TaxTMI 
TaxTMI 
2018 (11) TMI 131
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....12.2010 respectively framed by ACIT-4(1) , ITO 4(1) & ACIT-3(1), Indore. 2. The relevant grounds in each three appeals reads as follows; I.T.A. No.315/Ind/ 2012 in respect of Smt. Annapurna Maheshwari pertaining to Assessment Year 2008-09 1. That the Learned CIT(A) erred in confirming the action of the AO of treating the short term capital gain of Rs. 41,29,512/- taxable u/s ll1A @ 10% as income from other sources by holding these transactions as sham and bogus. That on the facts and in the circumstances of the case and in law these transactions are genuine and the treatment of the said transaction by the Assessing Officer is wrong and bad in law and it is prayed that the short term capital gain of Rs. 41,29,512/- be accepted as such. 2. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises. I.T.A. No.252/Ind/ 2016 in respect of Smt. Annapurna Maheshwari pertaining to Assessment Year 2010-11 1. That the Learned CIT (A) erred in upholding the action of the AO of treating and adding short term capital gain offered of Rs. 28,31,383/- as Inc....
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.... from purchase/sale of shares as bogus and sham and taxing them as unexplained credit u/s 68 of the Act by both the lower authorities. As the issues raised are common these three appeals were heard together and being disposed off by this common order for sake of convenience and brevity. 4. For the purpose of adjudication we will take up the facts of Smt. Annapurna Maheshwari for Assessment Year 2008-09 relating to I.T.A. No.315/Ind/2012 and our decision on the common issue referred above shall be applied on the remaining two appeals to be dealt in forthcoming paragraphs. 5. Brief facts relating to Smt. Annapurna Maheshwari for Assessment Year 2008-09 as culled out from the records are that the assessee is an individual having regular source of income from salary, house property, capital gain and income from other sources. Income of Rs. 46,16,412/- declared in the income tax return submitted on 31.07.2010. Return filed were processed u/s 143(1). Case selected for scrutiny. Statutory notice u/s 143(2) of the Act duly served upon the assessee. While scrutinizing the details the learned Assessing Officer (In short 'Ld.A.O') observed that Short Term Capital Gain of Rs. 41,29,512/- has....
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....h the AO has to function and operate. Firstly, these transactions which are normally welldocumented and are secretly negotiated are scrutinized by the AO after a sufficient gap of time i.e. nearly two years from the end of the relevant F.Y and then when the appellant/assessee and the other persons abetting the assesee in such manipulation are confronted by the AO, there is usual tendency to evade the replies or in the least to delay the replies. The AO again has to finalize the proceedings within the statutory limitation involved and then he cannot devote the entire time available at his disposal to a particular case. Here, it will be pertinent to make reference to the observation of the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT 214 ITR 8()l(SC) made in the context of sale and purchase transactions of prize winning lottery tickets which are very much applicable to the facts of the case. The same are as extracted here under: "The matter has to be considered in the light of human probalities. The Chairman of the Settlement Commission has emphasized that the appellant did posses the winning ticket which was surrendered to the Race Club and in return a crossed che....
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....iled of manipulation of stock prices of such dubious companies by the operator and manipulators with or without the active help and assistance of to spread rumours or highly exaggerated growth/profit prospects' of such companies leading to such phenomenal price rise. Reference can be made to the following decisions: (a) CWT v. Rohtas Industries Ltd., 67 ITR 283 (SC), wherein it was held that "In the absence of any direct evidence, a judicial or quasijudicial Tribunal can base its conclusions on the basis of what arc known as notorious facts bearing in mind the principles of section 144 of the Evidence Act." (b) 'Attar Singh Gurmukh Singh v. ITO 191 ITR 667(SC) wherein, while interpreting the provisions of section 40A(3), it was held that "In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under circulation in our country."' 4.3.3; AO's finding that it is a case of dubious tax planning, it has to be necessarily upheld for the simple reasons that the only object of the appellant in so entering into such dubious transactions was evading/ avoiding incidence of tax by bringing unaccounted cash needed f....
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....nal. 8. At the outset Ld. Senior Counsel for the assessee submitted that the issue raised in the instant appeal is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench in the case of Shri Omprakash Phatandas Phajwani v/s ACIT, I.T.A.No.968/Ind/2016 order dated 19.1.2018 wherein similar facts relating to sale of IFCI Ltd shares and abnormal delay in making the payment of purchase to the share broker were there for adjudication and the Co-ordinate Bench allowed the assessee's appeal holding that for the alleged short term capital gain both the lower authorities erred in treating the Short Term Capital Gain as income from other sources. Ld. Senior Counsel for the assessee has also submitted that no proper opportunity was given to the assessee to cross examine Shri Vishal J Shah who is the son of the share broker and the statement of Shri Vijay V Shah was recorded by the DDIT, Mumbai and not by the Assessing Officer himself. Thus the truthfulness of the statement remain untested by the Ld.A.O. He further requested that an adequate opportunity ought to have been given to the assessee to cross examine the share broker through whom the equity shares of IFCI....
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....e payment for purchases made through account payee cheque. These two reasons lead the way of the alleged treatment of Short Term Capital Gain from sale of shares declared by the assessee as income from other sources along with treating them as sham and bogus transactions. 12. We find that very same set of facts came up before the Coordinate Bench in the case of Shri Omprakash Phatandas Phajwani v/s ACIT (supra) wherein the shares of IFCI Ltd were purchased and there was a significant gap in between the date of purchase as per the contract note and date of payment for the purchases. The Tribunal decided the issue in favour of the assessee observing as follows; "7. We have heard rival contentions and perused the records carefully. 8. In Ground No.1 to 6 raised by the assessee, the sole grievance is against the order of Ld.CIT(A) partly confirming the addition made by Ld. A.O by treating the short term capital gain of Rs. 6,62,870/as income from undisclosed sources which was added by the Ld.A.O applying provisions of section 68 of the Act. We observe that the issue revolves round the transaction of short term capital gain from sale of shares. The Ld.A.O has doubted the genuineness ....
