Manish Kumar Baid Vs ACIT (ITAT Kolkata)
Income Tax Appellate Tribunal (ITAT), Kolkata, has ruled in favor of Manish Kumar Baid, setting aside the assessment order passed by the Assistant Commissioner of Income Tax (ACIT). The tribunal found that the Assessing Officer (AO) incorrectly rejected the assessee’s claim for exemption on long-term capital gains (LTCG) arising from the sale of shares. The ITAT held that the AO’s decision was based on unsubstantiated theories and probabilities rather than concrete legal evidence implicating the assessee in any wrongdoing.
The case revolved around the assessee’s investment in and subsequent sale of shares of Kreston Allied Financial Ltd. (KAFL), which had earlier merged with CPAL. The AO had questioned the legitimacy of these transactions, suspecting them to be accommodation entries designed to evade tax. This suspicion was primarily based on a third-party statement that was never cross-examined and interim orders issued by the Securities and Exchange Board of India (SEBI) concerning alleged price rigging in KAFL’s shares.
However, the ITAT noted that neither the assessee nor his stockbroker, Ashita Stock Broking Ltd., were named in the third-party statement or the SEBI orders as being involved in suspicious transactions or as beneficiaries of any alleged manipulation. The tribunal emphasized that the amalgamation of CPAL with KAFL had been approved by the High Court, and the AO should not have questioned its validity based on unverified third-party information. Furthermore, the assessee had provided documentary evidence, including bills, contract notes, demat statements, and bank records, to demonstrate the genuineness of the share transactions, which the AO did not find to be false or fabricated.
Relying on the precedent set by the Special Bench of the Mumbai Tribunal in the case of GTC Industries Ltd., the ITAT underscored that the AO could not reject the assessee’s claim based on mere surrounding circumstances or probabilities without presenting any legal evidence against him. The tribunal also highlighted that the SEBI order, heavily relied upon by the AO, did not implicate the assessee or his broker in any price rigging activities. In fact, the SEBI order itself acknowledged that KAFL had performed well during the relevant period. Consequently, the ITAT concluded that there was no adverse material to link the assessee to the allegations made by the AO. The tribunal also found support for its decision in various judgments of the Hon’ble Jurisdictional High Court, for which the Departmental Representative could not provide any contrary case laws.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
