TaxTMI 
TaxTMI 
2022 (12) TMI 252
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....elaxation granted by the Hon'ble Supreme Court, the delay of 123 days is hereby condoned and appeal of the Revenue is admitted for adjudication. 2.1. The Revenue has raised the following grounds of appeal:- 1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the profits and gains of Rs. 34,01,87,229/- derived by the assessee from purchase and sale of shares of M/s Anukaran Commercial Enterprises Ltd. cannot be treated as unexplained cash credit under section 68 of the Act, without appreciating the fact brought on record by the Assessing Officer that M/s Anukaran Commercial Enterprises Ltd. is an entity engaged in providing accommodation entries of LTCG/STCG to beneficiaries, including the assessee." 2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that provisions of Section 68 are not applicable to the assessee's case without appreciating the fact that during the survey operations u/s 133A as well as during the assessment proceedings, the assessee has not been able to satisfactorily explain the genuineness of its transaction in shares of M/s Anukaran Commercial Ent....
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....acturing and trading of textile products. The assessee filed its return of income for the A.Y.2014-15 on 28/11/2014 declaring total income of Rs.14,75,45,668/- comprising of business loss of Rs.19,30,14,338/- and short term capital gains of Rs.34,05,60,006/-. Subsequently in the course of assessment proceedings, the assessee filed a revised return on 22/03/2016 revising its total income at Rs.14,71,72,890/- and the entire income is offered to tax as business income. The ld. AO during the course of assessment proceedings observed that assessee had sold shares of M/s. Anukaran Commercial Enterprises Ltd (in short as 'ACEL') and had originally shown short term capital gain of Rs.34,05,60,006/- in the original return of income by offering the same to tax at special rates u/s.111A of the Act. However, in the revised return, the said gain was shown as business income by the assessee. The chronology of events leading to the said share transactions are as under:- DATE Narration of events 09.10.2012 The assessee purchased 5,00,000 Shares of M/s Anukaran Commercial Enterprises Ltd through block deal from M/s Marcos Securities India Pvt Ltd for a consideration of Rs. 5,37,50,000/-....
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....) Contract notes for purchase of sale of shares (b) Demat account statement (c) Bank statement of assessee company (d) The assessee also submitted that the shares were purchased by it in open market in Bombay Stock Exchange through registered broker M/s. Anand Rathi Shares and Securities Ltd., 3.2. The assessee categorically denied that there was nothing incriminating found during the course conducted on 12/03/2015 and that survey team verified the cash balance, books of accounts, bills, vouchers, diaries, writing pads, accounts maintained on computers, e-mail of all the computer etc., and found nothing incriminating thereon. The assessee further pointed out that the survey team was only of the opinion that the short term capital gains earned by the assessee company in the shares of ACEL was bogus and no document per se was found to support their view in that regard. Since the holding period of those shares from the time of purchase and its consequential sale was lesser and volume of share transactions were high, the survey team was of the opinion that the gain arising on sale of such shares should be treated as business income and not short term capit....
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....Arvind Poddar did not offer any comments on being confronted with the statements of various persons regarding shares of ACEL being used for providing accommodation entry due to following reasons:- (a) The statements shown to Shri Arvind Poddar were relating to allotment of shares of ACEL through private placements and providing entry to LTCG. This was not the case with the assessee company. (b) The statement do not contain the name of the assessee company. (c) No accommodation entry has been taken in the books of the assessee company towards STCG or LTCG in the shares of AECL. (d) The price movement in the scrip was known to everyone who deals in shares. 3.5. The assessee further stated that there is no statement or documentary evidence which directly or indirectly confirms that the assessee company has taken accommodation entry by way of STCG. The assessee further stated that it had offered proper and correct explanation as to nature and source of income arising on sale of shares by way of producing contract notes, bank statements, Demat account statement together with other documents etc. Thus, this is not a case where a sum found is credite....
