2013 (3) TMI 660 - AT - Income Tax

Whether CIT (A) erred in deleting addition made by AO as income from other sources in respect of Long Term Capital Gain shown by assessee as sale of shares of M/s Talent Infoway Ltd.? - Held No

Summary

Issues Involved:
- Deletion of addition of income from other sources in respect of Long Term Capital Gain
- Recognition of share transactions as genuine and not as accommodation entries

Analysis:

Issue 1: Deletion of addition of income from other sources in respect of Long Term Capital Gain
The appeal by the Revenue was directed against the orders of the CIT (A) regarding the deletion of an addition of income from other sources in respect of Long Term Capital Gain shown by the assessee as the sale of shares. The Revenue contended that the assessee's claim of Long Term Capital Gain was based on accommodation entries and lacked substantiation. The AO treated the LTCG offered by the assessee as bogus following a previous year's order. However, the CIT (A) disagreed with the AO and directed the amount to be treated as LTCG but taxed at the prevailing rate due to non-payment of STT. The CIT (A) also found the STCG transactions in shares of a specific company to be genuine. The Revenue challenged this decision before the ITAT.

Issue 2: Recognition of share transactions as genuine and not as accommodation entries
The ITAT considered the previous year's decision in the assessee's case where similar issues were raised and decided in favor of the assessee. The Tribunal noted that off-market transactions were not unlawful activities and emphasized the genuineness of the share transactions based on documentary evidence provided by the assessee. The Tribunal highlighted the importance of verifying share transfers with the Registrar of Companies. As the facts were similar to the previous year and the CIT (A) had already deleted the addition based on the evidence presented, the ITAT upheld the CIT (A)'s decision. The ITAT found no reason to interfere with the order, especially since the issue was resolved in favor of the assessee in the earlier year.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the CIT (A)'s decision to delete the addition of income from other sources in respect of Long Term Capital Gain and recognizing the share transactions as genuine. The judgment emphasized the importance of documentary evidence and consistency in decision-making based on previous rulings.