TMI Blog2015 (4) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... f physical shares, one cannot set them for de-materialisation. These factual aspects have not been disproved by the tax authorities. The shares were sold in the off-market and hence the transaction of sales was not routed through the stock exchange. The shares were held in the name of the partners on behalf the assessee firm and hence, naturally, the name of assessee firm would not find place in the transactions. Under these set of facts, the letters issued by the Stock Exchange could not be relied upon by the tax authorities. The case law relied upon by the Ld CIT(A) were also not found to be supporting the case of the tax authorities. We have also noticed that the assessing officer has assessed the Long term capital gain arising on sale of impugned shares. Under these set of facts, we are of the view that the tax authorities are not justified in suspecting the claim of purchase and sale of shares and also assessing the amount of ₹ 1.00 crore as undisclosed income of the assessee. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the assessing officer to delete the assessment of ₹ 1.00 crore made in the hands of the assessee. - Decided in fav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase and sale of shares of M/s Buniyad Chemicals Ltd was only accommodation entries obtained by the assessee from M/s Goldstar Invest Pvt Ltd. Hence the AO held that the amount of ₹ 1.00 crore, referred above, represents unexplained money u/s 69A of the Act and assessed the same accordingly. It is pertinent to note that the assessing officer also accepted and assessed the long term capital gain arising on sale of shares of M/s Buniyad Chemicals Ltd declared by the assessee in its return of income. 4. In the appellate proceedings, the assessee furnished before the ld. CIT(A) all the details relating to purchase and sale of shares of M/s Buniyad Chemicals Ltd. Hence Ld CIT(A) called for a remand report from the AO. In the said remand proceedings, the assessing officer made enquiries with the Stock exchange regarding the impugned purchase and sale transactions. However, the Stock exchange replied that the share transactions have not taken place either in the name of M/s R.C. Enterprises or in the name of M/s Goldstar Finvest Pvt Ltd. Accordingly the AO reported that the amount of ₹ 1.00 crore represents undisclosed income of the assessee. Hence, the Ld CIT(A) als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s R.B.K. Share Broking Limited on 10th April, 2002 (page 86). A copy of Depository Account Statement for the period from 11/03/2002 to 30/03/2002 along with the memo of DP charges and Postage Courier charges payable by the assessee firm to M/s R.B.K. Share Broking Limited are enclosed. (Pages 24 to 26). The aforesaid evidence proves that the assessee firm was holding shares of Buniyad Chemicals Ltd. in physical form which were delivered to the Depository, viz., M/s. R B K Share Broking Ltd for dematerialization. (vi) The said shares were reflected as investment in assessee's Balance Sheet as on 31st March, 2002 which was annexed to his return of income for A.Y.2002-03 filed on 12th September, 2002. (page 110) (vii) The assessee firm sold the said shares in parts between 9th May, 2002 and 31 May, 2002 through M/s. Goldstar Finvest Pvt. Ltd. (pages 27 to 81) and received the consideration by crossed account payee cheques which were deposited into the bank account of the assessee firm with Citi Bank. (Pages 96 to 100). (viii) The assessee gave instructions for delivery of shares on sale of the same to MIs R.B.K. Share Broking Ltd. and accordingly the demat account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balance sheet as on 31.3.2002 and the said Balance Sheet has also been attached with the return of income filed for AY 2002-03. 7. We notice that the assessing officer has disbelieved the claim of purchase of shares by placing reliance on the statement given by shri Mukesh Choksi before the DDI (Inv.). The assessing officer has also extracted the relevant questions posed to Shri Mukesh Choksi and answers given by him. As contended by the Ld A.R, they were general questions and general answers given by Shri Mukesh Choksi before DDI (Inv) with regard to his business transactions. It is pertinent to note that the assessing officer has not examined Shri Mukesh Choksi with regard to the transactions carried on by the assessee. From the fact sheet extracted above, it can be noticed that the shares of M/s Buniyad Chemicals Ltd were sent for dematerialization through M/s R.B.K share broking Limited. The dematerialized shares were held by M/s Central Depository Services (I) Ltd (CDSL) in demat form. It is pertinent to note that M/s CDSL is one of the reputed depositories and hence the transaction carried on by it cannot be doubted with. Further, it cannot also be denied that the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares, i.e., the Share broker has sold the shares off-market. Hence the sale transactions did not find place in the records of Stock exchange. However, sold shares have been reduced in CDSL account. The above said discussion would show that there are reasons to clarify as to why the transaction of sales was not routed through the stock exchange either in the name of M/s R.C Enterprises or in the name of M/s Goldstar finvest P Ltd. In view of the above, the letter given by the Stock exchange could not be taken support of by the tax authorities in order to disbelieve the purchase and sale of shares. Hence, we are of the view that the tax authorities are not justified in placing reliance on the letters given by the Stock exchange without appreciating the factual aspects discussed above. 9. The Ld CIT(A) has taken support of the decision rendered by Hon ble Supreme Court in the case of CIT Vs. Durga Prasad More (supra). However, the facts prevailing in the instant case would show that the assessee has adduced all the evidences to support the claim of purchase of shares and also sale of shares. None of those evidences were proved to be false by the tax authorities. It is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isproved the various documents furnished by the assessee in support of purchase and sale of shares by conducting specific enquiries with the brokers who had purchased and sold the shares on behalf of the assessee. The strong fact relating to the dematerialization of shares was not disproved by the tax authorities. The fact of purchase of shares was disclosed by the assessee in its return of income filed for AY 2002-03. The source of purchase was the speculation profit arising on sale of certain shares and the said speculation profit was also assessed in AY 2002-03. The assessee has dematerialized the shares through M/s RBK Share Broking Ltd, one of the depository participants of M/s CDSL. Without availability of physical shares, one cannot set them for de-materialisation. These factual aspects have not been disproved by the tax authorities. The shares were sold in the off-market and hence the transaction of sales was not routed through the stock exchange. The shares were held in the name of the partners on behalf the assessee firm and hence, naturally, the name of assessee firm would not find place in the transactions. Under these set of facts, the letters issued by the Stock Excha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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