TaxTMI 
TaxTMI 
2017 (3) TMI 434
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....Sampat(JKS)were the Directors of the Mahasagar Group, one of the main companies of the group was M/s. Alliance Intermediaries and Network Pvt. Ltd. (Alliance).It was observed by the AO that MMC and Group concerns were engaged in the business of issuing fraudulent bills and providing bogus speculation profit/losses,that he had entered into transaction with Alliance to the tune of Rs. 26.31 lakhs,that it had purchased shares of Karuna Cable Ltd. (KCL) through Alliance.The AO issued a show cause notice to the assessee on 07.12.2011 in that regard.In its reply,the assessee said that the shares were transferred through D-mat Account, that he had sold shares through stock exchange,that share transactions entered into were genuine,that he had paid money/received money through banking channels. The AO observed that the assessee had taken delivery of shares through off market and sold the shares through market,that he could manage the transaction through 'touch and go' technique. He asked the assessee as to why STCG should not be treated as undisclosed income of the assessee u/s.68 of the Act. In its reply the assessee argued that in the statements of MMC his name was not appearing.He asked....
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....d the shares through other broker, that he could not have purchased the shares from Alliance, that the sales of shares was beyond doubt,that the genuineness of the transaction was not proved, that the D-mat statement produced by assessee showed that shares had been transferred from Alliance, that it was an accommodation entry.The FAA issued notice for enhancing the income and to treat it as unexplained cash credit.Finally, he held that sale proceeds of shares sold by the assessee amounting to Rs. 32.34 lakhs,was to be treated as unexplained cash credit and that same was to be assessed in his hands under the head 'income from other sources'. 5. Before us,it was argued that the shares were purchased and sold through DMAT account, that payments made for purchase was through banking channels, that the FAA himself had not doubted the sale of shares, that he had added the entire sale proceeds to the income of the assessee,that the assessee had asked for cross examination of MMC.He referred to the case of Smt. Ananya Singh (ITA/6493/Mum/2014-AY 2005-06 dt.11.03.15) and stated that facts of both the cases are identical,that in that matter also the assessee had purchased shares of KCL, tha....
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....issue fictitious bills or bills for claiming non-genuine profit/ loss.MMC has given a general statement disclosing broader outline of the transactions entered into by him and the group entities.He had never stated that all the transactions entered into by group were non genuine. His statement was a good lead to take the investigation further and make specific queries. But it was not done.Now,we are left with the general statement of MMC on side and on the other side are the facts like payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account,FAA's finding that the sale was not in doubt,non observation of principle of natural justice by not providing cross examination of MMC.If all these facts and circumstances are weighed in the scale of reasoning,it would tilt in favour of the assessee.We are of the opinion that there was no justification on part of the FAA to direct the AO to tax the entire sale proceed of shares in the hands of the assessee during the year under consideration.Similarly,the AO was not justified to hold the STCG as business transaction.The assessee was not dealing in the shares and securities and the shar....
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....ugh de-mate account and assessee had sold the shares through stock exchange the transitions entered by assessee was genuine. 4. In view of the above discussion the AO brought to tax the short term capital gain of Rs. 2,08,693/- earned by the assessee and which had been brought in the books of the assessee. Accordingly the AO made an addition of Rs. 2,08,693/- u/s.68 of the I.T. Act. 5. By the impugned order, the Ld. CIT(A) held that the sale proceeds of shares received by the assessee amounting to Rs. 12,27,623/- was unexplained cash credit. The CIT(A), therefore, directed the AO to assess Rs. 12,27,623/- as income from other sources from the bogus shares transaction. The income assessed by AO was accordingly enhanced. 6. Against above order of Ld. CIT(A), assessee is in further appeal before us. 7. The Ld. AR submitted that assessee genuinely purchase the shares, our attention was invited to the copies of purchase bills and contract notes of Karuna Cables Ltd. places at pages 8-17 of the paper book. Our attention was also invited to the copy of ledger account for the period from 1/4/2004 to 31/3/2005 and 1/4/2005 to 31/3/2006 in the books of the assessee and confirmation o....
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....d in the demat Account of the assessee held with ICICI Bank, copy of demat statement was placed on page 21-22 of compilation. A reference to the same would show that the shares of Karuna Cables were received in the demat Account of the assessee on purchase and then transferred to the DP account of the assessee maintained with the broker Rajidas Nagarmal Consultants Pvt. Ltd. through whom sales have been effected on the stock exchange platform. We also found that in the instant case, only purchase has been effected from Alliance, whereas sale has been effected through another broker i.e. M/s. Ramjidas Nagarmal Consultants Pvt. Ltd. who has no connection with Mr. Mukesh Chokshi and there is nothing on record which suggests that M/s. Ramjidas Nagarmal Consultants Pvt. Ltd. has issued bogus bills to the assessee or above sale transaction is not genuine. With regard to the statement of Mr. Mukesh Chokshi recorded, it was contended by Ld. AR that in the statement of Mr. Mukesh Chokshi, the assessee was not named. Further, during the course of assessment proceedings, the assessee had requested the ld. AO to allow an opportunity to cross examine Mr. Mukesh Chokshi. However the Ld. AO could....
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....foresaid four companies to the effect that the shares were in-fact transferred to the name of the Assessee. In these circumstances, the decision of the ITAT in holding that the Assessee had purchased shares out of the funds duly disclosed by the Assessee cannot be faulted. Similarly, the sale of the said shares for Rs. 1,41,08,484/- through two Brokers namely, M/s Richmond Securities Pvt. Ltd. and M/s. Scorpio Management Consultants Pvt. Ltd. cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in question are still lying with the Assessee nor it is the case of the Revenue that the amounts received by the Assessee on sale of the shares is more than what is declared by the Assessee. Though there is some discrepancy in the statement of the Director of M/s. Richmand Securities Pvt. Ltd. regarding the sale transaction, the Tribunal relying on the statement of the employee of M/s. Richmand Securities Pvt. Ltd. held that the sale transaction was genuine. In these circumstances, the decision of the ITAT in holding that the purchase and sale of shares are genuine and therefore, the As....