TaxTMI 
TaxTMI 
2021 (6) TMI 923
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....e Tax Act' 1956. 2. That, the Ld. Commissioner of Income Tax (Appeals)-Il, Indore has erred to confirm the addition made in the present case made by the Ld. A.O. merely on the basis of information received from Financial Investigation Unit-MOU, New Delhi relying on which investigation was carried out by DDIT (Inv.), Indore, however such addition is bad in law in absence of any further enquiry I investigation carried on by the Ld. A.O. 3. That, on the facts and in circumstances of the case, Ld. Commissioner of Income Tax (Appeals)-Il, Indore has erred to confirm the disallowance of exemption Us. 10(38) considering it to be not genuine, such act is totally bad in law, as all the transaction were held through banking channel and there was no finding or enquiry into the appellant case regarding generation of unaccounted money and that, it was her own money which was diverted as LTCG. 4. That, on the facts and in circumstances of the case, Ld. Commissioner of Income Tax (Appeals)-Il, Indore has erred to confirm disallowance of the exemption claimed on the ground, that transaction of purchase was effected through a derecognized entity, as appellant was tota....
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....long with required documents. Summons were also issued to other connected parties. Assessee's case was reopened for reassessment proceedings. Notice u/s. 148 of the Act was issued on 28.3.2016 after recording reasons and getting prior approval from the competent authority. Notice u/s. 142(1) of the Act was served upon the assessee. Copy of the return filed on 27.03.2012 declaring income of Rs. 9,10,070/- was again filed in response to notice u/s. 148 of the Act. During the proceedings it was submitted by the assessee that she had purchased 9000 equity shares of VIP Industries Ltd. from Eden Financial Services, Mumbai during April, 2009 at a cost of Rs. 4,02,160/-. Payment for purchase was made during Financial Year 2010-11 and 9000 shares were sold through registered broker at recognized stock exchange at a sale price of Rs. 52,87,709/-. On examining these details Ld. A.O. observed that registration certificate of M/s. Eden Financial Services was cancelled by Securities Exchange Board of India (In short 'SEBI') vide its order dated 28.8.2004. Based on this fact Ld. A.O. concluded that the alleged transaction of purchase is a fraudulent transaction which was done thro....
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....following exhaustive & voluminous documents, which are also enclosed herewith for your ready perusal; * Bill of the broker "Eden Financial Services" certifying the purchase of the 4000 shares on 23.04.2009 and 5000 shares on 15.04.2009 (Page 15-18). * Advice of the aforesaid broker dt. 31.12.2010, certifying the holding of the said shares. * Statement of shares reflecting the conversion of physical holding of shares to the Demat form during the concerned year and the sale of the same shares after the said conversion respectively. * Settlement statement of the broker "Angel Broking Ltd." stating the sale of aforesaid mentioned shares on various dates during the year under consideration * NSECM ledger and BSECM ledger certifying the sale transactions of the above-mentioned shares through NSE and BSE stock exchanges respectively during the year under consideration. Thus, in light of the above documentation appellant submits that he has sufficiently proved all the bona fides of the transaction pertaining to earning long term capital gain & such transaction has been undertaken through banking channel as well as on the recognized stoc....
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....d before him that appellant was totally unaware of such fact and this alone cannot become basis to consider the entire transaction of sale and purchase of share to be bogus, for such contention appellant relies upon the decision of ITAT Mumbai Bench in the case of ITO Vs. Arvind Kumar Jain HUF, ITA No. 4862/MUM/2014 wherein it is held by the Hon'ble court that; "When purchases payment has been made by account payee cheque, delivery of shares was taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same" Accordingly, the appeal was allowed, thus in the present case also the addition is not warranted and liable to be deleted. That, the assessee relies upon the following judicial precedents in support of his claim that....
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.... rise in the price of shares. The ITAT found that the assessee had substantiated their claim with the relevant documents for example, bank statement, demat account statement and contract notes etc. which were not found false or bogus by the A.O. thus, it was held that the claim of the assessee regarding the capital gain was genuine and the addition made by A.O. was therefore, deleted. * Mukesh R. Marolia v. Addl. CIT [2006] 6 SOT 247 (Mum): In this case, it was observed that the assessee was earning agricultural income which was duly declared in his return for the last few years and the assessee had sufficient cash in hand for buying the shares. Hence, it was opined that the purchase of shares was made against cash available with the assessee. With regard to off market transaction of purchase and sale of share, it was found that the off-market transactions are not illegal. It was also observed that the assessment has to be completed on the basis of records and material available before the assessing authority and that personal knowledge and excitement on events should not lead the A.O. to a state of affairs where relevant evidences are overlooked. * CIT v. Arun Ku....
