DCIT Vs Pinkiben Riddheshkumar Bhandari (ITAT Ahmedabad)
Ahmedabad ITAT Upholds Deletion of Bogus LTCG Addition; Independent Enquiry Essential, Mere Investigation Report Insufficient
The Ahmedabad ITAT dismissed the Revenue’s appeal and upheld the deletion of an addition of ₹44.19 lakh made under section 68 in respect of alleged bogus long-term capital gains (LTCG) arising from transactions in the shares of Kushal Tradelink Ltd. While the Tribunal disagreed with the CIT(A)’s findings on the legal validity of the reassessment, it nevertheless sustained the relief on merits, resulting in the Revenue’s appeal being dismissed.
The Tribunal held that the CIT(A) had erred in treating the notice under sections 148/148A as time-barred and in holding that approval ought to have been obtained from the PCCIT instead of the PCIT. It observed that, while computing the limitation period under section 149, the time consumed in proceedings under section 148A has to be excluded, and the same computation also governs the determination of the competent sanctioning authority under section 151. The later amendment to section 151 was held to be clarificatory, supporting this harmonious interpretation.
On merits, however, the Tribunal found no infirmity in the CIT(A)’s conclusion that the Assessing Officer had made the addition without independent application of mind. The assessee had produced contract notes, broker statements, bank statements, demat records and other documentary evidence, proving the genuineness of the share transactions. The Assessing Officer neither conducted any independent enquiry nor confronted the assessee with the Investigation Wing’s material or permitted cross-examination. Instead, the addition was made solely on the basis of the Investigation Wing’s report.
The Tribunal also noted that the Assessing Officer had accepted the short-term capital gain earned by the assessee from the same scrip, yet rejected the long-term capital gain without assigning any convincing reason. It further observed that the assessee’s broker was not implicated in any alleged accommodation entry racket, the scrip was not blacklisted by SEBI at the relevant time, and all sale proceeds had been received through normal banking channels. Since the Revenue failed to produce any cogent evidence to disprove the assessee’s claim, the deletion of the addition was upheld. Accordingly, although the Revenue succeeded on the legal issues, it failed on merits, and the appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
