TaxTMI 
TaxTMI 
2012 (3) TMI 498
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....claim of purchase from M/s. Swan Securities Pvt. Ltd. The broker M/s. Swan Securities Pvt. Ltd. although confirmed the purchase being made by the assessee and intimated that it was off market transaction but did not provide various details called for by the AO to prove the transfer of shares to his colleague on the date of purchase and also the names of the persons from whom the shares were purchased which were sold to the assessee and other details. Also the intimation of this off market transaction was not sent by the broker to the stock exchange as per prescribed procedure. The AO further observed that the assessee failed to establish that the shares were held for more than 12 months. After discussing the matter in detail in the assessment order, the AO concluded that as the assessee and his share broker have not filed various details called for and not proved that the shares were actually purchased in April, 2005 and held for a period of more than 12 months. Hence, he treated the transaction as sham transaction and accordingly treated the amount of Rs. 22,93,718/- found credited in the assessee's books as unexplained cash credit u/s 68 of the IT Act and made the addition th....
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....cash to the purchase of shares against the payments made by them to the appellant by way of purchase consideration for shares purchased by them. Hence, the addition cannot be made for unexplained cash credit treating the transaction, as sham as held by the Hon'ble ITAT Agra Bench in the case of Smt. Memo "Dey vs ACIT 7 DTR 158 (Agra) (Trib). (h) The bank statement was furnished which indicates the payment of the purchase consideration paid to the broker and the amount received on the sale of shares through account payee cheques. (i) The demat account of the appellant also indicates both the purchase of the shares and the sales of the concerned shares." 3. The learned CIT(A) considering the facts of the case in the light of the submissions of the assessee directed the Assessing Officer to reduce the addition as short term capital gain (STCG for short) instead of making addition of unexplained cash credit. The appeal of the assessee was accordingly allowed. The findings of the learned CIT(A) in the impugned order in para 4.1 and 4.2 are reproduced as under: "4.1 I have considered the facts and the submissions. From the details submitted the appellant....
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....hares hence, it cannot be termed as unexplained cash credit. However, it is also a fact that the appellant has not proved that shares were actually purchased in April,2005 but evidences suggest that it were purchased in March, 2007. Hence, the appellant has not been able to prove that the shares were held for more than one year so it cannot be taken as long term capital gain. Therefore, in my view, the appellant's claim that the gain should be treated as long term capital gain and also to be treated as exempt income is not acceptable. At the same time, the Assessing Officer's treatment of receipt of amount as income from other sources u/s.68, is also not justified as the evidence is there that the amount has been received from Motilal Oswal Securities. Limited on sale of shares and also evident from the movement of shares as appearing in the demat account. Therefore, the correct approach will be to treat the income earned as short term capital gain. Accordingly, the Assessing Officer is directed to reduce the addition to Rs. 19,78,515/- as short term capital gain instead of making the addition of Rs. 22,93,718/- as unexplained cash credit." 4. The assessee in his appeal ....
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....the documents filed on record clearly prove purchase of shares by the assessee in April, 2005. He has relied upon the CBDT Circular No.704 dated 28-04-1995 in which it was explained that in case the transactions took place directly between the parties and not through stock exchange, the date of contact of sale as declared by the parties was to be treated as date of transfer provided is it followed up by actual delivery of shares and the transfer deeds. Copy of the same is placed on record. He has further submitted that sale bills were filed before the AO and all the sale transactions were conducted through account payee cheques on which security transaction tax has been paid along with stamp duty. PB-2 is the ledger account of the broker M/s. Motilal Oswal Securities Ltd. to show the transaction in a sum of Rs. 16.42 lacs. PB-3 to 7 are the brokers contract note to prove genuine sales of the shares. He has, therefore, submitted that since sales are not in doubt would prove that the assessee made genuine purchases of the shares. He has relied upon the order of ITAT Ahmedabad Bench in the group cases of Smt. Vimlarani Biharilal Batra and others Vs ACIT in ITA No.762/Ahd/2009 order da....
