TMI Blog2013 (10) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... gh price of the concerned script on this date - When the sale price adopted by the assessee is close to the high price of the concerned share on the relevant date, it cannot be said that the transactions effected by the assessee is not at market rate, particularly, when the AO has not given even a single instance where the assessee has effected the transaction of purchase at a price higher than the high price of the concerned share on the relevant date or effected the sale of a share at a price below the low price of the concerned share on the relevant date – Decided against the Revenue. Further, AO that in similar transactions, the assessee has earned profit also and even if the AO is making disallowance of the loss in "off market transactions", then he should disregard the profit also in similar transactions and hence, only net loss can at best be disallowed. But the AO has taxed the profit earned by the assessee in such transactions and disallowed the losses only. This goes to show that the AO has also accepted "off market transactions" as genuine and valid where the assessee has earned profit, but in similar transactions, where the assessee has incurred losses, the AO had di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) in all the four years and protective addition was made by the AO in the cases of these two individuals which were also deleted by the ld. CIT(A) on a consequential basis. Hence, all these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. Since substantive addition was made by the AO in the hands of the company M/s. Prudent Finance (P.) Ltd., first we decide the four appeals filed by the Revenue in this case. In this case also, the issue involved in all the years is identical and it was agreed by both the sides that the same can be decided in any one year and that order can be followed in the remaining years. Hence, we take up the appeal of the Revenue for AY 2002-03 in ITA No.2452/Ahd/2008. 2.1 Brief facts till the assessment stage and the submissions before the ld. CIT(A) and his decision are available in para Nos.8 to 19 of the order of the CIT(A) and the same are reproduced below for the sake of ready reference: 8. As regards Grounds 3,4 and 5,during the course of assessment, the Assessing Officer noticed that the appellant company, as part of their business, makes huge purchase of shares through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions with the above concerns should not be disallowed and considered as transfer of company's profit to the respective entities. From the order of assessment, it is seen that the appellant made a detailed submission in which the appellant contested the applicability of section 19(1) of the Securities Contracts (Regulation) Act, 1956, reiterated that the documentary evidences had been submitted to establish the genuineness of the transactions carried out by them, the availability of funds of the concerns with whom transactions had been carried out on principal to principal basis, reiterated the submission already made of the copy of the market rate of Bombay Stock Exchange, submitted the alternative details called for by the Assessing Officer mentioned above and also made other submissions to establish the legitimacy and genuineness of the transactions carried out by them on principal to principal basis. From the order of assessment it is further seen that the appellant had made another submission on the same date. In the latter submission, the appellant pointed out to the Assessing Officer that the losses proposed to be disallowed should be reduced by the amount of brokerage i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had the other director Shri Jolit Shah in this venture who is holding 50% of share shares of appellant company along-with other family members. What is noteworthy is that all the bills for all (he transactions have been sent under the signature of Shri Jolit Shah. No prudent person, aware of the business realities, can expect one director of a company to allow all the benefits to be transferred to the entities concerned with another director. Shri Nitin Parikh and Shri Jolit Shah arc not personally connected with each other. Assessee was asked to furnish details of sales and purchases transactions with certain concerns listed in para 6.3 in tabular format which contains date wise purchase and sale of securities. Date wise script wise, share summary was not submitted on the grounds that it would involve voluminous data It is submitted that even when the Assessing Officer had called for the details vide her letter dated 20/9/2007 in a very detailed format, the details were still submitted in all the columns specified in the format. But for the fact that scrip-wise consolidated details were submitted whereas the Assessing Officer wanted scrip-wise and date-wise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Assessing Officer during the course of assessment proceedings to confirm that the said annexure containing the details called for were submitted. The aforesaid details were exactly as per column specified in the notice. Even market rates were in public domain and are available to her. The appellant reiterates that each and every off market transaction conducted by the appellant on principal to principal basis with all the entities are on the market rate as prevailing in respect of a particular scrip on the