Ayush Jain Vs ITO (ITAT Indore)
The Income Tax Appellate Tribunal, Indore Bench, adjudicated multiple appeals involving common issues relating to denial of exemption under Section 10(38) of the Income Tax Act on alleged Long Term Capital Gains (LTCG) arising from sale of shares of M/s Sunrise Asian Limited, along with additions under Section 68 and estimated brokerage expenses. The Assessing Officer treated the gains as unexplained cash credits, alleging that the transactions were sham and involved a penny stock used as a device to convert unaccounted income. Additions were also made on presumed commission expenses. These findings were upheld by the Commissioner (Appeals).
The assessees contended that the transactions were genuine, supported by documentary evidence including purchase through banking channels, allotment of shares, dematerialization, merger approved by the Bombay High Court, and sale through recognized stock exchange with payment of securities transaction tax. It was argued that no direct evidence linked the assessees to any alleged manipulation, and that reliance on general investigation reports, third-party statements, and suspicion violated principles of natural justice, especially in absence of cross-examination.
The Tribunal examined the sequence of events, evidences, and comparable judicial precedents, particularly decisions of coordinate benches involving identical facts and the same scrip. It noted that the assessees had discharged the burden of proving genuineness through contract notes, demat statements, and bank records. The Tribunal found that the Revenue failed to establish any nexus between the assessees and alleged operators or to produce cogent evidence of price manipulation or accommodation entries. It also observed that additions were primarily based on general allegations, third-party statements without cross-examination, and presumptions rather than concrete material.
