The Delhi Bench of Income Tax Appellate Tribunal (ITAT) while quashing the reassessment, allowed the exemption under Section 10(38) of the Income Tax Act on sale of shares.
The bench of Saktijit Dey (Vice President) and M. Balaganesh (Accountant Member) has observed that in assessee’s brother’s case, Shri Rajiv Madan, in respect of identical facts of sale of shares of Yamini Investment Company Limited, the income tax department had accepted the claim of short term capital gains disclosed by him to be genuine in the reopened assessment proceedings under section 143(3) read with section 147 of the Income Tax Act.
The assessee has challenged the validity of reassessment under section 147 of the Income Tax Act and challenged the addition of Rs. 76,21,459 made by the AO and confirmed by the CIT(A).
The AO proceeded to treat the Long Term Capital Gain (LTCG) declared by the assessee and claimed as exempt under section 10(38) of the Income Tax Act in respect of sale of shares of M/s Yamini Investment Company Limited to be bogus and added a sum of Rs 73,99,475/- by denying the exemption under section 10(38) of the Income Tax Act.
Since the LTCG of Rs 73,99,475/- was treated as unexplained cash credit arising through accommodation entries, estimated commission expenditure at the rate of 3% of the value there on was also added as unexplained expenditure under section 69C of the Income Tax Act in the sum of Rs 2,21,984. This action of the AO was upheld by the CIT(A).
The assessee contended that the total sale consideration received by the assessee on sale of shares of Yamini Investment Company Limited was Rs 75,99,961/- and after reducing the purchase cost of Rs 2 lakhs, he earned Long Term Capital Gains of Rs 73,99,975/- and claimed the same as exempt under section 10(38) of the Act as the sale transaction had duly suffered STT and had been made through a registered stockbroker in the recognized stock exchange.
The tribunal has held that even if the scrip is to be construed as tainted scrip, the assessee cannot be implicated or linked with the alleged tainted persons merely because certain tainted persons were involved in the artificial rigging in the share price. There is absolutely no evidence brought on record by the department that assessee had either approached the alleged tainted parties/entry operators who were involved in artificial rigging of share price of Yamini Investment Company ltd in order to receive accommodation entries in the form of exempt long term capital gains.
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Case Details
Case Title: Sujit Madan Versus DCIT
Case No.: ITA No. 3436/Del/2023
Date: 20/01/2025
Counsel For Appellant: Rajiv Saxena, Adv Ms. Sumangla Saxena,Adv Shri Shyam Sunder
Counsel For Respondent: Jaya Chaudhary, CIT DR