particular date and on such rate assessee has no control. While deciding the issue as to genuineness of off market transactions, the applicability of provisions contained in section 19(1) of SCRA, 1956 is not taken into consideration. SCRA Act is not considered as even otherwise such translations are not genuine transactions and are colorable device. --- The Assessing Officer has categorically held that the off market transactions conducted by the appellant with their sister concerns as well as some outside parties were legitimate. However, her averment is that though legitimate, these off market transactions were not genuine. To quote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission made vide letter dated 24th December, 2007 to AO The appellant does not come within the ambit of exception provided to Section 19(1) of SCRA, 1956, i.e. "Spot Delivery Contracts". The appellant at outset submits that when provisions of section 19(1) are not applicable, the appellant are not required to come within ambit of exception provided in section 19(1) being Spot Delivery contracts. Further, it may be relevant to mention that in the scheme of the Act the provision for spot delivery contracts has not been provided as an exception to section 19(1). As the wording of the section itself clarifies, if at all, this kind of contract can only be treated as an exception to sections 13, 14, 15 and 17 of the Act (As per para 1:6 of submission) The assessee has engineered a unique method by exploiting provisions of law in such a manner that no tax is paid in the case of company though huge profit is earned in its case in share trading activity. At the same time profit to transferred to sister concerns is offset against the loss generated on sale of mutual fund and thereby avoiding any incidence of tax. Assessee has meticulously planned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parikh co. (PNB) Rs. 24,40,464/-; Nitin B. Parikh Rs. 3,64,68,436/-. In this case the above profit in off market transaction is taxed whereas loss is disallowed. (ii) Similarly in the case of transaction with Heenaben (HNP Traders) has been disallowed at Rs. 1,00,79,744/- whereas in transaction with her another proprietary concern Heena N. Parikh profit of Rs. 47,91,454/- has been taxed. (iii) Similar cases are of transactions with Nitin B. Parikh HUF and Sushilaben Parikh. (Para 1.2 of submission) Here reference is invited to the provisions of section 132(4A) of the I.T. Act. As provided in the said section where any books of account or the documents etc. are found in the course of search, it may be presumed that the contents of such books of account and documents are true and correct. In the circumstances the A.O. has to accept that the transactions which are recorded in the books found at the time of search are true and correct. The appellant states that entire transactions of purchase and sales are recorded in the books of account and both profit/loss arising from such transactions are duly recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, scant evidence has been adduced to establish that the device adopted by the appellant was 'colorable' or that the appellant's methods were 'dubious'. The AO has relied on decision of Macdowell company Ltd. v. CTO(1985) 154 ITR 148. The Appellant relies on decision of Gauhati High Court in the case of George Williamson (Assam Ltd.) (265 ITR 626) wherein Court has held as under: "In view of the aforesaid legal principles laid down by the Supreme Court it is clear that the principles laid down by the IRC v. Duke of Westminister (1936) AC.1, (1935) 19 TC 490, (1935) All ER Rep 259 (HL) are still applicable in this country and it is open to assessees to arrange their affairs in such a manner that it would not attract the tax liabilities if it can be managed within the permissible limits of law." The appellant relies on Supreme Court's decision in the case of Azadi Bachhao Andolan (263 ITR 706) where the Honorable Court concurred with the observation of the Madras High Court in the case of M.V. Valiappan (170 ITR 238). The observation to quote "Decision in McDowell cannot be read as laying down that every attempt at tax planning is illegitimate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer admits the availability of the funds of the parties concerned with the appellant but ignores the reality of a running account. Not a single instance has been cited by the Assessing Officer to impute that funds are supplied by the appellant in any account which went into deficit. The appellant states that the aforesaid entities have made day to day transactions with assessee company hence it was not possible to make bill to bill payment payment/receipt of amount due. It is stated that even when transactions are carried out with brokers on Stock Exchange, bill to bill payment is not necessary. With regards to aforesaid off market transactions, delivery of shares in DEMAT was not given by assessee company. Off market transactions were not supported by actual transfer of shares hence there is no trail to verify it and such is colorable device. In this connection, appellant has submitted before AO that given the short settlement cycle on the Stock Exchanges (T+2), with a view to reduce market risk, cost of transfer and other administrative costs the shares bought or sold were retained by the appellant at the instruction on respective parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es