TaxTMI 
TaxTMI 
2012 (10) TMI 64
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....government securities. The AO noticed that the assessee had earned profit of Rs.1,48,22,000/- on sale 1,50,000 shares of ALPS industries out of its opening stock. This profit was sought to be set off mainly against the loss of shares on sale of J.P. Industries and Himachal Futuristic Company Ltd. The assessee had purchased the shares of J.P. Industries on 12.2.2001 (@ Rs.88.35 per share); they were sold on 23.3.2001 @ Rs.33.95/- per share. Similarly, shares of Himachal Futuristic Company Ltd. were purchased on 8.1.2001 @ Rs.1397 per share and sold on 28.2.2001 @ Rs.756.50 per share. The shares were purchased through M/s A. Nitin Capital Services and again sold through that concern. The AO after considering the materials on record and the circumstances which included opportunities granted to M/s A. Nitin Capital Services Pvt. Ltd. (through summons under Section 131 to furnish various documents and evidence, such as, purchase and sale books for the relevant period, explanation regarding trading cycle of shares purchased and sold, the complete details of the clients from whom shares of J.P. Industries were purchased and sold and copies of delivery note submitted for each cycle during ....
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.... their sister concern. The appellant has also shown that the shares of M/s Himachal Futuristic were sold on 28.2.01 at Rs.756.50. However, the quoted shares for quoted price for M/s Himachal Futuristic on 12.2.01 was Rs.992. Again if the appellant has chosen he could have disposed the stock at a higher price a few days earlier. The very nature of the transaction entered into by the appellant shows that the purchase had been made at a higher price and not the prices quoted on the BSE. The sales have been made on dates when the price of the shares was at its lowest in the market. The appellant company has also not been the beneficiary of the dividend by these companies which has gone to M/s A. Nitin Capital Services according to the submissions made. The very fact that the directors of the two companies are so closely interrelated as also the fact that the necessary documents were not produced before the AO in the form of distinctive numbers of the shares traded, the books of accounts were not produced and repeated adjournments sought, establishes that the transaction was a sham transaction and not a genuine transaction. The close family connection between the 2 firms lays a higher o....
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....ecurities. Such business of sale and purchase of shares of other companies, according to the Tribunal, has to be deemed as speculative business and consequently any income or loss generated from such activity had to be treated as only speculation profit or speculation loss. The Tribunal, therefore, allowed the appeal. 5. The Revenue urges in the present appeal that the lack of any material to substantiate the genuineness of the transactions, the fact that even dividend was not enjoyed by the assessee for the period that it claimed to hold the shares of the two companies, the fact that no delivery of shares was effected and most importantly that shares were sold at the lowest price, clearly pointed to the sham nature of the transaction and the intention of the assessee to claim losses only for the purpose of setting off its profit. It was also argued that most importantly there was no evidence showing that consideration had ever been paid for the shares and that only book entries were made. Counsel emphasized that merely because the shares were shown to have been purchased on a particular date and sold later, there can be no assumption that they were actually traded and for the rel....
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....oss/Profit 1 12.2.01 J.P. Industries shares purchased from A. Nitin Capital Services Ltd. No. of Shares 214000 Rs.88.35 Total Rs.18906900 23.3.01 Rs.35.95 A Nitin Capital Service Ltd. Rs.7693300 Rs.11213600 Loss 2 8.1.01 Himachal Futuristic purchased from A. Jain & Co. (P) Ltd. No. of Shares 4700 shares Rs.1397 Total Rs.6565900 28.2.01 Rs.756.50 3355550 sold to A Nitin Capital Services Ltd. Rs.301035 Loss 3. ALPS 15000 shares Total Rs.9419700 17.6.00 17.6.00 Rs.24235425 Rs.14815725 Profit 9. In this case, the AO scrutinized the bills from M/s A. Nitin Capital Services and noticed that they were not serially numbered; they did not contain any voucher number, ledger folio number. They merely described the sale price of the shares of M/s J.P. Industries. The shares were apparently physically traded and not on de mat bases. M/s A. Nitin Capital Services was issued with summons and time was provided for its representative to explain the facts and circumstances. After repeated accommodation, the AO proceeded to frame the assessment orders since cooperation was not forthcoming. The order of the AO would reveal that on 5.3.2004, the assessee was asked to exp....
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....nd sophisticated legal devices to avoid tax and to expose the devices for what they really are and to refuse to give judicial benediction. It is necessary to remember, as observed by Lord Reid in Greenberg v. IRC (1970) 46 TC 240 (HL) that one must find out the true nature of transaction. It is unsafe to make bad laws of hard facts and one should avoid subverting the rule of law...." 11. The reasoning of the Tribunal that the acceptance of M/s A. Nitin Capital Services' claims in its returns would lead to the inference that the transactions with the assessee were genuine, in the opinion of this Court, is too broad to be accepted. The impugned order does not reveal whether the assessment was made under Section 143(1) or whether it was completed under Section 143(3). Furthermore, it is not clear as to how M/s A. Nitin Capital Services' books and other particulars were made available, especially, having regard to the fact that its representative sought repeated adjournments and since he did not furnish the necessary particulars after receiving summons under Section 131. Having regard to these circumstances, the fact that M/s A. Nitin Capital Services' assessments were complete....