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2015 (10) TMI 317 - ITAT HYDERABAD

2015 (10) TMI 317 - ITAT HYDERABAD - TMI - Claim of exemption u/s 10(38) on long term capital gain from sale of shares - date of transaction to be considered - shares were transferred to assessee’s D-mat account - CIT(A) held that the gain derived from transaction in shares cannot be treated as short term capital gain - also the conclusion drawn by AO that source of investment in shares on 15th nd 17/05/07 was not explained by assessee while making addition u/s 69A cannot be sustained - Held tha .....

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hich has not been controverted by the department. It is also a fact on record that sub-broker M/s Alliance Intermediateries & Network Pvt. Ltd. issued confirmation certificates acknowledging the fact that shares were held in its pool account on behalf of assessee till it is transferred to assessee’s D-mat account. When assessee has produced all documentary evidences and has also submitted its explanation before AO as well as ld. CIT(A), there is no reason to disbelieve the same unless strong and .....

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icate the date of purchase as 04/04/2006. In the aforesaid view of the matter, finding no infirmity in the order of ld. CIT(A), we are inclined to uphold the same and dismiss the grounds raised by the department. - Decided against revenue - ITA No. 153/Hyd/2015, C.O. No. 16/Hyd/2015 - Dated:- 4-9-2015 - SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER For The Revenue : Shri Ramakrishna Bandi For The Assessee : Shri K.C. Devdas ORDER PER SAKTIJIT DEY, J.M.: This appeal o .....

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r of the CIT(A) is erroneous and is prejudicial to the interest of revenue. ii. The decision of ld. CIT(A) is not acceptable as the CIT(A) erred in taking into consideration the information received from Intelligence Authorities and also that the assessee failed to furnish evidence in support of purchase date of shares. 4. As could be seen, the only issue raised by the department is with regard to assessee s claim of exemption u/s 10(38) on long term capital gain from sale of shares amounting to .....

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the income returned. Subsequently, on the basis of certain information available with regard to the genuineness of the share transactions carried on by assessee through one of the broker, assessment was reopened u/s 147 of the Act. During the reassessment proceeding, AO found that one Shri Mukesh Choksi had created certain fictitious companies for providing bogus accommodative entries, one of then, being M/s Alliance Intermediateries & Network Pvt. Ltd. and assessee is one of the beneficiar .....

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6 to 16/05/07 was neither registered as a trading per of exchange nor registered as a subbroker affiliated to any trading member of exchange. Further, enquiries made on National Stock Exchange also reveal that M/s Alliance Intermediateries & Network Pvt. Ltd. was a registered subbroker affiliated to M/s ISE Securities and Services Ltd. and was registered in the capital market segment on 12/10/2000 and registration was cancelled on 19/02/04. AO accordingly issued a show cause notice to assess .....

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t Work Pvt. Ltd is in existence and status of the company is active". b) Regarding the payment made to MIs Alliance Intermediateries & Net Work Pvt. Ltd., the assessee stated that, the details of payment made were enclosed with the letter dated 17/10/2013 and however enclosed a copy of the same. c) The assessee already filed complete evidence of purchase and sales with contract notes evidencinq the transactions, and the amount has been received by Account Payee Cheques. Thus, all the tr .....

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merely on Investigation Report, a copy of which was not made available to the assessee. AO after considering the submissions of assessee, however, noted that as per the details of purchase and sale of shares, it was found that only the shares of M/s Jai Corporation Ltd. were transacted through M/s Alliance Intermediateries & Network Pvt. Ltd. and assessee derived long term capital gain of ₹ 22,19,093. However, on verification of D-mat account of assessee, it was found that opening bal .....

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ce Intermediateries & Network Pvt. Ltd. stating therein that shares of M/s Jai Corporation Ltd were held on behalf of assessee in the pool account from the date of purchase till the date of transfer to D-mat account and assessee also furnished purchase and sale contract notes for shares of M/s Jai Corporation Ltd., but, AO was not convinced with the same. AO observed that assessee could not produce evidence to show that purchase price of shares was paid to M/s Alliance Intermediateries & .....

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n statement. AO further observed, to verify the genuineness of assessee s claim letters were addressed to Bombay Stock Exchange and National Stock Exchange calling for information regarding M/s Alliance Intermediateries & Network Pvt. Ltd. and in response to the said letters, National Stock Exchange vide its letter dated 08/01/04 informed that, though, M/s Alliance Intermediateries & Network Pvt. Ltd. was a registered sub-broker, but, the registration was cancelled on 109/02/04. Bombay S .....

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eries & Network Pvt. Ltd. calling for information with regard to share transaction, but, there was no response from the said company. Thus, on the basis of the aforesaid information, AO finally concluded that sale transactions of shares relating to M/s Jai Corporation Ltd. are not long term capital gain, but, short term capital gain as per the entries made in D-mat account of assessee. He, therefore, treated the gain derived from sale of shares amounting to ₹ 82,613 as short term capit .....

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ome. Accordingly, he completed the assessment. Being aggrieved of the assessment order so passed, assessee preferred appeal before ld. CIT(A). 6. In course of hearing before ld. CIT(A), assessee reiterating the submissions made before AO contended that when documentary evidences in the form of contract notes towards purchase of shares were furnished before AO, he was completely wrong in holding the transactions as short time capital gain by considering the date of purchase of shares as 15th and .....

