TaxTMI 
TaxTMI 
TaxTMI 
2010 (1) TMI 890
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...., chemical raw materials, shares as well as into the business of financing, investment and consultancy services. During the course of assessment proceedings, the AO recorded that on going through the cash book and ledger of the assessee, it is seen that on a number of occasions, the assessee has shown receipts and repayments in cash from 4 persons, including a company. Show cause notice was issued as to why penalty u/s 271D and penalty u/s 271E of the Act should not be levied as loans were accepted and also repaid in amounts exceeding Rs.20,000/- in aggregate in cash. The assessee replied that cash was received from various parties as advance on account of purchase of shares of various companies for them, but due to price disagreement, the ....
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....the sub-broker in share trading business and hence could not act on behalf of the four parties to purchase shares. He held that it is mandatory to be registered with SEBI as a broker or sub broker for purchase and sale of shares on behalf of any client. He further noted that the assessee accepted cash in March, April, May and June, 2000 and repayments were made from January to March, 2001. 2.2 Aggrieved, the assessee carried the matter in appeal. The first appellate authority observed that the assessee had taken cash and deposited the same with the bank account with HDFC and later these amounts were paid back and accounts squared up. He referred to the statement of Mr. Girraj Agrawal, Director of the company that the amount was received in....
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....Kedia further submitted that the money received was advances given to the assessee for purchase of shares held by it. He pointed out that the amount was declared as advance against shares in the books of account and no interest is payable. He pointed out that the CBDT in its Circular No. 387 dated 6-7-1984, held that purchase/sale of shares is not covered by loans/deposit u/s 269SS. He contended that the stand of the assessee that it had received certain advances for purchase of shares has not been disputed by the AO and even in statement recorded u/s 131 from Shri Girraj Agrawal, no question was asked, to contradict this claim of the assessee. On the contrary, in the show cause notice, the AO agreed that this amount is an advance. Alternat....
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...., suggest that they cannot be advanced but can only be loans introduced by the assessee in its books of account. He pointed out that the cash amount received was immediately deposited in the bank account, which suggest that the assessee required the same for meeting certain immediate obligations. He further submits that the assessee is neither a broker nor a sub broker in share trading business and hence the assessee is not authorised to sell shares. He submitted that the assessee has not sold any shares nor he authorised to sell any share. He submitted that the theory flouted by the assessee, that it had received advances for the purchase, is only an after thought. He pointed out that there was a mark deviation in the assessee's stand as p....
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....nd the orders of the authorities below as well as the case laws cited, we hold as follows. 7. The assessee has been purchasing and selling shares in huge quantities. This is clear from Annexure 'A' to the assessment order. In fact the AO relied on this purchase and sale of shares for coming to a conclusion that the assessee had failed to establish its claim of investment in the shares and also that the provisions of section 43(5) will apply and the loss claimed by the assessee is nothing but a speculation loss. On the face of these findings, the AO as well as the CIT(Appeals), in our humble opinion, have wrongly concluded that the assessee could not purchase or sell shares, unless it is registered as a share broker or sub broker. No regist....
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....ted the loan or an advance. The two terms Loan and Advance are not the same and connote different nature of transactions. The amount received as an advance for the purchase of shares and declared as such in the books of account is different from a loan transaction. Third party evidences cannot be rejected without verification or further enquiry. Mere rejection of submissions made by the assessee and third party evidences produced by him, does not authorise either the AO or the Addl. Commissioner of Income to come to a conclusion that the explanation is not genuine or factually incorrect. On these facts, we are of the opinion that the conclusion drawn both by the AO as well as by the CIT(Appeals) is based on surmises and conjectures. Thus we....