TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 109
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....2014, declaring a loss of (-) Rs. 4,00,72,252/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the A.O that as per the information received from the Kolkata Investigation Directorate the assessee had traded in penny stocks of M/s Shreenath Commercials and M/s Tuni Textiles Mills in Bombay Stock Exchange (BSE) and had fraudulently booked "Short Term Capital Loss" (STCL) of Rs. 3,86,56,040/-, as under : Scrip Name : 12105 Shreenath commercials & 31411 Tuni Textiles Buy Sell Scrip code quantity rate Amount quantity rate Amount Loss 12105 100000 39.68 Rs. 3967920 100000 8.71 Rs. 871000 (-) 3096920 31311 1460500 25.65 Rs. 37457770 1460500 1.30 Rs. 1898650 (-) 35559120 Business Loss : Rs. 3,86,56,040/- After exhaustively referring to the findings of the Investigation wing and the modus operandi that was adopted by the operators for facilitating booking of accommodation entries in the form of LTCG/STCL, the A.O concluded that the busines....
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.... not sold the shares in question and the loss returned by him was on account of diminution in the value of inventory and not a trading loss or capital loss, the CIT(A) vacated the addition made by the A.O. 5. The revenue being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. The ld. Departmental Representative (for short "D.R") relied on the orders of the lower authorities. On being confronted that as to on what basis the A.O had concluded that the assessee had made a loss from the sale of shares of the above referred two scrips and also the basis for quantification of the same, the ld. D.R failed to come forth with any reply. 6. Per contra, the ld. Authorized Representative (for short "A.R") relied on the order of the CIT(A). It was submitted by the ld. A.R that the A.O had on the basis of a glaringly incorrect and misconceived facts made an addition of Rs. 3,86,56,040/- u/s 68 of the Act, which thereafter had rightly been vacated by the first appellate authority. 7. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record. As observed by us he....
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....ds of appeal are against the addition of Rs. 3,86,56,040/- as sale proceeds of shares u/s. 68 of the IT Act. The AO observed in the assessment order that the return of income was filed by the assessee declaring a total loss of Rs. 4,00,72,252/-. He thereafter went on to explain the modus operandi followed by certain entry operators in Kolkata. He referred to the information received from the Investigation Directorate of Kolkata and stated that the assessee has dealt in two penny stock shares, Shreenath Commercial and Finance Ltd and Tuni Textiles Mills Ltd. According to the AO, the assesses had fraudulently booked short term capital loss of Rs. 3,86,56,040/- from sale of the scrips of these two companies. The details of the toss according to the AO are as under: Business Loss on sale of shares in assessee's case: Scrip name: 12105 Shreenath commercials & 31411 Tuni Textiles Buy Sell Scrip Code Quantity Rate Amount Quantity Rate Amount Loss 12105 100000 39.68 3967920 100000 8.71 871000 (-) 3096920 31411 1460500 25.65 37457770 1460500 1.30 1898650 (-....
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....t appreciating the true facts the Ld. Assessing officer has made the application for section 68 of Income tax Act, 1961 instead considering business loss on account of change in the value of inventories under section 145 of Income Tax Act, 1961. The facts of the case are that during the F.Y. 2013-14 relevant to the A.Y. 2014-15, the Assessee Company has suffered business toss of Rs. 4,01,11,372/- out of which toss of Rs. 4,00,08,550/- has arisen due to Change (decrease) in value of inventories. Therefore, the ld. Assessing Officer has made an apparent error by treating business loss arising due to change in inventory as toys due to sale of shares. The copies of statement showing stock in trade for FY 2013-14 have been furnished to you which are enclosed herewith. 2. During the A.Y. 2014-15, Assessee Company has valued the dosing stock as per Accounting Standard 2 "Valuation of Inventories" as 'Cost or NRV, whichever is lower'. The valuation of dosing stock is also as per the provisions of Section 145 of the Income tax Act, 1961 which is in consonance with Accounting Standard 2. For this purpose the Assessee Company relies on the following citations: * ACIT, Circte....
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....ebsite, taxmann, court rulings, internet as well as investigation wing report and findings of the SEBI". The Ld. Assessing Officer erred in appreciating the facts and submissions made by the Assessee Company and passed the order merely based on suspicions, findings of investigation wing, SEBI and various other toots as mentioned above. High Court of Gujarat in case of Commissioner of Income-tax-1 Vs. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat) held that where Assessee Company proved genuineness of share transactions by contract notes for safe and purchase, bank statement of broker, demat account showing transfer in and out of shares, as also abstract of transactions furnished by stock exchange. Assessing Officer was not justified in treating capital gain arising from sale of shares as unexplained cash credit. The Assessee Company also relies on the following citation: * Commissioner of Income-tax-I Vs. Himani M. Vakil [2013] 326 (Gujarat High Court) * DCIT Vs. Sunita Khema [2011] ITA 714 to 718 (ITAT Kolkata) * Tekchand Rambhiya HUF [2012] ITA 930 (ITAT Mumbai) * Commissioner of Income-tax Vs. Smt. Sumitra Devi [2012] ITA 54 (Rajasthan High Court) * A....
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....d diminished to Rs. 47,77,625/- resulting in a loss of Rs. 4,00,08,550/-. This loss coupled with some administrative expenses resulted in a loss of Rs. 4,00,72,252/-. There is no trading activity, whatsoever, which happened during the year. So the AO's contention that the assessee had set off the loss from sale of shares against income from sale of other shares is factually incorrect. The assessee had no business activity and there was no other receipt during the year. It is also not understood as to where from the AO obtained the figure Rs. 3,86,56,040/-, The assessment order is silent on how this figure of loss has been arrived at or when these shares have not been sold by the assessee. The findings En the assessment order are contradictory to the facts as could be seen from the return of income and the financials filed by the assessee. The AO did not comment on the facts as per the return of income. 7.4 The facts, as could be seen from the return of income and the financials of the assessee are that the assessee has not undertaken any trading during the year. There is no business activity conducted by the assessee during the year. The assessee has been holding scrips of th....