involved in share transactions generally for better appreciation of issues involved in this case. From reading the assessment order and after going through the submissions made by the appellant's representatives, it seems these basics have remained to be appreciated by the Assessing Officer while dealing with this case. No statute can prohibit or put restrictions on the transfer of a property which legitimately belongs to the transferor. However, if a system for such transfer is in place which has some statutory support, the transferor and the transferee can avail of the legal recourse in the event something goes wrong. In other words, if a system is in place and the transactions are earned through that system the rights of parties to the transaction become legally enforceable with the support of the institutions responsible for enforcing those rights. Coming to the transactions in the present case, from the records it is evident that the appellant was conducting securities transactions in two ways - one, they were transacting through the stock exchange mechanism; and two, they Were also transacting outside the system of stock exchange with certain entities some of whom were con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant success fully, address these three vital aspects of genuineness in contradistinction to the averments made by the Assessing Officer. 10.2 Yet another expression which has been repeatedly used by the Assessing Officer in her order, which needs to be clarified, is "spot delivery". From the reading of the assessment order, it appears that the Assessing Officer has equated 'off market transactions' with 'spot delivery'. It may be relevant to mention that whereas 'spot delivery' is a statutorily recognized mode of share transaction, 'off market transactions' as a mode of share dealing, though perfectly legitimate, does not find any mention in the Securities Contracts (Regulation) Act, 1956. In other words, in a 'spot delivery' contract entered into in terms of Securities Contracts (Regulation) Act, 1956, the rights of the contracting parties is enforceable under the provisions of the Act and by the institutions responsible for enforcing the Act. To sum up, therefore, transactions in shares through 'spot delivery' contract is not the same as 'off market transactions' in shares. Further, to set the records straight, 'spot delivery' contract is not an exception to trading through s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds, whether the 'off market transactions' conducted by the appellant on principal to principal basis was legally permissible and even if it was legally permissible whether the-transactions the appellant carried out were in fact genuine and not merely paper transactions, as has been held by the Assessing Officer, with the prime .motive of transferring profits to other entities. 13. At the outset, it must be put on record that .the Assessing Officer's observation (page 19. of the assessment order) on this issue, is some what contradictory. To quote: " ... .... the issue involved in the case of the assessee is not legitimacy of "off market transactions'', but the issue is genuineness of off market transactions as in the case of the assessee such transactions are not failing into the-exception criteria laid down in this regard as discussed in para 8.2 above. In my opinion, a sample copy of DIS furnished by the assessee will not come to its help but on the contrary it will Act against the cause of assessee. The format of DIS suggests that even if transactions are carried out in "off market" the delivery of securities can be affected by DIS which assessee has failed to obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby avoiding any incidence of tax on them as well In her final view, the transactions are not genuine because even though they may legally correct these transactions have been devised to defraud the Revenue. In other words, according to the Assessing Officer, if a tax-payer is lowering the incidence of tax payable or pays no tax through legitimate tax planning conducting perfectly legal and genuine transactions he can be accused of defrauding the Revenue and for this sole reason, his transactions can be held us non-genuine. I am afraid this view is for from correct as has been shown by the appellant's representatives in their submissions on that part of the Assessing Officer's order when the Assessing Officer had sought to apply the ratio of McDowell's case to that of the appellant. It may be relevant at this point to reproduce certain decisions post McDowell where the Courts have held legitimate tax planning as perfectly justified. "In view of the aforesaid legal principles laid down by the Supreme Court it clear that the principles laid down by the IRC. v. Duke, of Westminister (1936) AC.I, (1935) 19 TC 490, (1935) All ER Re, 259 (HL) are still applicable in this count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer for verification. Presuming but not admitting it was further argued that even if the appellant did not provide the rates, which in fact they did, before making such huge disallowances the Assessing Officer could as well have verified the rates from the website of the 'exchange herself. It was, therefore, argued that no material has been brought on record by the Assessing Officer to conclude that the transactions had not been carried out at the market rate. Finally, it was argued that every single transaction carried out by the appellant either with the sister concerns or with the outside parties were well within the price band of the day for the respective securities. 