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2018 (11) TMI 131 - ITAT INDOREBogus Short Term Capital Gain and Long Term Capital Gain from purchase/sale of shares - unexplained credit u/s 68 - Held that:- The genuineness of the sale transactions has not been doubted by the revenue authorities. Equity shares of the IFCI Ltd have been purchased by making payment through disclosed sources in the form of account payee cheque. Equity shares have been duly transferred 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 for unexplained cash credit do not apply in the given facts when the sale consideration has itself been found to be genuine. 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 set aside the order of the lower authorities and allow the ground raised by the assessee and direct AO to treat the alleged profit from sale and purchase of equity shares of IFCI Ltd as short term capital gain and tax accordingly. In the result appeal of the assessee is allowed. Profit earned by the assessee wherein the delivery of shares have not been taken through demat account because the shares were sold in short span of time i.e. within 7 to 8 days of the purchase and for this reason the gain has been treated as business profit - Held that:- We find that the assessee is not a regular trader of shares as it earned income from salary and house property. This is not the case of an intra day trading nor of the forward market trading for derivatives. It is simply a case that share have been purchased and they were held in the demat account of 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 ₹ 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 ₹ 2,49,045/- treating it as Short Term Capital Gain from sale of shares. Capital gain as claimed as exempt income by virtue of provision of Section 10(38) - Capital Gain from sale of listed equity shares as per the provisions of Section 111A - Held that:- Similar issue in the case of ITO V Deepchand Shah [2010 (10) TMI 687 - ITAT, MUMBAI] wherein it was held that “it is necessary to trace corresponding purchase of shares from the demat account maintained by the broker in order to verify whether such purchases of respective shares were actually made by broker on behalf of the assessee and shares so purchased were credited to its demat account and were lying there till same were transferred to demat account of the assessee after a period of more than one year”. Examining the facts of the instant appeal and our discussions in the preceding paragraphs on this issue we are of the considered view that the alleged transaction claimed by the assessee to have resulted into Long Term Capital Gain is not sustainable and the alleged transaction of earning income of ₹ 17,23,052/- should be taxed by the Assessing authority treating it as Short Term Capital Gain because the equity shares sold in these transactions were held for less than 12 months and therefore they were in the category of Short Term Capital Assets.
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