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2015 (4) TMI 677 - ITAT MUMBAI

2015 (4) TMI 677 - ITAT MUMBAI - TMI - Addition of unexplained income under section 69A of the Income Tax Act, 1961 - Purchase & sale of shares - De-materialised shares - Stock exchange denied any such transaction on exchange platform - Held that:- The foregoing discussions would show that the tax authorities have proceeded to assess the amount of ₹ 1.00 crores on suspicion, conjectures and surmises. Further they have not disproved the various documents furnished by the assessee in support .....

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-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 .....

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es 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 favour of assessee. - I.T.A. No.3861/Mum/2012 - Dated:- 8-4-2015 - S/Shri B.R.Baskaran And Amit Shukla JJ. For the Appellant : Shri B V Jhaver .....

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ection 69A of the Income Tax Act, 1961 (the Act). 3. Facts relating to the case are stated in brief. The assessee filed its return of income for the year under consideration declaring total income of ₹ 4.83 crores which included income from Long Term Capital Gain LTCG of ₹ 4.46 crores. The AO received information from DDIT(Inv) that a company named M/s Mahasagar Securities Private Limited and its related Group Companies, mainly M/s Goldstar Invest Private Limited, were engaged in the .....

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icer noticed from the statement given by a person named Shri Mukesh Chokshi, Director of M/s Mahanagar Securities Pvt Ltd before the DDIT (Inv.) that Shri Mukesh Choksi had admitted about giving accommodation bills. Since the assessee did not furnish the relevant details, the AO took the view that the assessee had also received only accommodation bills for purchase and sale of shares of M/s Buniyad Chemicals Ltd. Accordingly he held that the assessee has paid a sum of ₹ 1.00 crore to M/s G .....

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ed 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 .....

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n the case of CIT V/s Durga Prasad More reported in 82 ITR 540 (SC) and also the decision rendered by a Co-ordinate Bench of the Mumbai Tribunal in the case of Ramesh Kumar D Jain V/s ITO (ITA No.3192/Mum/2010 dated 15.6.2011 for AY 2006-07). Aggrieved by the order of the ld.CIT(A) the assessee has filed this appeal before us. 5. We heard rival contentions and perused the record. The assessee has filed a fact sheet before us narrating therein about the sequence of purchase and sale of shares of .....

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ting the speculative profit earned by the assessee firm in AY 2002-03 which was payable by the broker, i.e., M/s. Richmond Securities Pvt. Ltd. to the assessee firm. iii) On 26th April, 2001, M/s. Buniyad Chemicals Ltd. transferred the said 2,00,000 shares in the name of Mr Suresh Ratilal Kapadia, Mr Dhirenkumar Navinchandra Kapadia and Mr Jigneshkumar Navinchandra Kapadia, partners of the assessee firm and forwarded the duly transferred shares to the assessee firm. A copy of covering letter of .....

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hare Broking Limited on receipt of the said shares for dematerialization and a copy of duly filled Dematerialisation Request Form are enclosed at pages 22 & 23 of the paper hook. (v) The said 2,00.000 shares of MIs. Buniyad Chemicals Ltd. were credited to the assessee's demat account with 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 & Co .....

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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 of t .....

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eration within one week of the date of sale i.e., between 23' May, 2002 and 6th June, 2002. (x) It is required to be noted that a partnership firm is not a legal entity distinct from its partners and therefore, the shares of a limited company cannot be purchased and recorded in the name of a partnership firm. Accordingly, the shares purchased by the assessee firm were recorded in the names of the partners). 6. The assessee has failed all the relevant documents in the paper book filed before .....

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settlement period from 4.4.2001 to 10.4.2001 and from 11.4.2001 to 17.4.2001 and earned profit thereon. The said profit has been declared as speculation profit, since the above said shares were purchased and sold on the same day. The assessee has also purchased the shares of M/s Buniyad Chemicals Ltd during the above said settlement period and hence the amounts payable by the assessee on purchase of shares of M/s Buniyad Chemicals Ltd were adjusted against the amounts receivable by the assessee .....

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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 t .....

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by it cannot be doubted with. Further, it cannot also be denied that the shares cannot be sent for dematerialization without purchasing the same. We notice that the tax authorities have not disproved the fact of purchase of shares and its dematerialization by bringing any materials contrary to the submissions made by the assessee. On the other hand, the assessee has disclosed the speculation profit as its income in AY 2002-03 and also declared the purchase of shares of M/s Buniyad Chemicals Ltd .....

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view that the tax authorities have not brought any material on record to suspect the purchase of shares. 8. We further notice that the shares have been sold through M/s Goldstar finvest Private Limited. We have already seen that the assessee has dematerialized the shares before its sale. We have also noticed that the dematerialized shares were held by M/s CDSL, one of the reputed depositories. Hence, in our view, holding of shares cannot be doubted with under these set of facts. The tax authorit .....

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he assessee firm). Hence the transactions of sales shall also take place in the name of Shri Sureshchandra Ratilal Kapadia and not in the name of M/s R.C. Enterprises. Hence the Stock exchange has stated that there was no transaction in the name of M/s R.C Enterprises. The assessee has also furnished copies of delivery instructions given by it at pages 82 to 85 of the paper book filed by it. A perusal of the same would show that the assessee has given Off-Market Delivery of the shares, i.e., the .....

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upport 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 add .....

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re DDI (Inv), though it was generalized one. The tax authorities did not make any enquiries with Shri Mukesh Choksi with regard to the transactions carried on by the assessee. Under these set of facts, we are of the view that the Ld CIT(A) was not justified in placing reliance on the decision of Hon ble Supreme Court rendered in the case of Durga Prasad More (supra) to simply brush aside the evidences furnished by the assessee. 10. The Ld CIT(A) has also placed reliance on the decision rendered .....

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of shares of Buniyad Chemicals Ltd and assessed the same also. However, the AO was of the view that the assessee would have given the amount equal to the amount of Long term Capital gain plus commission charges in order to get the accommodation entries. The AO has estimated the amount so given by the assessee as ₹ 1.00 crore and assessed the same as unexplained income of the assessee. Since the assessing officer has accepted the fact of sale of shares and also the Long term capital gain a .....

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res on suspicion, conjectures and surmises. Further they have not disproved 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 .....

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