16. During the course of argument, it was further brought to my notice that in another set of transactions which the appellant had conducted on principal to principal basis the appellant had earned substantial profits. The details of such transactions were annexed to the Assessing Officer's show-cause notice dated 18/12/2007 itself. Therefore, it was entirely incorrect on the Assessing Officer's part to observe that the transactions had been conducted by. the appellant only with a view to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been devised in such a manner that the profits transferred to the sister concerns had been offset against the losses generated from the sale of units of the mutual funds, once again avoiding any incidence of tax on thorn as well, it was pointed out by the appellant's representative that the losses incurred by the sister concern were within the ambit of section 94(7) of the Income-tax Act, 1961. On this issue, the appellant's representatives also cited the decision of ITAT Special Bench, Mumbai in the case of Wallfort Shares and Stock Brokers Ltd. (96 TTJ 673) where the ratio of the decision was clearly applicable to the appellant's case. 18. Flowing from the observations of the Assessing Officer that the motive behind all these transactions was tax planning with a view to avoid payment of taxes by all concerned entities, it was argued that out of the ten parties listed by the Assessing Officer only four were connected with the appellant. It was further argued that it can be nobody's case that profits were being, transferred to outsiders with a view to avoid payment taxes by the appellant. It clearly pointed out that delivery of share's bought or sold were given only when it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of these, therefore, the disallowance of losses made by the Assessing Officer is uncalled for and is deleted.' 3. Since the disallowance was deleted by the ld. CIT(A) in all the four years, now the Revenue is in appeal before us in all the four years. 4. Ld. DR of the Revenue supported the assessment order. He vehemently argued that the order of the CIT(A) on this issue should be reversed and that of the AO should be restored. DR of the Revenue also made written submissions which are reproduced below:- "No. CIT(ITAT)-ll/B Bench/2013-14/1 Date: 18/04/2013 he Hon'ble Members, ITAT Bench, Ahmedabad. Respected Sir, Sub : Appeal before the Hon'ble ITAT, Ahmedabad in the cases of (i) Hina Nitin Parikh - 1TA No.l800/Ahd/2008 -A.Y.2004-05 ITA Nos.2445 to 2449/Ahd/2008 - A.Yrs.2002-03, 2003-04, 2004-05, 2005-06 CO.Nos.l90 to 193/Ahd/2008 A.Ys.2002-03, 2003-04, 2005-06 2006-07 (ii) Prudent Finance (P.) Ltd. - ITA Nos.2450 to 2455/Ahd/2008 A.Yrs.2000-01 to 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of McDowell Comp. Ltd. v. CIT 154 ITR 148(SC). So Ld. CIT(A) has failed to appreciate the facts in right perspective. Therefore it is prayed that the additions made by Assessing Officer be sustained. Submitted for your honour's kind consideration. Yours faithfully. Sd/- [ROLEE AGARWAL] Commissioner of Income-tax Encl: As above. (ITAT)-II, 'B' Bench, Ahmedabad," ** ** ** "MOST URGENT No. ACIT/Cir-5/PFPL/2000-01 to 2005-06/2003-14 Date : 12/04/2013 To The Commissioner of Income-tax (ITAT)-II, B-Bench Ahmedabad (Submitted through the Addl. CIT, Range-5, Ahmedabad) Madam, Sub : Appeal before the Hon'ble ITAT, Ahmedabad in the case of Prudent Finance Pvt. Ltd. - ITA No.2450 to 2455/Ahd/2008 - A. Yrs. 2000-01 to 2005-06 - Regarding. Kindly refer to the subject mentioned above. 2. As desired, kindly find a written submission defending the department's case in the above mentioned case for above mentioned Assessment Years as under:- 3. In this case a search ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed part of the working capital and were invested in current assets. 4.2 Against the CIT(A)'s order, the department is in appeal which is under reference. In this connection it is to submit that provisions of 14A are over-riding the provisions of section 36(l)(iii) for the reason that Section I4A is part of the main chapter and is applicable to all heads of income including profit and gains of business of profession whereas section 36(l)(iii) is part of sub Chapter 1VD and it is applicable only where income is chargeable to tax. Further, dividend income is not chargeable as profit and gains of business and therefore, the expense attribute to it will be governed by section 14A and not by section 36(l)(iii) of the Act. 4.3 Further in the case of ITO v. Daga Capital Management (P.) Ltd. it has been held that for the purpose of section 14A what is relevant is to work out expenditure in relation to exempt income and not to examine whether expenditure incurred by assessee has resulted into exempt income or taxable income. The head note of the refer judgment is reproduced as under:- "Section 14A of the Income-tax Act, 1961 - Expenditure Incurred in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading in Shares. During the course of assessment proceedings the A.O noted that the assessee company carried out its business of share trading from the stock exchange on day-to-day basis mainly through four brokers namely ; (i) Kotak Securities Ltd. (ii) Anagram Stock Broking Ltd. (iii) Anagram