Shoubit Goel (HUF) Vs ITO (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi Bench, has ruled in favour of the assessee, Shoubit Goel (HUF), allowing a claim for Long Term Capital Gains (LTCG) exemption under Section 10(38) of the Income Tax Act, 1961. The dispute centred around the sale of 72,800 shares of M/s Unno Industries Ltd., which the Assessing Officer (AO) had treated as unexplained income under Section 68, suspecting it to be an accommodation entry arranged through penny stocks. The Commissioner of Income Tax (Appeals) [CIT(A)] had previously upheld the AO’s decision.
The case originated from the assessee declaring LTCG of ₹19,14,520 from selling shares acquired through a series of corporate actions. Initially, 80 shares of M/s Pinnacle Vintrade Ltd. were purchased in July 2012. Bonus shares were issued, followed by a scheme of arrangement sanctioned by the Bombay High Court in January 2013, resulting in the assessee holding 72,800 shares of M/s Unno Industries Ltd. The AO rejected the LTCG claim primarily based on a statement recorded from Shri Amit Dalmia during a survey, where Dalmia allegedly admitted to providing accommodation entries. The AO also noted that SEBI had suspended trading in the Unno Industries scrip from January 2015 due to surveillance measures and felt the assessee failed to provide sufficient evidence of a genuine transaction.
The assessee contested these findings before the ITAT, arguing that the transactions were genuine and fully documented. It was submitted that the shares were sold through a registered broker (HDFC Securities) on a national stock exchange, with payments received via banking channels after deduction of Securities Transaction Tax (STT) and brokerage. The assessee maintained that the statements relied upon by the AO were general in nature, lacked specific details pertaining to the assessee’s transaction, and were not properly confronted. Furthermore, the opportunity for cross-examination offered was impractical, requiring travel to Kolkata. The core argument was that the entire addition was based on suspicion and surmises, not concrete evidence proving the assessee’s own funds were routed back.
The ITAT found merit in the assessee’s arguments, observing that the transactions were backed by documentary evidence like contract notes, demat statements, and bank records. Crucially, the Tribunal noted the absence of specific, adverse evidence against the assessee in the third-party statements used by the AO. It emphasized the principle that evidence gathered from third parties cannot be used against an assessee without proper confrontation and an opportunity for rebuttal or cross-examination. The Tribunal relied on several judicial precedents. It cited the jurisdictional Punjab & Haryana High Court’s decision in Prem Pal Gandhi, which held that high share price appreciation alone is insufficient to deny LTCG if transactions are documented, occur on an exchange, and lack specific evidence of manipulation.
Further reliance was placed on coordinate ITAT benches. The ruling in Smt. Shikha Dhawan (ITAT Delhi) involved similar circumstances where documented transactions prevailed over general suspicion. The ITAT Kolkata decision in Prakash Chand Bhutoria, which dealt with the same scrip (Unno Industries Ltd.), was also highlighted. That ruling stressed that additions cannot be made merely on suspicion or general investigation reports without confronting the assessee with specific adverse material. Citing these precedents and the principle that suspicion cannot replace proof, the ITAT concluded that the AO had failed to controvert the evidence provided by the assessee. Consequently, the ITAT set aside the order of the CIT(A) and directed the AO to delete the addition made under Section 68, thereby allowing the assessee’s claim for LTCG exemption under Section 10(38). Similar appeals involving identical facts were also allowed based on this reasoning.
FULL TEXT OF THE ORDER OF ITAT DELHI
