ITO Vs Ice Worth Reality LLP (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, adjudicated appeals filed by the Revenue against orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2015–16 and 2012–13 concerning additions made under Sections 68 and 69C of the Income-tax Act.
For AY 2015–16, the assessee, an LLP engaged in civil contracting, reported Long Term Capital Gain (LTCG) on sale of shares of Sunrise Asian Ltd., claimed as exempt under Section 10(38). The Assessing Officer treated the transactions as bogus penny stock arrangements based on an investigation report and statements of a third party, and added ₹60.87 crore as unexplained cash credit under Section 68 and ₹3.04 crore as unexplained expenditure under Section 69C. However, the CIT(A) deleted these additions after examining documentary evidence such as purchase records, demat statements, contract notes, and bank transactions. It was found that shares were purchased through banking channels, dematerialized, and sold through registered brokers with payments received via cheques and subjected to Securities Transaction Tax.
The CIT(A) also noted that the Assessing Officer relied on third-party statements without granting effective cross-examination. The statement relied upon did not implicate the assessee, and the cross-examination process was either not completed or not properly considered. The Tribunal observed that no independent evidence was brought on record to disprove the genuineness of the transactions. It further held that suspicion, investigation reports, or general allegations regarding penny stocks cannot substitute for evidence. The Tribunal upheld the CIT(A)’s findings that the assessee had discharged its burden of proof through credible documentation and that the additions were based on inadmissible material. Accordingly, the deletion of additions under Sections 68 and 69C was confirmed.
