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ACIT - 13 (3) , Mumbai Versus Late Shri Himatlal H. Dadia

2016 (1) TMI 603 - ITAT MUMBAI

Addition u/s 68 - genuineness of transactions of purchase and sale of shares - book entries taken for long term capital gains. - Held that:- As per provisions of Section 68 of the Act assessee has to prove the nature of credit appearing in the books and also identity, creditworthiness and the genuineness of the credits appearing in his books of accounts. In the case of assessee, the credit of ₹ 16,15,188/- was received by the assessee from the broker through whom the shares were sold. Ther .....

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xistence of shares of 150000 in the hands of assessee was also established by filing concerned demat account. Therefore, the conditions for making addition under section 68 were missing in the case of the assessee. In view of the above the CIT(A) was justified in observing that the addition made under section 68 of the Act are not justified and the same were rightly deleted by him - Decided in favour of assessee - ITA No. 1148/Mum/2013 - Dated:- 28-10-2015 - SHRI SHAILENDRA KUMAR YADAV, JM AND S .....

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68 of the IT Act. (ii) While doing so, the Ld. CIT(A) has erred in not appreciating that the transactions undertaken by the assessee are not genuine transactions of purchase and sale of shares but the book entries taken for long term capital gains. 2. The appellant prays that the order of the CIT(A) on the above ground(s) be set aside and that of the Assessing Officer be restored. 3. Assessee is engaged in the business of dyes and chemicals. The only issue before us is the action of the Assessin .....

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4 for a total consideration of ₹ 16,15,188/-. During assessment proceedings, the A.O asked appellant to furnish following details: - It is seen from the Audit Report and the annexures flied along with the return of income with regard to Long-term Capital Gains: a) It is seen that you have purchased 150000 shares of M/s. Shukun Construction. The total purchase price claimed to be paid was ₹ 65,961.33/-. It is therefore ascertain that all such shares were allegedly sold on 15.12.2004 [ .....

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of the same if payments were payment made in cheques. c) Contract notes issued by progress on account of purchase and is seen that the purchase price per share is ₹ 0.43/- and the 'e price per share comes to ₹ 10.76/- resulting in such huge appreciation in value of shares in such a short period. Please submit further - i) Whether Shukun construction is a listed company of the stock exchanges. ii) When did such shares credited in your De-mat account. iii) Demat statement for the e .....

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res were claimed to have been purchased. The notice was received back unserved with remarks "left". The Assessing Officer also issued notice to M/s. Sushil Finance Consultants Ltd, through whom the shares were sold. Assessing Officer has mentioned that there was no response received from M/s. Sushil Finance Consultants Ltd. During assessment proceedings, the assessee vide letter dated 05.12.2007 explained as under:- "Regarding long term capital gain on sale of shares of M/s. Shuku .....

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ited in our client Demat account in November, 2004. e) Copy of Demat account is already submitted and we have not received any dividend or balance sheet and profit and loss account of the company." 5. The Assessing Officer noticed that the shares were kept with the broker before its splitting into 150000 shares of value of ₹ 1/- per share. Purchases were made in cash in support of which only cash vouchers and journal entry in the books of accounts of assessee and broker s note were su .....

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struction, shares of which were purchased and sold by the assessee. The Assessing Officer asked the assessee to substantiate the fact that shares were actually purchased in July, 2003. Assessing Officer also asked assessee to submit proof of physical shares allotted to him and to furnish the evidence that these shares were actually transferred in the name of assessee from the previous share holder. Assessing Officer mentioned in the assessment order that assessee failed to furnish the explanatio .....

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amount of ₹ 16,15,188/- is treated as not explained to the satisfaction of the Assessing Officer and the sum so credited is considered as the income of the assessee u/s. 68 of the I.T. Act, 1961. Penalty proceedings u/s. 271(1)(c) of the Act are initiated separately for concealing the true and correct particulars of income by the assessee. 6. The matter was carried before first Appellate Authority wherein various contentions were raised on behalf of the assessee. Having considered the same .....

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g Officer be restored. On the other hand, the learned A.R. for the assessee supported the order of the CIT(A) and submitted that the amount of ₹ 16,15,188/- represent sale proceeds of 150000 shares of M/s. Shakun Construction. The long term capital gains earned out of sale of shares were properly reflected in the return of income and accordingly the said amount cannot be said to be unexplained cash credit in the books of account. The Assessing Officer s observation regarding purchase of im .....

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evant financial year, copies of receipt issued by broker, copy of ledger account of M/s. Shukun Construction, and broker in the books of assessee, copies of computation and balance sheet filed with return of income for A.Y. 2004-05 reflecting the shares and various other details. On the basis of details/evidences filed, the learned A.R. for the assessee prayed that the addition made by the Assessing Officer has rightly been deleted by the CIT(A), same should be upheld. 7. We find that facts of t .....

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- Sale consideration : ₹ 16,15,188 - Mode of payment received : cheque - Sold through : M/s. Sushil Finance Consultants Ltd. 8. The details in the form of vouchers, copies of contract note, ledger account etc. were filed by the assessee during assessment proceedings before the concerned Assessing Officer. During appellate proceedings, few additional evidences were also filed i.e. (i) copy of ledger account of M/s. Shukun Construction, and broker in the books of assessee, (ii) copy of lett .....

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dences. Having considered the same CIT(A) observed that firstly, the issue of purchases, non service of notice on broker from whom shares were purchased, purchase of shares in cash, holding of assessee's share by the broker from whom the shares were purchased, thereafter transfer of these shares after splitting up into the Demat account of the assessee, sale of shares by assessee through another broker and finally the receipt of sale consideration by cheque by the assessee. As discussed abov .....

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shares, copy of ledger account of assessee in the books of share broker from whom shares were purchased, .copies of receipt issued by broker to assessee for purchase of shares, computation of income, Balance Sheet as on 31.03.2004 and other annexure filed with return of income for A.Y. 2004-05, in which shares of M/s. Shukun Construction, were shown under the head 'investment in shares and debentures'. 9. It is not in dispute that during assessment proceedings these documents were filed .....

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ssessing Officer, at relevant point of time, copy of demat statement of the assessee in which 150000 shares were credited to assessee's demat account on 22nd November, 2004. This demat account establishes the fact of ownership of the assessee of 150000 shares of M/s. Shukun Construction, as on 22nd November, 2004. No addition was made by the Assessing Officer on account of purchase consideration. The only addition made by Assessing Officer was in respect of sale consideration of ₹ 16,1 .....

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