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....lding has been sold by the appellant company on various dates, during a span of six months, at varying rates, it is difficult to comprehend how the appellant company could be said to be an active beneficiary of such price manipulation, if any. 4.9 Furthermore, the modus operandi of accommodation entry providers has been discussed in detail in the assessment order. AO has mentioned therein that the shares of a penny stock are issued to the beneficiary of LTCG at very low prices, generally through the preferential allotment, by way of private placement. These shares have a lock-in period of one year, as per the SEBI Regulations 2009. This is not the case of the appellant company, which has purchased the shares of ACEL on 09.10.2012 in the open market on the platform of BSE, and not through private placement. The appellant company has sold these shares before the period of one year, and has offered to tax the resulting gains there from, originally as STCG, which was later revised as business income 4.10 On perusal of statement of Shri Kushal Pravin Shah, Director of ACEL it is seen that he has admitted that ACEL had issued preferential shares on 02.03.2012. ACEL allo....
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....a careful perusal of such evidence, it is seen that the same only corroborates the fact that the shares of ACEL have been used for providing accommodation entry of LTCG. However, it is seen that the name of appellant company as a beneficiary of such accommodation entry is not mentioned in any of these statements. 4.13 Shri Arvind Poddar was confronted with the statement of Shri Kushal Pravin Shah, Director of ACEL that the shares of ACEL were allotted on preferential basis, and thereafter used to provide entry of bogus LTCG (Question no 39). Shri Arvind Poddar has clarified in his statement that the appellant company has acquired the shares of ACEL through stock exchange and the same were not allotted to the appellant on preferential basis. Further, on being confronted with statements of various other persons, Shri Arvind Poddar did not offer any comments, as these statements do not make any mention of the transaction in shares of ACEL related to the appellant company. Shri Arvind Poddar, while concluding his statement, agreed to pay tax on the transactions in the shares of ACEL at normal rates, and undertook to file revised return of income of the appellant company for A.....
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.... sale of shares as STCG in the return of income. The appellant later revised the return of income, during the course of assessment proceedings, wherein it offered the gains on sale of shares as business income and paid taxes thereon at normal applicable rates. 4.16 On these facts. I find that this is not a case where the assessee has failed to offer any satisfactory explanation about any sum found credited in the books of accounts of the assessee. The sum credited in the books of accounts, in the present case, is the proceeds on sale of shares of ACEL. The appellant has duly reflected the share transactions in the books of accounts, submitted the relevant documentary evidence in support such as the contract note, bank statement and demat statement, offered the resulting gains for taxation in the return of income as STCG, later revised as business income, and also offered a satisfactory explanation as to source of investment towards purchase of shares. There is no evidence on record to establish that the appellant company was one of the beneficiary of the accommodation entry of LTCG in the shares of ACEL, even though the evidence does suggest that shares of ACEL were used f....
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....ulation of prices, role of the assesee thereon, completely falls flat and fails. In any case, one of the main grievance of the ld. AO is that there were 47 investors to whom preferential allotment of shares were made on 02/03/2012 by ACEL. Admittedly, the assessee's name does not figure in those 47 investors. On this ground also, the case of the ld. AO fails. Despite all these strong points, the assessee has come forward to buy mental peace and to avoid protracted litigation pursuant to the survey by offering gain arising on sale of shares of ACEL as business income instead of short term capital gains offered at special rates of tax. By this process, the assessee has actually paid excess tax to the Government. It is not in dispute that assessee had duly paid the differential taxes together with interest thereon along with revised return filed by the assessee on 22/03/2016. It is also pertinent to note that in the various statements recorded by the ld. AO from various persons, the name of the assessee was never mentioned by any of them. Hence, it could be safely concluded that the assessee herein has got absolutely no link with either promoters of the company, entry providers, exit ....
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....al business loss. With regard to allowability of deduction of expenses towards warehousing rent of Rs.12,12,432/-; brokerage and commission amounting to Rs.8,12,749/-; and stamp charges amounting to Rs.1,43,141/- in relation to activity of commodity trading, the ld. CIT(A) observed that the transactions made in NSEL in commodity trading cannot be construed as speculative transactions and hence, these expenditure would become allowable as normal business expenditure u/s.37 of the Act. 4.3. It is not in dispute that assessee incurred a net loss in commodity transacion amounting to Rs.24,39,25,896/- during the year under consideration. We find that the assessee company had carried out trading activities in commodity and all the transactions were routed through profit and loss account and income or loss arising there from to the assessee were duly offered under the head 'income from business'. Similarly, all the expenditures incurred thereon in the form of warehousing rents, transaction charges, stamp duty agreement, VAT, service tax etc, which were incurred in trading of commodities were claimed as regular business expenditure to earn the said business income. The ld. AO in the A.Y....