Securities Ltd. and (iv) L FS Investment Ltd. The A.O also noted that the assessee has also carried out "off market transactions" for sale purchase of stock with other following main parties: Sr.No. Name of the Party Remark 1. M/s. NBP Traders Sister Concern 2. M/s. HNP Traders Sister Concern 3. M/s. Prudent Finance Consultants Sister Concern 4. Nitin Parikh Co. Sister Concern 5. Manubhai Co. 6. JMP Traders 7. Darshana fiscal (P.) Ltd. 8. Anjali Exim (P.) Ltd. 9. Shri Parshwa Profin (P.) Ltd. 10. Varuneshkumar Rameshwar Prasad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n market rate prevailing on the date of transaction. During the course assessment proceedings, to verify the genuineness of loss, the assessee was asked to furnish details of sale and purchase of shares made with the above named parties. In this regard the assessee was given a format by the A.O. However, assessee had preferred not to furnish those details on the pretext that the data called for was voluminous one. Even on test check basis, assessee failed to furnish such details and therefore, A.O came to the conclusion that the off market transaction carried out by the assessee with the family members and others were not carried out at market rate and therefore, the loss arouse on account of those transactions was not allowable as those transactions were nothing but a colorable devise to reduce /transfer out profit earned in regular stock market operations. 6.1 On assessee's appeal, Ld. CIT(A) has deleted the addition observing that the off market transactions with the family members and others were carried out at market rate and therefore. those being genuine one loss claimed by the assessee in off market transaction was allowable. 6.2 On careful consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002-03 Rs. 4,49,93,613/- 2003-04 Rs. 9,89,72,371/- 2004-05 Rs. 9,36,93,513/- 2005-06 Rs. 11,90,48,610/- To give a brief background of this case so as to appreciate the controversy in proper context, a search was conducted under sec.132 of the Income-tax Act, 1961 on 22/9/2005, in the case of Nitin B. Parikh group. The assessee is the flagship company of this group. As a consequence of scrutiny of return filed in response to notice under section 153A, it was noticed by the Assessing Officer that the assessee company, which trades in shares, units of mutual funds and also trades in Futures and Options, normally conducted transactions of two types - a) transactions on the stock exchanges through registered market intermediaries; and b) transactions with certain individuals/concerns on principal to principal basis. The individuals/concerns as reflected from seized documents were the following: (i) M/s. N.B.P. Traders (sister concern) (ii) M/s. H.N.P. Traders (sister concern) (iii) M/s. Prudent Financial Consultants (sister concern) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferring taxable profits to other entities and in the case of sister concerns loss booked on account of dividend stripping was set off against the profit transferred. Tiic.3, this is a device to avoid payment of tax (Page 17-18 of assessment order). (f) So far as identity of person with whom off-market transactions have been conducted, there is no doubt about it; as regards the availability of funds of concerns, funds were there with the assessee. Availability of funds of such concerns is not denied at all. But, the sale and purchase is not conducted through banking channel and therefore, funds available with the assessee can at best be regarded as loans and deposits- (Page 20 of assessment order). (g) The action of not transferring the shares to Demat Account was aimed at enabling the assessee to issue sale and purchase bill at its will ignoring prevailing market rate and allocating particular set of transactions to other entities depending on their tax status (Page 21 of the assessment order). (h) The assessee failed to prove that off-market transactions were carried out at market rate of particular scrip on the date of transaction (Page 22 of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained this issue which was also appreciated by him while drawing the final conclusion. It was pointed out that given the short settlement cycle where the securities were required for day to day transaction to reduce market risk and also to reduce the cost of transfer and other administrative cost, the shares bought or sold were retained by the assessee on the basis of general written instructions of the individual/concern. It was further pointed out that whenever any party to such transactions wanted delivery of shares in their account such requests were promptly complied with. It would, therefore, be wrong to conclude that the physical delivery of shares was not given, however, it was given only on the instruction of counter-party. This explanation was also provided to the Assessing Officer at para 4.5 of its written submission filed vide letter dated 24th December, 2007, which is also reproduced at page No. 9 of Assessment Order for A.Y. 2004-05. 