2024 (3) TMI 710 - AT - Income Tax

Addition u/s 68 - Genuineness of LTCG and claim of exemption u/s 10(38) - sale of penny stock script - HELD THAT:- Assessing Officer and Ld.CIT(A) has applied the concept of Human probabilities and held the above said scrip to be a penny stock without bring on record how the assessee is involved in any of the scrupulous activities or directly linked to one of the person who has involved in manipulation/rigging of share prices, entry operator or exit provider. Therefore, there is no material with the tax authorities to substantiate their findings that the impugned transaction is non-genuine. - Accordingly the Ground No.1 raised by the assessee is allowed.

Addition u/s 68 - bogus loan transaction - as alleged assessee failed to prove the capacity and genuineness of the transactions - HELD THAT:- AO has observed from the financial statements of the lender companies and he formed opinion on the basis of earning capacity and not on the basis of funds available to make to loan to others. In our view what is needed to be seen is the funds available with the lenders to make the loan to form an opinion on the capacity of the lenders not the earning capacity. These are financial entities, has to be judged on the basis of funds available in the business.

With regard to genuineness of the transaction, we observe that assessee has taken unsecured loans from Blue Circle Services Ltd., JMD Sounds Ltd and JMD Telefilms Industries Ltd., and submitted the confirmations letters from them which are placed on record. At the same time, assessee also submitted bank statements and financial statements of Blue Circle Services Ltd., JMD Sounds Ltd and JMD Telefilms Industries Ltd., in the Paper Book and it is brought to our notice that assessee has repaid the unsecured loans taken by it along with interest.

As brought to our notice that the assessee has repaid to JMD Sounds Ltd current financial year itself, the same is placed on record at Page No. 128 and 129 of the paper book. Similarly, the payment of JMD Telefilms Ltd in the same financial year, the same is place on record at Page 123 and 124 of the paper book. The payment of Blue Circle Service Ltd are paid in the subsequent assessment year along with interest. Therefore, assessee has demonstrated that assessee has taken unsecured loans and repaid the same along with interest. Normally accommodation entries are taken and the unsecured loans remain unsettled for a long period of time. However, in this case, the assessee has taken the loan and repaid the same along with interest, it clearly indicate that the loan transaction is genuine.

Also brought to our notice that the assessment was reopened mainly on the basis of statement of Shri Jagdish Purohit and Shri Jagdish has subsequently retracted the statement given. Therefore, the genuineness has to be seen independently. Accordingly, Ground No.2 raised by the assessee is allowed.

Disallowance made on account of interest expenses - deduction u/s 57 or u/s 37(1) - As we have adjudicated Ground No.2 in favour of the assessee and the issue involved is disallowance of interest on the same loan. This ground being interest paid i.e., consequential to Ground No. 2, is also allowed in favour of the assessee.