Kunal Arvindbhai Patel Vs ITO (ITAT Ahmedabad)
Material Facts
The assessee, an individual, filed the return for AY 2018-19 declaring income of ₹64,28,580 and claimed exempt long-term capital gains (LTCG) of ₹1,67,46,187 under Section 10(38) arising from the sale of shares of Kushal Tradelink Ltd. The assessment was reopened under Sections 147 and 148, and the Assessing Officer treated the sale proceeds as undisclosed income by making an addition of ₹1,67,46,187 under Section 69A read with Section 115BBE.
Procedural History
The CIT(A), NFAC dismissed the assessee’s appeal. The assessee challenged the reassessment proceedings and the addition before the ITAT.
Legal Issues
The Tribunal considered the validity of the reassessment proceedings and whether the assessee’s exempt LTCG claim on the sale of Kushal Tradelink Ltd. shares was genuine.
Parties’ Submissions
The assessee contended that the transactions were genuine, supported by bank statements, demat records, broker statements, payment of brokerage to a SEBI-registered broker, payment of Securities Transaction Tax, and disclosure of LTCG in the return. It was also argued that the Assessing Officer relied solely on the SEBI report without independent findings.
The Revenue relied upon the assessment order and the order of the CIT(A).
Tribunal’s Findings
The Tribunal noted that although the assessee had produced demat statements, transaction reports, broker statements and bank statements showing transactions through recognised stock exchanges and banking channels, the addition had been made based on investigation findings relating to the Kushal Group and the abnormal rise in the price of the scrip. Relying on its earlier decision in Rameshkumar Karsanbhai Patel Vs. ITO and several judicial precedents concerning penny stock transactions, the Tribunal held that the Revenue had examined the factual circumstances underlying the capital gains claim.