2.2 The next issue repeated by the learned Commissioner of Income-tax (DR) in para 2.2 of her written submission is that one to one banking transactions were missing in these off-market transactions as there were no cheques foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, even if the sister concern has got the benefit of set off of its loss against profit earned through the assessee, the entire transaction is evidently genuine and has been accepted as such by the same Assessing Officer. The assessee would like to draw attention of Hon'ble Bench to para 16 of CIT (A)'s order at page No. 24 wherein Learned CIT(A) has observed as under: "16. During the course of argument, it was further brought to my notice that in another set of transactions which the assessee had conducted on principal to principal basis, the assessee had earned substantial profits. The details of such transactions were annexed to the Assessing Officer's Show-Cause Notice dated 18th December, 2007 itself. Therefore, it was entirely incorrect on the Assessment Officer's part to observe that the transactions had been conducted by the assessee only with a view to transfer profit.... The assessee's representative cited the decision of Hon'ble Gujarat High Court in the case of Glass Lined Equipment Company Ltd 253 ITR 454 where the Court had held that it was not open for the CIT (A) to ignore part of the contents of the affidavit where the remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details called for by her in regard to transactions carried out on a particular date claimed to have been submitted alongwith the assessee's submission on 24/12/2007 were in fact not submitted. The assessee submits that the annexure mentioned in their reply dated 24/12/2007 was submitted on next working day, as the details of market rates required to be submitted as part of the format took a considerable time to be downloaded from the official website of the Bombay Stock Exchange. In other words, the details as called for were submitted though a day late and for valid reasons. If required, the assessee is even prepared to submit affidavits of their representatives who were regularly appearing before the Assessing Officer during the course of assessment proceedings to confirm that the said annexure containing the details called for were submitted. Not only that these details were submitted in the assessee's own case but were also submitted in the case of other group concerns namely, Prime Finvest and Nitin Parikh Co. Wealth Management Services. While on the issue of submitting details, it is respectfully submitted that even when the Assessing Officer had called for the details vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es traded, the same were also available to the Assessing Officer from the official website of Mumbai Stock Exchange. (ii) However, be as it may, the assessee did furnish the details of scrip-wise, date-wise transaction including the relevant details of market rate on the trading days. Considering all the submissions made by the assessee along with the details of transactions carried out at market rate, Learned CIT(A) has decided the issue in favour of Assessee by holding in para 19 on Page 27 of appellant order as under: "Considering the arguments of the appellant's representatives on the observations of the Assessing Officer for making this disallowance, I am inclined to agree with the appellant that the disallowance has been made without any justifiable basis. After conceding that securities dealing through "off market transactions" was a legitimate mode of dealing in securities, the Assessing Officer has failed to adduce any evidence to establish her conclusion, that the off market transactions of the appellant conducted by them on principal to principal basis were not genuine. From the material on record it is evident that the parties to the transactions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finally debiting or crediting the account of the entity concerned. If the learned Commissioner of Income-tax (DR) happens to be suggesting that the settlement by book entries was merely paper settlement, without being followed up by giving or receiving cheque, the kind attention is invited to para 4.4 of our submission dated 24/12/2007 wherein we had categorically submitted that: "Further, during the year, we have made payments by banking channels and received amounts again through the banking channels for all the transactions. Even while settling our accounts, we have made or received payments through banking channels, which again established the genuineness further transactions." It is further submitted that it is normal practice prevailing in the market wherein transactions with the parties are carried out on a day to day basis and is just like a current account. There is not even a single transaction where cash is involved but account is settled with account payee cheques. Neither the Assessing Officer, nor the learned Commissioner of Income-tax (DR) has pointed out a single instance where settlement remained merely on paper. 2.6 The next iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, avoidance of tax. No commercial man in his senses is going to carry out a commercial transaction except upon the footing of paying the smallest amount of tax that he can." 2.8 In view of aforesaid facts, it is respectfully submitted that the appeal filed by department on this ground may kindly be dismissed." 