TARUN KUMAR GOYAL (HUF) ,HYDERABAD V. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(2), HYDERABAD

ITA 455/HYD/2020

AI Insights

The case involves Tarun Kumar Goyal (HUF), who appealed against the orders of the Commissioner of Income Tax (Appeals) which upheld the additions made by the Assessing Officer regarding the Long Term Capital Gain (LTCG) claimed as exempt under section 10(38) of the Income Tax Act, 1961. The Assessing Officer had treated the LTCG from the sale of shares of M/s. Kailash Auto Finance Limited as income from other sources, suspecting the transactions. The Tribunal examined the evidence, including SEBI's exoneration of the scrip and the assessee's transactions, and found no basis for the additions made by the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36446 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2014-2015
• Other Referred Cases: CIT-V, Hyderabad v. Smt. Aarti Mittal, Shri Aditya Mundada vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M. NARMADA
• Assessee Lawyers: P. MURALI MOHAN RAO
• Keywords: Bogus
• Section: 143(3); 271(1)(c)

Judgement Text

"आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ मɅ IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI MANJUNATHA. G, ACCOUNTANT MEMBER & SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 2093/Hyd/2017 (Ǔनधा[रण वष[ / Assessment Year: 2014-15) Tarun Kumar Goyal (HUF), Hyderabad. [PAN : AABHT6646N] Vs. Dy. CIT, Circle-2(2), Hyderabad. अपीलाथȸ / Appellant Ĥ× यथȸ / Respondent आ.अपी.सं / ITA No. 455/Hyd/2020 (Ǔनधा[रण वष[ / Assessment Year: 2014-15) Tarun Kumar Goyal (HUF), Hyderabad. [PAN : AABHT6646N] Vs. Assist. Commissioner of Income Tax, Central Circle-3(2), Hyderabad. अपीलाथȸ / Appellant Ĥ× यथȸ / Respondent Ǔनधा[ǐरती ɮवारा/Assessee by: Shri P. Murali Mohan Rao, AR राजè व ɮवारा/Revenue by: Mrs. M. Narmada, CIT-DR सुनवाई कȧ तारȣख/Date of hearing: 17/12/2024 घोषणा कȧ तारȣख/Pronouncement on: 28/01/2025 ITA No.2093/Hyd/2017 & 455/Hyd/2020 Tarun Kumar Goyal (HUF) Page 2 of 8 आदेश / ORDER PER K. NARASIMHA CHARY, J.M: Aggrieved by the orders dated 16/08/2017 and 31/01/2020 passed by the learned Commissioner of Income Tax (Appeals)-12, Hyderabad & learned Commissioner of Income Tax (Appeals)-11, Hyderabad (“learned CIT(A)”) respecƟvely, in the case of Sri Tarun Kumar Goyal (HUF) (“the assessee”), assessee preferred the capƟoned appeals for the AY 2014-15. 2. Briefly stated facts are that the assessee is a Hindu Undivided Family (HUF). It filed the return of income for the assessment year 2014- 15 declaring a total income of Rs. 31,48,400/-and claimed the exemption under section 10(38) of the Income Tax Act, 1961 (for short “the Act”). Case was selected for scrutiny for the reason of \"suspicious Long Term Capital Gain (LTCG) on shares”. 3. It could be seen from the record that the assessee claimed an exemption under section 10(38) of the Act for the LTCG earned from selling shares of M/s. Kailash Auto Finance Limited (KAFL), a listed company. The total sale amount for the KAFL shares was 38,10,750/-, and the assessee set off a capital loss of Rs. 6,167.47 from the sale of Reliance Power Ltd shares, calculating a net LTCG of Rs. 36,76,913, which was fully claimed as exempt. Assessee invested in M/s. Kailash Auto Finance Limited by purchasing 1,00,000 shares at Rs.1/- per share in 2012. These shares were sold in 2013 on multiple dates through HSE Securities Limited. Assessment under section 143(3) of the Act was completed by order dated 03/11/2016 by making an addition of Rs. 36,83,077/- which represented the sale consideration of shares, under the head \"Income from Other Sources.\" ITA No.2093/Hyd/2017 & 455/Hyd/2020 Tarun Kumar Goyal (HUF) Page 3 of 8 4. Aggrieved by such an acƟon of the learned Assessing Officer, assessee preferred appeal before the learned CIT(A). Learned CIT(A), concurred with the findings of learned Assessing Officer and upheld the addiƟons. Hence this appeal before us, by the assessee. 