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.... of share transactions;-Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted-Held, yes From the above cited decisions in the favor of the assessee, it is clear that the assessee has entered into bona fide transactions and genuinely incurred short term capital loss on such transaction. That, it is specifically held by hon'ble courts that, merely on the basis of investigation report of the income tax officer or survey conducted at the premises of other assessee/company concluding the involvement of accommodation entries, no addition in the hands of assessee can be made, particularly when no specific enquiry relating to the transaction of the assessee has been made and no any opportunity of cross examination has been provided to the assessee. Hence in such circumstances addition made is liable to be deleted. Reliance is also placed on; * CIT Vs. Rahul Vineet Traders [2014] 41 taxmann.com 86 (Allahabad HC) * Abhik Jain Vs. ITO (2013] 33 taxmann.com 577 (Delhi Trib) * ACIT Vs. Bahubali Dues Ltd. 12015] 55 taxmann.com 357 (Delhi Trib.) * Bharti Suntex L....
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....nd net LTCG of Rs. 48,85,547/- claimed exempt u/s. 10(38) of the Act by the assessee in the return of income. 8. Now the bone of contention is only limited to the genuineness of transaction of purchase. Ld. A.O. has not doubted the sale transaction and the fact that 9000 equity shares of VIP Industries Ltd. have been transferred from the Demat account held in the name of the assessee to another buyer after effecting the sale through registered broker on a recognized stock exchange. Ld. A.O. has doubted the purchase transaction since the registration of Eden Financial Service was cancelled by SEBI and this information was given to National Stock Exchange of India Ltd. vide Circular No. 421 dated 10.09.2004 which was made public. Revenue's contention is that when the party which has sold the shares to the assessee is itself not a legal entity to trade and sell the shares to the assessee, all what has is happened since purchase is fraudulent and is a managed affair to evade tax by getting an accommodation entry and claim exempt income. 9. There is no dispute at the end of the assessee about the correctness of the fact that registration certificate of Eden Financial Services ....
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....ubted, the company of which the equity shares are sold i.e. VIP Industries Limited is not a penny stock company and sale effected through registered broker, we are satisfied with the genuineness of sale transactions. As regards purchase which is made by the payment of Rs. 4,02,161.99 through account payee cheque, there is a corresponding receipt of 9000 equity shares of VIP Industries Limited in the Demat account of the assessee. Had the identity of the broker has not been in doubt then this transaction of earning LTCG would be covered under the provision of Section 10(38) of the Act but since the identity of broker is in dispute the alleged transaction needs to be examined with the period of holding of equity shares in the Demat account of the assessee. As the identity of seller is in doubt and 9000 equity shares are held in the Demat account for less than 12 months, the net gain deserves to be taxed as Short Term Capital Gain. 13. We find that similar type of issue came up before this Tribunal in the case of Smt. Annapurna Maheshwari V/s. ACIT ITA No. 315/Ind/2012 dated 31.10.2018 wherein transaction of LTCG was in dispute and revenue authorities questioned the genuineness of ....
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....ven by Mr. Vishal Vijay J. Shah who is the son of the proprietor of the stock broking firm M/s. Vijay Bhagvandas & Company who denied the alleged transaction of purchases were denied. However nothing odd was noticed about the 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 Co-ordinate 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/-....
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....r by treating the Short Term Capital Gain as unexplained cash credit?" 2. The assessment year is 2006-07 and the relevant accounting period is 1.04.2005 to 31.3.2006. The respondent-assessee, an individual, filed her return of income showing total income of Rs. 8,72,299/- including short 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 t....
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....relevant material has been ignored, nor is he able to point out any material to the contrary so as to dislodge the concurrent findings of fact recorded by the Tribunal. Under the circumstances, the impugned order being based upon concurrent findings of fact recorded by the Tribunal upon appreciation 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 det....
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....ansferred in and transferred out of the demat account of the assessee at the time of purchase and sale respectively. The alleged addition made u/s. 68 of the Act for unexplained cash credit do not apply in the given facts when the sale consideration has itself been found to be genuine. Therefore for the only reason that payments have been made after significant time which is also 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 o....