5. We have considered the rival submissions, perused the material from record and gone through the orders of the authorities below. We find that the main objections of the AO for making disallowance of loss incurred by the assessee are following:- (a) The AO doubted the genuineness of "off market transactions" on the basis of applicability of the provisions contained in section 19(1) of Securities Contract (Regulation) Act, 1956. (b) The second objection of the AO is that of "off market transactions", delivery or payment were not effected for each transaction and the same was effected on net basis and the delivery of shares was not given by the assessee through Demat Account. (c) The third objection of the AO is that this "off market transactions" was not carried out by the assessee at market rate. 5.1 Regarding the first object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nrecognized stock exchange or carrying out any activity in the nature of a stock exchange and since the assessee is only having some transactions on "off market" and on the basis of principal to principal basis, it cannot be said that the assessee is a Member of any unrecognized stock exchange or the assessee is organizing or assisting in organizing any activity for the purpose of assisting in, entering into or performing any contract in securities. Hence, this objection of the AO is without any merit. 5.4 On page 15 of assessment order, the AO says that the provisions of section 19(1) of Securities Contract (Regulation) Act, 1956 are not taken into consideration in the present case, but again in para 8.2 of assessment order, the AO talks of explanation given in the same provision i.e. "Spot Delivery Contracts". Once the AO says that the provisions of section 19(1) are not being considered, then this discussion of the AO regarding explanation of the same provision is not relevant. Thereafter, the AO is saying that inspite of carrying out the transactions with its brokers to the tune of Rs. 12862 crores and though it has earned huge profit on day-to-day basis trade, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee simply by issuing purchase bill or sale bill by ignoring market rate. We are very surprised to note that not a single instance has been given by the AO highlighting that any purchase or sale was effected by the assessee in respect of these "off market transactions" which is not at market rate. As per written submissions filed by the ld.AR of the assessee before us, he vehemently contended that evidence regarding the prevailing market rate on the date of transactions of each script was provided by the assessee before the AO. He also submitted before us that even if, for the sake of argument, it is accepted that no such evidence was provided by the assessee regarding market rate on the date of transaction then also, market rate of a particular share on a particular date is easily verifiable independently from the website of Bombay Stock Exchange(BSE). The assessee has furnished the print-out of stock prices from such site of BSE before us in respect of various transactions and from the same, it is seen that the transactions carried out by the assessee in respect of these "off market transactions" is very much at market rate. For example, in respect of AY 2004-05, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred losses, the AO had disallowed such loss by holding that such transactions are only paper transactions or bogus transactions. This is not permissible. If the transaction in which the assessee is earning profit is accepted to be genuine, then similar transactions in which the assessee had incurred losses is also required to be accepted as genuine unless the AO has established some adverse factor in such transactions where the assessee had incurred losses. In the present case, no such adverse factor has been established by the AO in those transactions where the assessee had incurred losses. The allegation of the AO that the transactions are not at per market rate is examined by us and found to be baseless. Regarding the delivery and payment also, we have seen that such delivery was also made by the assessee on instruction of the other party and payment was also made or received through banking channel although on a consolidated basis. Hence, none of the objections of the AO is found to be valid. In the light of above discussion, we have seen that the losses disallowed by the AO on the allegation that the transactions are only paper transactions and are without delivery or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on proportionate basis cannot be sustained. We therefore do not find any reason to interfere in the order of Ld. CIT(A) on this issue. Accordingly, this ground of Revenue's appeal is rejected." 7. Since the facts in the present case are identical and it is accepted position that the company is also dealing in shares, we do not find any reason to interfere in the order of the CIT(A) on this issue also. By respectfully following our own decision cited above, this ground of the Revenue is also rejected. 8. Ground Nos.3 4 are general in nature which do not require any specific adjudication. 9. In the result, the appeal of the Revenue in ITA No.2452/Ahd/2008 is dismissed. 10. Since the grounds and facts are identical in all the remaining three appeals also, the same are also decided in similar line. In the result, all the four appeals of the Revenue in the case of Prudent Finance Pvt. Ltd. are dismissed. 11. Now, we take up the appeals of the Revenue filed in the case of Individual; namely, Smt. Hina Nitin Parikh in ITA Nos.2445 to 2448/Ahd/2008 for AYs 2002-03 to 2005-06 respectively. The grounds raised by the assessee are identical and hence, the same are reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X
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