5. Learned AR submiƩed that the shares that were sold were acquired in earlier years and the learned Assessing Officer has not doubted the purchase of shares. According to him, the learned CIT(A) failed to consider various evidences filed by the assessee in the form of Bank Statements, Details of shares purchased, Share Bills, ConfirmaƟon leƩers, Statement of Accounts, Ledger copies about the existence, genuineness of the sales and purchases made during the year under consideraƟon, and that the learned Assessing Officer made the disallowance merely based on the order of SecuriƟes & Exchange Board of India (“SEBI”), without verifying the applicability and otherwise of the same in the assessee’s case. 6. Further, according to learned AR, the sale transacƟons between the assessee and the other party i.e., HSE SecuriƟes Ltd was not a pre- arranged transacƟon the share transacƟons have been made through M/s HSE SecuriƟes Ltd., a recognized stockbroker/member of BSE and that they are genuine. He further submiƩed that the impugned shares were of listed companies and that the assessee paid the sƟpulated tax u/s 111A of the Act that the sale transacƟon between the assessee and the other party was not a pre-arranged transacƟon, therefore, the learned Assessing Officer cannot deny the sale transacƟon. Learned AR further submiƩed that the learned Assessing Officer did not doubt the purchase of shares and conversion of shares into D-MAT Form through Government agency, thus sale cannot be stated as bogus; that the shares were in dematerialized Form and sold in electronic form and that they were genuine; that there is no menƟon in the impugned order that there ITA No.2093/Hyd/2017 & 455/Hyd/2020 Tarun Kumar Goyal (HUF) Page 4 of 8 is any nexus between the assessee and the party who purchased the shares through stock exchange; that the there is no incriminaƟng material to suggest that the seller has made compensatory payment to buyer for purchase of shares; that the authoriƟes should have noƟced that the judgement of jurisdicƟonal High Court in I.T.T.A. No. 490 of 2014 dated 30.07.2014 in the case of CIT-V, Hyderabad v. Smt. AarƟ MiƩal and should have held that the share transacƟons of the appellant are genuine; that the First Appellate Authority is incorrect in observing that the assessee has not declared any income under “Income DeclaraƟon Scheme (IDS)” on this scrip of “Kailash Auto Finance Limited’, which the learned Assessing Officer has considered the same in the assessment order; and that the SEBI later has liŌed the ban on the scrip “Kailesh Auto Finance Ltd”, which proves that the scrip is genuine. 7. Per contra, learned DR placed reliance on the observaƟons of the learned Assessing Officer in the assessment order and also the reasoning given by the learned CIT(A). 8. We have gone through the record in the light of the submissions made on either side. It could be seen from the assessment order that during the Financial Year 2013-14 relevant to the assessment year 2014- 15, the assessee sold shares for a total sale consideraƟon Rs. 38,10,750/- of M/s. Kailash Auto Finance Limited. The assessee aŌer adjusƟng the purchase cost of Rs. 1,07,310/- & Transfer Expenses of Rs. 26,527.82, worked out long term capital gain at Rs. 36,76,913/- and claimed the enƟre capital gain as exempt u/s 10(38) of the Act. 9. We further noted that the shares are purchased from M/s. SanskriƟ Vincom Private Limited and the same was purchased through Bank Statement which are furnished by the assessee as a proof for purchase and sale of shares. From the bank statements it is noted that ITA No.2093/Hyd/2017 & 455/Hyd/2020 Tarun Kumar Goyal (HUF) Page 5 of 8 shares purchased by the assessee were pertaining to M/s Kailash Auto Finance Limited and the transacƟons for the same were carried through banking channels. The main plank of contenƟon of assessee before us is that the learned Assessing Officer and the learned CIT(A) relied on the interim order of SEBI passed on 29/03/2016. Both the authoriƟes below referred to the same in their orders. 10. Now the Learned AR filed the copy of order of SEBI dated 21/09/2017 and argued that the company is dealing with M/s Kailash Auto Finance Limited, including the assessee parƟcularly, M/s SanskriƟ Vincom Private Limited which is menƟoned at item No. 126 at page 5 of the order is exonerated. Learned AR took us to page 5 and the Column denoƟng the name of EnƟty and parƟcularly, M/s. SanskriƟ Vincom Private Limited shown at item no.126, wherein the share price through M/s. SanskriƟ Vincom Private Limited is exonerated. 