Capital Ltd. in July 2011 as per the information available in public domain.
7. The authorities below failed to appreciate that pursuant to change of name of the Company from Brilliant Securities Ltd. to Stampede Capital Ltd. in July 2011, the shares of Brillian
