TaxTMI 
TaxTMI 
2011 (10) TMI 630
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....device to evade actual payment of tax by claiming Long Term Capital Gain. b) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the capital gain of ₹ 27,58,778/- on sale of shares as LTCG whereas the A.O. had treated the same as STCG on protective basis for want of material evidence in the transaction of sale and purchase of these shares especially the duration for which the shares were held by the assessee. 3. For these and other reasons that may be urged at the time of hearing, it is requested that the order of the CIT(A) be quashed and that of the A.O. restored." 3. Before adverting to the merits of the case it is placed on record that when the case was taken up for hearing on 12.04.2011 the case was adjourned at the request of the learned D.R., who wanted to file certain documents. Subsequently the case was adjourned on behalf of the assessee and the learned D.R. in the months of June, August and finally to October 2011. When this was taken up on 12.10.2011 the learned D.R. Shri. P.K.B. Menon has informed that the facts in the case are similar to the facts in the case of A Sunder Raj, HUF in ITA No. 413/Mum/2010 and placed on....
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....ich is as under: - "6. I have carefully considered the above facts and submissions and have also gone through the material on record and the assessment records and also the order of the AO. I find that the AO has given his finding and observations in paras 9 to 16 of his order. The claim of the appellant of having purchased 42,000 shares of Twenty First Century (India ) Ltd. in physical form from intra day speculation profit of ₹ 1,41,525/- on shares of ACC Ltd and ₹ 15/- having been paid in cash as per voucher of M/s. P. K. Agarwal & Co. and threafter the shares having been dematerialized on 15.4.2003 as per demat account submitted by the assessee and sold as per bills referred to hereinabove are recorded by the AO in his order. The AO has further made certain observations in para 10 and 11. Whereas in para 10, he has depicted certain anomalies such as the date of purchase as per assessee's submission and date of purchase as per broker's note, date of sale and quantity of shares as per assessee's submission and date as per bill and of shares, bills not submitted for sale of 12,000 shares, demat balance as on 31.3.2004 at 15,000. Whereas the assessee has claimed to hav....
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.... as per broker's note and similarly, the date of sale etc., this is because of the appellant having not maintained regular books of accounts. The date on which the appellant has claimed having purchased and sold in the submission could be the dates on which the conversations regarding the transactions with broker took place. Moreover, there is no substantial difference in the dates as well which affects either the genuineness of the transactions or the period of the transaction as such. Regarding the observation of the AO that bills not submitted of 12O0 shares it was also contended that this is also factual1y incorrect. The appellant had submitted the entire bills of sales during the assessment proceeding. Further, in respect of the AO's observation that assessee has not shown speculation profit in the return of income filed for A.Y. 2003-04 it has also been contended that the AO's observation is factually incorrect and wrong, the appellant had submitted the copy of acknowledgement of return of income before the AO. Similarly, for the demat balance as on 31.3.2004, it was contended that the reasons for this was also explained before the AO during the assessment proceedings. 6.3 A....
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....and surmises no disallowance or additions can be sustained. Therefore, the purchases having made through broker M/s. P. K. Agarwal & Co. who issued broker note and payment of purchase also having been adjusted against the short term gain of the shares of ACC Ltd. sold through this broker only, the purchase of shares of Twenty First Century (India) Ltd. during the year in physical form by the appellant cannot be discarded merely suspicion and neither the transaction can be treated as carried out by resorting to colourable devices or dubious methods. Therefore, the reliance placed by the AO in the case of Mcdowells & Co. Ltd. is not applicable to the facts of the appellant's case. Conversely, the appellant's case is covered by the decision of Hon'ble P&H High Court in the of CIT vs. Anupam Kapoor, 299 ITR 179, wherein on almost similar facts, observed that "the tribunal took into consideration that the AO had not dealt with all the documents placed before him and had simply presumed that the transaction was bogus and held that the purchase contract note, contract note for sales, distinctive numbers of shares purchased and sold, copy of the share certificates and the quotation of shar....
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....fied by the department from an internal booklet supplied to the officers. 7. Per contra,the learned counsel referred to page No. 9 of the paper book to submit that assessee has purchased shares in the stock market of ACC of 23300 shares which were sold on the same day and thereby earned profit of ₹ 1,41,525/- and this amount was utilised for purchase of shares for which the bills of M/s. P.K. Agarwal & Co. dated 05.04.2002 was submitted to the A.O. He referred to the statement No. 70 in A-2003309 dated 05.04.2002 in the Stock Exchange, Calcutta from page 153 to 157 by which assessee has purchased 42000 shares of Twenty First Century (India) Ltd. Since the profit earned by assessee on 02.04.2002 was with the broker there is no further payment towards this purchase. It was further submitted that the shares were taken delivery and were sent to the company for transfer of the name, which was acknowledged by the said company on 29.04.2002 placed in the paper book at page 13. The shares were transferred vide folio No. 479 and certificate Nos. being 3949- 64 and 3930 - 42 and 29 share certificates having 42000 shares were delivered to the assessee. Subsequently assessee opened a de....
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....klet of the department of how the bogus transactions are arranged and particularly how certain brokers are involved in arranging capital gains profits. While admitting that this exercise undertaken by the Department may be true in few cases, the modus operandi pointed out by the learned D.R. was not established in assessee's case. There is no enquiry with reference to the share transactions undertaken in A.Y. 2002-03 with reference to the capital gains/speculation profit earned in the first instance, there is no dispute of offering incomes in that year i.e. A.Y. 2003-04 with reference to the profit on purchase of shares, there is also no enquiry with reference to the sale price received by the assessee. If the modus operandi as explained by the learned D.R. regarding 'purchase of capital gains' is to be believed the A.O. should have verified how the sale price was received in assessee's bank account. Whether there was any corresponding payment in cash either through the bank or to the subsidiaries of brokers as was made out by the Department on enquiry in some cases. In fact there are no enquiries made by the A.O. while completing the assessment. Invoking the Mcdowell & Co. case an....