Case Law Details
Raj Kumar Gupta Vs DCIT (ITAT Ranchi)
Conclusion: CIT (A) was directed to reassess the long-term capital gain (LTCG) claim as it was found that new evidence submitted by assessee had not been considered during the earlier proceedings.
Held: Assessee was a proprietor of Sitaram Jewellers, had earned LTCG of Rs.1,91,276 from the sale of shares worth Rs.74,30,512/. Assessee claimed this income as exempt under Section 10(38). During the scrutiny, AO questioned the genuineness of the LTCG, alleging that the shares involved were traded through a broker, B. R. Jalan Securities Pvt. Ltd., known for engaging in unfair trade practices. AO claimed that the shares were part of a manipulated transaction, involving artificially inflated prices. Based on this, AO treated the transaction as a sham and added the entire amount of ₹74,30,512/- to assessee’s income, applying tax under Section 115BBE. Assessee, aggrieved by the addition, appealed to CIT(A). However, CIT(A) upheld the AO’s decision, stating that the transactions were manipulated and amounted to colorable devices. During the appeal, assessee submitted new evidence, including a detailed explanation of the transactions, the purchase of shares through an Indian Overseas Bank account, and the submission of broker’s notes. Assesee argued that the purchases were made through account payee cheques and properly reflected in the books of accounts. Furthermore, he contended that the transactions did not violate SEBI and Stock Exchange Rules, challenging the AO’s findings. It was held that the additional details submitted by assessee which was not considered by CIT(A), in the impugned order, it was proper to remand the matter back to the file of CIT(A) to examine all those details produced and take an appropriate view and decide the issue afresh. The case was thus set aside.
FULL TEXT OF THE ORDER OF ITAT RANCHI
This appeal filed by the Assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), Ranchi[hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2014- 15, dated 06.09.2018.
2. The assessee has raised the following grounds of appeal:
“1. That the Ld. Assessing Officer is not justified in disbelieving the genuineness of the Long-Term Capital Gain and the Ld. Commissioner of Income Tax (Appeals) is not justified in upholding the view of the Ld. Assessing Officer and disbelieving the contentions and arguments of the assessee.
2. That the Ld. Assessing Officer is not justified in making an addition on the basis of circumstantial evidence and the Ld. Commissioner of Income Tax (Appeals) is not justified in conforming the same.
3. That the Ld. Assessing Officer and the Ld. Commissioner of Income Tax (Appeals) are not justified in not following the ruling given by the honourable Supreme Court.
That the other and further grounds shall be urged at the time of hearing.”
3. The facts of the case, in brief, are that the assessee Mr. Raj Kumar Gupta, is a proprietor of M/s Sitaram Jewellers, which is engaged in the business of trade of Gems, gold and silver jewellery, He also receives remuneration from M/s Sita Gems Jewellers Pvt. Ltd. Apart from this, the assessee also earned income from capital gains and income from other sources during the period under consideration. The case of the assessee was selected for complete scrutiny under CASS. Statutory notices u/s 142(1) and 143(2) were issued from time to time and necessary compliance was made by the assessee. The AO in the assessment order has mentioned that the assessee has sold shares worth Rs.74,30,512/- on which the assessee has earned long term capital gain (LTCG) of Rs. 71,91,276/- which has been claimed as exempt income u/s 10(38) of the Act. During the course of assessment proceedings, the assessee was specifically asked to furnish the details of the LTCG earned during the period under consideration along with copy of D-mat account, brokers note/contract note and the lower account of the broker in the tax of the assessee. In response to that the assessee submitted the requisite details, however, the AO found that the assessee had purchased the shares of Scrip, Kailash Auto Pvt. Ltd. through the broker B. R. Jalan Securities Pvt. Ltd. But, as per the information received from the Investigation Wing, it is learnt that the said broker B. R. Jalan Securities Pvt. Ltd was involved in unfair trade practices, and that the share broker was found involved in artificially lowering and raising the share price of Penny stock Kailash Auto Pvt. Ltd., leading to the undue rise in price of shares, and the consequent LTCG, which is a share transaction. The information has been received that Kailash Auto Pvt. Ltd is a Penny Company listed in the Stock Exchange, price of which were fluctuated in a wide range, and to claim exempted income, the shares were sold at abnormally high prices, even though the same were quoted in the stock exchange. Hence, the resulting LTCG is not a genuine capital gain, but a manipulated one. The AO thus, treated this transaction as sham transaction added a sum of Rs. 74,30,512/- as the income of the assessee and added to its total income, the AO also applied the tax rate u/s 115BBE of the Act.
4. Aggrieved by the order of the Ld. AO, the assessee filed appeal before the CIT(A), who, vide the impugned order confirmed the addition made by the AO on the ground that the impugned transactions were manipulated through colourable device to create undue loss/profit.
5. Aggrieved by the order of the Ld. CIT(A), this appeal has been preferred. During the appellate proceedings before us, the AR submitted before us that the assessee has purchased is 2,00,000 number of equity shares of M/s Panchsul Marketing Ltd. through the bank account maintained in Indian Overseas Bank, SB Account No. 17489, Main Road, Ranchi and all the purchases have been made through account payee cheque and have been duly reflected in the books of account of the assessee as well as in the ledger account of the persons from whom purchases were made. The copy of D-mat statement has also been attached evidencing the ownership of the shares. The broker’s notes were also produced. Further, the finding of the AO that the transactions have been made in violation of the SEBI and Stock Exchange Rules is incorrect. To support his contentions, the AR has also submitted all the details in the firm of paper book. During the appellate proceedings before us, the Ld. AR also placed reliance on the Hon’ble Supreme Court decision held in the case of Andman Timber Industries Vs. CCE (2015) 127 DTR 0241 and the decision of jurisdiction Hon’ble Jharkhand High Court decided in the case of ACIT, Circle -2, Jamshedpur Vs. Rajat Sent Gupta.
6. The Sr. DR on the other hand relied on the order of the Ld. CIT(A).
7. We have considered the rival submissions and it is found that the AR has submitted the details which was not considered by the CIT(A), in the impugned order thus we think it proper to remand the matter back to the file of the Ld. CIT(A) to examine all those details produced before us and take an appropriate view and decide the issue afresh. The case is thus set aside.
8. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 29.11.2024.
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