Sumaysh Agrrawal Vs ITO (ITAT Kolkata)
ITAT Kolkata Deletes Addition, Upholds LTCG Claim on Unno Industries Shares
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has ruled in favour of assessee Sumaysh Agrrawal for the assessment year 2014-15, deleting an addition of ₹38,02,285 made under Section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) had treated the Long Term Capital Gains (LTCG) claimed by the assessee from the sale of M/s Unno Industries Ltd. shares as bogus income, a decision subsequently confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)].
The AO’s suspicion arose from the transaction history: the assessee purchased 125 shares of M/s Pinnacle Vintrade Ltd. offline in January 2012 for ₹1,25,000. Following allotment of bonus shares and a subsequent court-approved amalgamation where Pinnacle merged into Unno Industries (ratio 1:10), the assessee held 1,13,750 shares of Unno Industries Ltd. These were sold between May and July 2013 for ₹38,20,475 through broker M/s Religare Securities Ltd., resulting in a gain exceeding 30 times the initial investment. The AO found this sharp rise abnormal, particularly given negative market trends and average company financials. The AO also cited Directorate of Investigation reports listing Unno Industries among scripts used for bogus LTCG and noted SEBI’s concerns on price manipulation. Treating the initial purchase as non-genuine, the AO added the sale proceeds as unexplained cash credit under Section 68. The Revenue’s representative later cited a statement by Shri Pawan Dalmia and other tribunal rulings supporting the addition.
The assessee countered that share price movements are influenced by various factors beyond financials and are outside an investor’s control. It was argued that general investigation reports or actions against brokers do not automatically taint an individual assessee’s transaction without specific adverse evidence. The assessee asserted that the transaction was genuine and fulfilled all conditions for LTCG exemption under Section 10(38): shares held over 12 months, sold on a recognized stock exchange (BSE) via a registered broker, payment received through banking channels, and STT paid. Crucially, the assessee presented extensive documentary evidence including purchase bills, payment proof (cheque/bank statement), share certificates (original and bonus), amalgamation order, demat statements showing allotment and sale, contract notes from Religare, and bank statements reflecting sale proceeds. The assessee argued against being judged on suspicion and highlighted the need for adherence to natural justice principles if third-party evidence was relied upon.
The ITAT Kolkata bench reviewed the substantial documentary evidence submitted by the assessee. The Tribunal found the issue squarely covered by its own coordinate bench decision in Sanjib Kumar Patwari (HUF) (ITA No. 205/Kol/2018 for AY 2014-15). This precedent, along with numerous others cited within it (such as Sanjiv Shroff, Jagmohan Agarwal, Navneet Agarwal, and the Calcutta High Court ruling in Alpine Investments), established key principles: documented transactions conducted through banking channels, via registered brokers on stock exchanges, and supported by contract notes and demat records, should not be treated as bogus merely based on suspicion arising from price volatility or general investigation reports. These rulings emphasized that the onus shifts to the Revenue to disprove the transaction’s genuineness with specific evidence against the assessee, and adverse material/statements from third parties cannot be used without confronting the assessee and allowing cross-examination.
Following the detailed reasoning and principles laid out in Sanjib Kumar Patwari and other consistent rulings by Kolkata benches and jurisdictional High Courts, the ITAT concluded that the assessee had provided sufficient evidence to prove the genuineness of the LTCG transaction. The Tribunal noted that the AO had not effectively controverted this evidence with specific adverse findings against Sumaysh Agrrawal. Distinguishing the case law cited by the Revenue, the ITAT allowed the assessee’s appeal, setting aside the CIT(A)’s order and directing the AO to delete the addition made under Section 68.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
