Facts of the Case

  • A survey under Section 133A was conducted on 07.08.2012.
  • The Revenue alleged that the assessee introduced unaccounted income in the guise of LTCG through transactions in shares of REI Agro Ltd. and REI Six Ten Ltd.
  • LTCG amounts involved were substantial across AY 2008–09, 2009–10, and 2010–11.
  • The assessee claimed exemption on such LTCG.
  • The Assessing Officer treated transactions as sham and made additions under Section 68.
  • CIT(A) partly allowed the assessee’s appeal.
  • ITAT upheld CIT(A)’s order and deleted additions.
  • Revenue filed appeal before the Delhi High Court.

Issues Involved

  1. Whether LTCG claimed by the assessee was bogus and represented unaccounted income.
  2. Whether additions under Section 68 were justified.
  3. Whether reassessment under Sections 147/148 was validly sustained.
  4. Whether findings of ITAT and CIT(A) suffered from perversity warranting High Court interference.

Petitioner’s (Revenue) Arguments

  • The assessee introduced unaccounted income through bogus LTCG.
  • Transactions were structured using share dealings of REI Agro Group.
  • Investigation Wing findings and statements indicated accommodation entries.
  • Fund flow suggested routing of money via intermediary companies.
  • The entire transaction lacked genuineness and was a sham.

Respondent’s (Assessee) Arguments

  • Transactions were genuine and conducted through recognized stock exchange.
  • Shares were purchased and sold via brokers with proper documentation.
  • Payments were made and received through banking channels.
  • Securities Transaction Tax (STT) was paid.
  • No evidence of price manipulation or collusion was established.
  • The assessee was regularly engaged in share trading and investment activities.

Court Findings / Order

  • The High Court observed that both CIT(A) and ITAT recorded concurrent findings of fact.
  • No material evidence was produced by Revenue to establish bogus transactions.
  • Statements relied upon did not prove price manipulation or collusion.
  • Transactions were carried out through stock exchange at quoted prices with proper documentation.
  • Shares were reflected in books and converted from stock-in-trade to investment legitimately.
  • Additions were based on assumptions and conjectures without supporting evidence.
  • No substantial question of law arose.

Final Order

  • Appeals dismissed.
  • No interference with ITAT order.

 

Important Clarifications by Court

  • Mere suspicion or investigation reports cannot justify addition under Section 68 without concrete evidence.
  • Share transactions through stock exchange with STT and banking channels indicate genuineness.
  • Conversion of stock-in-trade into investment does not render transactions bogus.
  • Concurrent factual findings by CIT(A) and ITAT cannot be disturbed unless perverse.

Sections Involved

  • Section 68 – Unexplained Cash Credit
  • Section 147 – Income Escaping Assessment
  • Section 148 – Reassessment Notice
  • Section 133A – Survey Proceedings
  • Securities Transaction Tax (STT) Provisions

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS12012023ITA132023_205605.pdf

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