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....hort term capital gain of Rs. 2,78,413/ - and long term capital gain of Rs. 3,41,683/-. During the year under consideration the assessee claimed long term capital gain of Rs. 34,65,171/ - on a scrip named Shri Nidhi Trading Limited. On scrutinizing the complete transaction the total sale value came to Rs. 36,72,631/- and total purchase value came to Rs. 2,07,460/-. The assessee accordingly showed capital gain of Rs. 34,65,171/-. The Assessing Officer after seeking details from the parties treated the sum of Rs. 36,72,631/- credited in the books of accounts unexplained cash credit under section 68 of the Act and brought it to tax. The assessee carried the matter in appeal before the Commissioner (Appeals) who allowed the said ground of appeal and directed the Assessing Officer to accept the claim of the assessee of Rs. 34,65,171/ - as capital gains. The revenue carried the matter in appeal before the Tribunal, but did not succeed. 3. Mr. Manav Mehta, learned counsel for the appellant has assailed the impugned order by placing reliance upon the reasoning adopted by the Assessing Officer. 4. As can be seen from the impugned order, the Tribunal, after appreciating the evidence on....
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....tion of the evidence of record, does not give rise to any question of law, much less, a substantial question of law so as to warrant interference. The appeal is, accordingly, dismissed." 11. Now in order to appreciate and examine the facts in the light of above judgment, we find that the assessee placed following documents before the lower authorities; 1.Contract note cum bill of broker from whom shares were purchased; 2. Confirmation of accounts from the same broker 3. Copy of ledger accounts of Broker 4. Copy of bank account of the assessee 5. Copy of D-mat account of the assessee 6. Copy of statement of affairs of the assessee 7. Copy of contract note cum bill for sale of shares 12. Now above referred details except for the genuineness of purchase, the Ld.A.O has not challenged the genuineness of other details most importantly the sale of shares which have been effected by the assessee through Bombay Stock Exchange portal and sold through Angel Capital & Debt Market Ltd. The relevant documents in the paper book from page 23 to 30 prove beyond doubt the genuineness of sale of equity shares. It is also not disputed that the share of IFCI Ltd were dematiz....
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....in the range of 8 to 9 months and the denial of the share broker of the alleged transaction even when the contract note has been issued showing complete details of the shares purchased, settlement number, order number, security name, purchase rate, service tax charged and all the necessary ingredients are mentioned in the contract note for the purchase of equity shares of well known company i.e. IFCI Ltd, then in such situation the purchase cannot be doubted. Therefore if the purchase and sale are not doubted as the payments made for purchase and sale consideration received are also genuine, demat account has been used for the alleged transactions of purchase and sale, then mere delay in payment itself cannot prove that the transactions are sham and bogus. We therefore respectfully following the decision of Co-ordinate Bench and in view of our above finding set aside the order of the lower authorities and allow the ground raised by the assessee and direct the Ld. Assessing Officer to treat the alleged profit from sale and purchase of equity shares of IFCI Ltd at Rs. 41,29,512/- as short term capital gain and tax accordingly. In the result appeal of the assessee is allowed. 14. Now....
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....f the broker and as the assessee has sold them in a very short period they were not transferred to her demat account. It is not the case of revenue that the broker i.e. HDIL Financial Ltd has not received the delivery of shares purchased and has not delivered the shares at the time of sale. In such situation treating of income of Rs. 2,49,045/- as business income will not be justified. We therefore set aside the finding of lower authorities and direct the Assessing Officer to tax the income of Rs. 2,49,045/- treating it as Short Term Capital Gain from sale of shares. Ground No.2 of the assessee is allowed. 17. Ground No.3 is general in nature which needs no adjudication. 18. In the result the grounds raised by the assessee for Assessment Year 2010-11 are allowed. 19. Now we take I.T.A.No.53/Ind/2014 in the case of Shri Pradeep Maheshwari for Assessment Year 2008-09 wherein the assessee has raised three grounds. Issues raised in Ground No.1 & 2 relates to treatment of short term capital gain and long term capital gain at Rs. 23,80,747/- and Rs. 17,23,052/- as unexplained cash credits u/s 68 of the Act. 20. As far as Ground No.1 relating to Short Term Capital Gain of Rs. 28,31,38....
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....rpose of claiming the exemption for Long Term Capital Gain the listed equity shares should be held by the assessee for more than 12 months. From perusal of facts we observe that the alleged income of Rs. 17,23,052/- was earned from two transactions, firstly from selling 10,000 equity shares of IFCI Ltd giving a gain of Rs.,4,05,418/- and another transaction of selling 25,000 equity shares of IFCI Ltd giving gain of Rs. 13,17,634/-. In both these transactions the purchase date i.e. date of contract note is 16.06.06 and 25.7.06. The payment for these purchase was made on 04.05.2007 and most importantly as discenable from paper book Page-21 the equity shares purchased came in to the demat account of the assessee as on 25.6.2007, which means that the transfer of equity shares into the demat account of the assessee is after making the payment on 4.5.2007. It is true that the purchase date are as per contract note is 16.6.06 and 25.6.06 but the payment for the purchase has occurred on 4.5.2007 and the transfer of the shares into the demat account of the assessee has been done after making the payment and these equity shares of IFCI Ltd were sold on 26.6.07 and 27.8.07. This shows that th....