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....hase of the shares through banking channel. PB-9 is debit note of the broker charging interest on the outstanding amount against the assessee in accounting year 2006-07. PB-17 is ledger account to show that shares have been purchased by the assessee in April, 2005 through the broker M/s. Swan Securities Pvt. Ltd. PB-22 is also the statement of bills containing the closing balance of the shares purchased by the assessee on 31-03-2006. PB-12 to 16 are the brokers debit note to support the contention of the assessee that shares were purchased in April, 2005. The assessee also filed sale bills to show that the same shares were sold through the broker M/s. Motilal Oswal Securities Ltd. and payments have been received through account payee cheques on which security transactions taxes and stamp duty have been paid. The same is supported by PB-2 which is ledger account of the broker through whom shares were sold at Rs. 16.42 lacs. PB-3 to 7 are the brokers contract note to show that shares were sold in March, 2007. Copy of the bank statement was filed in support of the contention. PB-22 is the balance sheet of the assessee as on 31-03-2006 to show outstanding liability in the name of M/s. ....
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....t proving the receipt of sales consideration and payment of purchases, copy of the balance sheet of the earlier year, confirmation/ledger account of the assessee from the brokers books of accounts and the quotation of the stock exchange, letter of the Calcutta Stock Exchange (PB-8) confirming sales made on 15-04-2004 of M/s. Herald Commerce Ltd. by the broker. The purchase of shares of M/s. Silicon Valley Infotech Ltd. on 21-03-2003 was also confirmed. No details of M/s. Globe Stock & Securities Ltd. are mentioned. Thus, the findings of the AO were incorrect as regards this fact. The assessee submitted that since transactions were off market by the brokers, therefore, information given by the stock exchange would not be relevant to the matter in issue. Despite part of the transactions have been confirmed the stock exchange, the purchases and sales of shares were fully supported by copies of the contract note and the details along with account and confirmation etc. of the brokers copies of which are filed in the paper book. The purchase of shares was duly recorded and thus the transactions were made out of disclosed funds and bills of purchase and sales of the shares were duly recor....
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....d the similar addition vide order dated 31-10-2007 copy of which is filed at page 17 of the paper book of the case law. The identical issue was considered by ITAT Ahmedabad 'B' Bench in the case of Mahesh Kumar Guipta Vs ITO in ITA No. 2814/Ahd/2007 and 2828/Ahd/2008 dated 07-01-2011 in which in Para 16 of the order it was held as under: "16. We have considered the rival submissions and material available on record. It was submitted by the assessee that all the transactions were off market transactions and were not conducted through stock exchange. Therefore, information furnished by the stock exchanges was irrelevant. The purchase and sales of shares were fully supported by the copies of contract notes and bills along with account confirmation etc. The purchases of shares were duly recorded and these were made out of disclosed funds and the bills were made by account payee cheques. The bills of purchase and sales of shares were duly recorded and supported by the documents. The brokers through whom such transactions were made have confirmed the same and same confirmations are filed in the paper book. The assessee had also filed copy of demat account showing the pur....
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....clearly confirmed that the shares of both the companies were listed with the exchange. We find that the genuineness of the transactions of purchase and sales of shares. In the remand report it was clearly mentioned that the transaction has been clearly confirmed by the brokers but also through separate letter issued by the brokers dt, 6.3.2006, We find that the CIT(A) has called for the remand report and the inquiries were conducted to ascertain whether or not transactions even though they were conducted on-line it has been duly reported by exchange as required by the guidelines issued by the SEBI. The AO has furnished report dt.24.4.2007 wherein it has been mentioned that the brokers and the depository have confirmed the said share transactions. Therefore, we are of the view that the CIT(A) is justified in deleting the same and our interference is not required." The same decision is also considered by another Bench of the Tribunal in the case of Sheth Heena Akshay Vs DCIT (supra) and addition has been deleted (PB-5). These facts would prove that the addition made in the case of Shri Sanjaykumar Agarrwal has been deleted by the learned CIT(A) and his appellate order has be....
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....ry that shares should have been listed in recognized stock exchange and according to the learned Counsel for the assessee it is not necessary that shares should be sold through recognized stock exchange. According to proviso to section 2 (42A) of the IT Act, the requirement is that assessee should hold the shares in company listed in the recognized stock exchange which is not disputed in this case. The identity of the brokers has not been doubted. Even if the sale transactions were of off market transactions, the same are properly documented and supported by evidences. The purchase of shares in the preceding assessment year 2006-07 is not doubted by the AO even while finalizing the scrutiny assessment u/s 143 (3) of the IT Act. Since the shares have been reflected in the balance sheet of the preceding assessment year, therefore, genuineness of the purchase of the shares in earlier years should not have been doubted by the AO in the assessment year under appeal particularly when in earlier year the assessment was made in scrutiny. Thus, the above evidence and explanation of the assessee support the case of the assessee that the assessee entered into genuine transaction. The details ....