TaxTMI 
TaxTMI 
2021 (12) TMI 352
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....up of business loss on sale of shares, which was duly furnished by the assessee before the ld. AO. Since the assessee had claimed huge loss from sale of shares and had sought to set off the same from income from business, the ld. AO sought sought to examine in detail the veracity of the loss claimed by the assessee on sale of shares. In the course of such examination, the ld. AO found that assessee had dealt with penny stocks and had declared huge loss on those shares and had sought to set off the same with business income of the assessee. The ld. AO observed that assessee had shown loss on sale of 3 penny stock scrips i.e Cressenda Company Ltd., Pearl Electric Ltd., and Pine Animations Ltd. totaling to Rs. 4,26,63,518. The ld. AO heavily placed reliance on the findings of Investigation Wing of Kolkata Income Tax department, and even reproduced the financials of those three companies apart from statement recorded from various entry operators and explaining the entire modus operandi on how certain people were involved in manipulation of prices of shares of certain scripts as a pre-planned activity. Finally, the ld. AO proceeded to disallow the loss on sale of shares of Rs. 4,26,63,5....
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....ly three scrips and proceeded to disallow the loss claimed thereon, after conducting detailed enquiries thereon. It was specifically submitted that the ld. AO had made the analysis of the scrip with respective information available with the ld. AO at the time of framing of assessment proceedings. The ld. PCIT however, disregarded all the contentions of the assessee and came to the conclusion that the loss claimed by the assessee on sale of shares of aforesaid four scrips totaling to Rs. 2,90,48,662/- are in the list of penny stocks investigated by the DIT-Investigation, Kolkata and that without proper verification, the ld. AO had allowed the same. Accordingly, the ld. PCIT set aside the order of the ld. AO treating the order of ld. AO to be erroneous and prejudicial to the interest of the Revenue. 3.2. The preliminary facts stated hereinabove are undisputed and hence the same are not reiterated herein for the sake of brevity. It is a fact that assessee had traded in 160 scrips during the year and had incurred loss. It is a fact that assessee has incurred loss during the year on sale of shares in respect of the following scrips:- Name Op.Qty Op. Amount P.Qty P.Amount S.Qty S....
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....000 1,87,09,985.19 (3,58,16,278.66) KIRLOSKAR ELECTRIC CO LTD 2,30,425 75,90,583.00 2,30,425 62,21,104.80 (13,69,478.20) LAKSHMI VILAS BANK LTD 1,00,000 87,13,149.30 1,00,000 82,04,313.25 (5,08,836.05) LICHSGFIN 50,000 1,42,87,559.05 50,000 1,41,65,467.70 (1,22,091.35) MAIIADUSH1 INTERNATION AL 1,50,000 44,14,150.00 1,50,000 18,16,500.00 (25,97,650.00) MAN ALUMIN DM 26,000 21,52,466.20 26,000 20,17,237.75 (1,35,228.45) MERCATORLIN DM 31,003 5,35,035.01 1,86,506 61,10,136.29 2,17,509 47,52,088.43 (18,93,082.87) MKEL 2,21,000 1,10,94,170.10 2,21,000 18,09,990.00 (92,84,180.10) MORARJEE DM 1,50,000 57,45,211.60 50,000 16,66,080.35 1,00,000 36,27,754.80 (4,51,376.45) NUT DM 4,50,000 2,27,07,421.14 4,50,000 2,19,12,290.86 (7,95,130.28) NYSSA CORPORATION LTD. ....
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.... letter dated 22/08/2017 had duly furnished the reply which are enclosed in pages 3 & 4 of the paper book. Further the assessee has also furnished yet another reply dated 08/11/2017 reconciling the share transaction that are reflected in Annual Information Return (AIR). We find that assessee had duly furnished copies of contract notes for sales and purchase of the scrips that were called for by the ld. AO and that were also reflected in the Annual Information Return. The details of bank statement evidencing the source of payment for purchase of shares together with sale proceeds getting credited in the bank statement alongwith Demat statement reflecting the trading of share. We find that the ld. AO during the course of assessment proceedings examined the partner of the assessee firm Shri Hemal J Jhaveri and recorded a statement on oath from him on 15/12/2017. In response to the query raised by the ld. AO as to how the firm had dealt with the purchase and sale of certain scrips, the concerned partner had replied that the firm would trade only on the share market news received and that the investment in shares are made based on the information that the price of those shares are likel....
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.... DIT investigation Kolkata and concludes that the loss claimed on these four scrips are bogus on the fact that these four scrips figured in the 84 penny stocks investigated by Kolkata Investigation Wing of Income Tax department. Having said so, the ld. PCIT finally concluded that no enquiries were carried out by the ld. AO with regard to loss claimed on sale of shares of aforesaid scrips. We find that the ld. PCIT had not carried out any analysis of the documentary evidences submitted by the assessee and had not taken any effort to prove how the loss claimed on the aforesaid four scrips is ingenuine and how the assessee has not discharged its onus for claiming deduction on account of said loss. We find that the ld. PCIT nowhere in his order had stated that the documentary evidences furnished by the assessee are wrong. We hold that if there is some grievance for the ld. PCIT that the ld. AO has not carried out any enquiry with regard to certain facts, which in our concerned opinion is not the matter of fact in this case as enquiries were indeed carried out by the ld. AO in the assessment proceedings, when the documentary evidences supporting the said facts are furnished by the asses....