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there are documentary evidences to prove such fact. Assessee submitted, since assessee was holding the shares of M/s Jai Corporation Ltd. for more than 12 months, gain derived from sale of shares can be treated as long term capital gain, which is exempt u/s 10(38) of the Act. As far as addition made u/s 69A is concerned, it was submitted by Assessee, when assessee has purchased the shares in 2006, AO was not justified in making the addition u/s 69A by considering the market price of the share as .....

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AY 2007-08, which were carried over to the next year and this fact was not disputed by AO. Ld. CIT(A) observed, only because shares were transferred to assessee s D-mat account on 15th and 17/05/07, it cannot be said that shares were not purchased by assessee in April 06. In this context, ld. CIT(A) referred to the confirmation issued by M/s Alliance Intermediateries & Network Pvt. Ltd. to the effect that shares were kept in their pool account till the time it was transferred to assessee s D .....

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E Securities and Services Ltd. was a sub-broker. Thus, on the basis of material evidences submitted before him, ld. CIT(A) observed, AO s conclusion that purchases of shares of M/s Jai Corporation Ltd. were made only on 15th and 17/05/07 cannot be accepted. As far as observation of AO that assessee could not explain the purchase of shares on 15th and 17/05/07 while making addition of ₹ 22,954,500, ld. CIT(A) observed that there is no evidence to show that assessee has paid cash equivalent .....

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e while making addition u/s 69A cannot be sustained. Accordingly, he deleted the addition made u/s 69A of the Act. 8. Ld. DR, more or less, relying upon the observations made by AO in the assessment order, submitted, AO in course of assessment proceeding has enquired with the concerned stock exchanges and found that assessee s registration with National Stock Exchange was cancelled long before the share transaction was entered into between assessee andM/s Alliance Intermediateries & Network .....

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term capital gain. It was submitted, when assessee has failed to establish such fact with proper evidence, AO was justified in treating the gain derived from sale of shares as short term capital gain considering the fact that as per the D-mat account shares were purchased by assessee on 15 and 17/05/07 and were sold on 16 and 18/05/07 respectively. 9. Ld. AR, on the other hand, supporting the finding of ld. CIT(A) submitted before us, assessee not only in the course of assessment proceeding, bu .....

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bmitted, when assessee through documentary evidence proved the purchase of shares of M/s Jai Corporation Ltd in April 06, there is no reason to disbelieve assessee s claim of purchase of shares in April 06 when the department has accepted sales of such shares. He submitted, when department is not disputing sales of such shares, it cannot treat the purchases as bogus. Ld. AR submitted, when assessee has submitted the contract note for purchase of shares as well as sale of shares and also certific .....

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ubmitted, when assessee has brought the entire evidence on record to show that shares in fact were purchased and held by assessee for more than a period of 12 months, AO merely on the basis that such shares were transferred to D-mat account on 15th and 17/05/07 treated the gain derived from shares as short term capital gain. In support of such contention, assessee relied on the following decisions: 1. CIT Vs. Shyam R. Pawar, [2015] 54 taxmann.com 108 (Bom.) 2. Jafferali K. Rattonsey, [2012] 23 t .....

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Intermediateries & Network Pvt. Ltd. since he has ultimately accepted the gain from sale of share transaction as capital gain, though he treated it as short term capital gain as against long term capital gain claimed by assessee. The only dispute AO is having is with the period of holding of shares of M/s Jai Corporation Ltd. It is the view of AO that since the shares of M/s Jai Corporation Ltd. were transferred to assessee s D-mat account on 15th and 17/5/07 and assessee has sold shares on .....

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which are at page 62 of assesse s paper book, it is observed that assessee has shown investments in shares under the head current assets for an amount of ₹ 32,68,789.45. The details of investment as furnished in page 63 of the paper book shows investment in shares of M/s Jai Corporation Ltd at ₹ 1,58,080. Cash book maintained by assessee, extract of which is at page 92 of paper book also reveals that assessee has withdrawn the amount of ₹ 2 lakhs from the partnership firm M/s P .....

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cuted by it on 05/04/06, a copy of which is at page 53 of the paper book. The contract note for purchase of shares of M/s Jai Corporation Ltd., a copy of which is at page 34 of the paper book clearly indicate the purchase of shares by assessee from M/s Alliance Intermediateries & Network Pvt. Ltd. on 04/04/06 through proper procedure after payment of service tax and security transaction tax. Thus, as far as assessee s claim of purchase of shares of M/s Jai Corporation Ltd. through M/s Allian .....

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quate and cogent documentary evidences by way of contract note and other evidences including the return of income filed for AY 2007-08, which has not been controverted by the department. It is also a fact on record that sub-broker M/s Alliance Intermediateries & Network Pvt. Ltd. issued confirmation certificates acknowledging the fact that shares were held in its pool account on behalf of assessee till it is transferred to assessee s D-mat account. When assessee has produced all documentary .....

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s. DCIT, [2012] 23 Taxmann.com 21 (Mum) while dealing with identical nature of dispute held as under: 9.7 The CBDT Circular No. 704 dtd. 28.4.1995 states that it is the date of broker s note that should be treated as the date of transfer in cases of sale transactions of securities provided such transactions are followed up by delivery of shares and also the transfer deeds. Similarly, in respect of the purchasers of the securities, the holding period shall be reckoned from the date of the broker .....

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