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2026 Supreme(Online)(ITAT) 9071
INCOME TAX APPELLATE TRIBUNAL (NAGPUR BENCH)
Pawan Singh, Judicial Member, Khettra Mohan Roy, Accountant Member
DCIT – Appellant
Versus
Shikha Indrakumar Agrawal – Respondent
ITA No. 239/NAG/2023
For the Appellants/Petitioners: Surjit Kumar Saha
For the Respondents: K.P. Dewani
Additions under Sections 68 and 69C cannot be made based on mere suspicion or general investigation reports. When a transaction is supported by documentary evidence like contract notes and bank statements, the burden lies on the Revenue to prove collusion with tangible evidence before labeling it a sham.
Headnote:(A) Income Tax Act, 1961 - Section 10(38), 68, 69C - Long-term capital gains - Exemption - Unexplained cash credits - Addition towards alleged commission expenditure - Taxpayer claimed exemption for gains on sale of shares. Revenue contended transaction was a colorable device for tax evasion, invoking Sections 68 and 69C. Held, addition sustained on suspicion without tangible material or direct evidence of price manipulation or connivance is unsustainable. Documented transaction through banking channels and stock exchange platform cannot be treated as bogus in absence of specific evidence pointing to collusion.
(B) Evidence - Burden of proof - Onus is on the person who alleges that the apparent is not real to bring on record tangible material or evidence. Suspicion, surmises, and general investigation reports regarding market manipulation cannot justify rejection of otherwise valid documented transactions.
(C) Natural Justice - Cross-examination - Reliance on statements of third parties without providing opportunity for cross-examination to the taxpayer is a violation of principles of natural justice.
O R D E R
PER KHETTRA MOHAN ROY, AM:
This appeal filed by the Revenue is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi, dated 01.06.2023 passed u/s. 250 of the Income Tax Act, 1961 (for short, “Act”) which is arising out of assessment order passed u/s. 143(3) dated 29.12.2017 by the ACIT, Circle-4, Nagpur for the Assessment Year 2015-16.
Revenue has raised the following grounds of appeal:-
“1. On the facts and in the circumstances of the case, the Ld. CIT(Appeals), NFAC has erred in deleting the addition of Rs.1,36,97,000/- & Rs.6,84,850/- made by the AO which were done after making independent enquiry and in concluding that the LTGC claim of the assessee was bogus and the corresponding expenditure in obtaining the bogus LTCG as unexplained expenditure u/s 69C of the Act.
2. On the facts and in the circumstances of the case, the Ld. CIT(Appeals), NFAC erred in allowing the appeal of the assessee ignoring the fact that investigation on the basis of information carried out by the Kolkata Investigation Wing and Mumbai on the basis of statement of various entry provider, share brokers, exist providers had unearthed the modus operandi of investments in penny stock for obtaining bogus LTCG as in the assessee’s case.
3. On the facts and in the circumstances of the case, the Ld. CIT (Appeals), NFAC erred in allowing the appeal of the assessee by ignoring the fact that the fundamentals of the M/s. GCM Securities do not corroborate with the instant hike in the price of its share and without examining the same to arrive at the conclusion.
4. Any other grounds which may be raised at the time of hearing with the permission of Hon’ble ITAT.”
In the present case, assessee has filed his return of income for AY 2015-16 on 21/10/2015, declaring total income of Rs.15,58,120/-. Case was selected for scrutiny, statutory notices u/s 143(2) & 142(1) of the Act were issued and duly served upon the assessee. Ld.Assessing Officer (AO) observed that the assessee had declared long term capital gains (LTCG) of Rs.1,32,17,000/- and claimed the same as being exempt u/s 10(38) of Act in respect to shares of M/s. GCM Securities Ltd. Assessee purchased 24000 shares of M/s. GCM Securities Ltd. for Rs.4,80,000/-. The shares have been sold at stock exchange through Registered Stock Broker. The total sale proceeds amount to Rs.1,36,97,000/- and LTCG on the same amounting to Rs.1,32,17,000/- which is claimed exempt u/s 10(38) of the Act. Ld. AO concluded the assessment holding that explanation offered by the assessee in respect of the source of credit being sale transaction has been held to be not satisfactory and section 68 is squarely applicable. The assessment order was passed by Ld. AO by making addition of Rs.1,36,97,000/- on account of unexplained cash credits u/s 68 of the Act in respect to sale proceeds of shares. Ld. AO also made addition of Rs.6,84,850/- as reasonable rate of 5% of amount as commission paid not shown in books of account by invoking the provisions of section 69C of the Act.
Being aggrieved, assessee carried the matter before the Ld. CIT(A), who after considering the assessment order, written submissions and documentary evidences, allowed the appeal of the assessee. While allowing, Ld. CIT(A) at para 7.3 in page No. 26 of impugned order tabulated the facts in the case of assessee with the facts as considered in the order of husband of the assessee Shri Indrakumar G. Agrawal. Ld.CIT(A) after considering the facts and evidence on record has concluded at para 7.4 that the facts involved in the case of the assessee are identical to the facts assessee’s husband as detailed at para 7.3 of the appellate order. Ld.CIT(A) after following the order of CIT(A)-3, Nagpur, dated 12/05/2023 proceeded to hold that the addition made by the Ld. AO at Rs.1,36,97,000/- u/s 68 of the Act and Rs.6,84,850/- u/s 69C of the Act are hereby deleted and directed the Ld. AO to allow the exemption claimed u/s 10(38) of the Act.
Ld. D