11. Apart from this, the learned AR placed reliance on the findings of the Coordinate Bench of this Tribunal in the case of Shri Aditya Mundada vs ITO ITA No. 632/H/2023 & ITA No. 2243/H/2018 wherein an idenƟcal issue of addiƟon towards Long-Term Capital Gain derived from the sale of shares of M/s. Kailash Auto Finance Limited and claimed exempƟon u/s 10(38) of the Act was involved. 12. On a perusal of the order dated 21/09/2017 passed by the SEBI, we found that though the preliminary examinaƟon into the dealings in the scrip of M/s Kailash Auto Finance Limited for the period between 17/1/2013 and 31/3/2015 was ordered and by way of interim ex-parte order dated 29/3/2016, 246 enƟƟes including the M/s. SanskriƟ Vincom Limited were restrained from accessing the securiƟes market and buying, selling or dealing in securiƟes, either directly or indirectly, in any manner whatsoever, Ɵll further direcƟons, aŌer an elaborate enquiry ITA No.2093/Hyd/2017 & 455/Hyd/2020 Tarun Kumar Goyal (HUF) Page 6 of 8 and detailed invesƟgaƟon into the role of all those enƟƟes, aŌer compleƟon of invesƟgaƟon by SEBI, no adverse evidence / adverse findings in respect of violaƟon of provisions of SEBI (ProhibiƟon of Fraudulent and Unfair Trade PracƟces RelaƟng to SecuriƟes Market) RegulaƟons, 2003 (PFUTP) were found in respect of 244 enƟƟes including M/s. SanskriƟ Vincom Private Limited and the interim order as well as the confirmatory orders were revoked. The order dated 21/9/2017 passed by the SEBI unequivocally establishes that nothing unusual or suspectable was there against either the scrip of M/s Kailash Auto Finance Limited or the dealings of M/s. SanskriƟ Vincom Private Limited. 13. Now coming to the findings returned by a Coordinate Bench of this Tribunal in the case of Aditya Mundada vs ITO (supra), for the sake of completeness, we extract the same hereunder: “9. In view of the above, learned counsel for the assessee made submission before us that there is no invesƟgaƟon carried out by the Directorate of InvesƟgaƟon of Kolkata in the case of the assessee or in the case of M/s. Kai/ash Auto Finance Limited and even now, there is no allegaƟon on assessee and the enƟre premise of the Revenue that SEBI has found irregulariƟes of jacking up all the prices which has been exonerated. We have gone through the order of SEBI dated 21.09.2017 end noted that SEBI has parƟcularly exonerated M/s. Kailash Auto Finance Limited, and shares traded through. Jatadhari MarkeƟng Private Limited are not under any invesƟgaƟon. In terms of the above facts and the facts narrated in SEBI report, we are of the view that there is no charge on the assessee that the assessee has entered into bogus transacƟons, or the shares of M/s. Kailash Auto Finance Limited was jacked up. Hence, we are of the lieu› that the transacƟons carried out by the assessee seems to be genuine and there is no evidence against the same. Hence, we delete the addiƟon made by the Assessing Officer and confined by the CIT(A) and allow this issue of assessee's appeal.” 14. This decision covers the facts of this case also on all its fours. In these circumstances, while respecƞully following the same, we agree with the contenƟons raised on behalf of the assessee and direct the ITA No.2093/Hyd/2017 & 455/Hyd/2020 Tarun Kumar Goyal (HUF) Page 7 of 8 learned Assessing Officer to delete the addiƟon made by disallowing exempƟon U/s. 10(38) of the Act. Grounds in ITA No. 2093/Hyd/2017 are allowed accordingly. 15. Coming to ITA 455/Hyd/2020, it is the appeal against the proceedings in respect of penalty U/s. 271(1)(c) of the Act levied by the learned Assessing Officer and confirmed by the learned CIT(A). since the quantum addiƟon is deleted, penalty has no legs to stand and therefore, the same is deleted. 16. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open court on this the 28th January, 2025. Sd/- Sd/- (MANJUNATHA. G) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 28/01/2025 OKK ITA No.2093/Hyd/2017 & 455/Hyd/2020 Tarun Kumar Goyal (HUF) Page 8 of 8 Copy forwarded to: 1. Tarun Kumar Goyal (HUF), /o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, Somajiguda, Hyderabad-500082. 2. Deputy Commissioner of Income Tax, Circle-2(2), Hyderabad. (ii) Assist. Commissioner of Income Tax, Central Circle-3(2), Hyderabad. 3. Pr. CIT, Hyderabad. (ii) Pr. CIT (Central), Hyderabad. 4. DR, ITAT, Hyderabad. 5. GUARD FILE. TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD "