ITO Vs Shaleen Khemani (ITAT Kolkata)
Income Tax Appellate Tribunal (ITAT), Kolkata, has dismissed the appeal filed by the Income Tax Officer (ITO) against Shaleen Khemani. The tribunal upheld the order of the Commissioner of Income Tax (Appeals) [CITA], which had earlier ruled in favor of the assessee. The core issue revolved around the Assessing Officer’s (AO) decision to treat the proceeds from the sale of shares received as a gift by the assessee as undisclosed income. The ITAT found that the AO’s action was based on conjecture and lacked any concrete legal evidence to support the allegations of wrongdoing by the assessee.
The assessee had received 65,000 shares of SOCIL as gifts from two individuals, Mr. Manish Kumar Agarwal (50,000 shares) and Mrs. Pushpa Singh (15,000 shares). The tribunal noted that the assessee had provided substantial evidence to substantiate the gifts. Mr. Agarwal’s gift deed, duly affirmed before a Notary Public, confirmed the gift and stated that he had held the shares since March 26, 2003, in his demat account. He also responded to a notice under Section 133(6) of the Income Tax Act, 1961, confirming the gift and the transfer of shares to the assessee’s demat account. His demat account statement further corroborated his holding of 100,000 SOCIL shares as of March 31, 2006. Similarly, Mrs. Singh’s notarized gift deed confirmed her gift and stated she had held the shares since March 30, 2003, in her demat account. She also responded to the AO’s notice, confirming the gift and transfer. Her demat account statement showed she held 40,000 SOCIL shares as of March 31, 2006. The ITAT concluded that the assessee had adequately substantiated the receipt of the shares as a genuine gift, and the AO’s doubt was unwarranted.
Furthermore, the tribunal observed that the subsequent sale of these shares by the assessee was supported by all necessary documentation, including contract notes, demat statements, and bank account details reflecting the transactions. The stockbrokers involved and the stock exchange had confirmed the transactions, which were executed on the online platform with unique trade numbers and times. The AO’s suspicion stemmed from a significant rise in the stock price; however, the ITAT reiterated that the assessee could not be held liable for price fluctuations without any evidence of manipulation on their part. The tribunal emphasized that regulatory bodies like the stock exchange and SEBI are responsible for monitoring and preventing stock rigging, and the AO had not presented any evidence of these authorities alleging any manipulation by the assessee, the brokers, or the company. The fact that the donors had held the shares for seven years before the gift further negated any suggestion of a pre-planned scheme to generate bogus capital gains without any supporting evidence.
The ITAT also relied on the judgment of the Hon’ble Calcutta High Court in Principal CIT vs Rungta Properties Private Limited, which held that allegations against a broker do not automatically make the assessee liable if the genuineness of the transaction documents is not doubted. In this case, the AO did not dispute the authenticity of the documents provided by the assessee. The tribunal also cited the Calcutta High Court’s decision in ALPINE INVESTMENTS, stating that share transactions supported by documentary evidence and conducted through recognized brokers cannot be dismissed based on mere suspicion. The ITAT found no reason to deviate from these established judicial precedents. Consequently, the tribunal held that there was no adverse material to implicate the assessee in any unwarranted allegations and that the AO was not justified in treating the sale proceeds of the gifted shares as undisclosed income under Section 68 of the Income Tax Act. The ITAT upheld the order of the CITA and dismissed the revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
