TMI Blog2012 (10) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 23.4.2010 for the A.Y. 2006-07. We first take the assessee s appeal being ITA No. 980/PN/10. The assessee has taken the following effective grounds in the appeal : 1) In the facts, circumstances and position of law Hon. Commissioner of Income Tax, Appeals-II, Nashik erred in not allowing the gain received on transfer of shares as long term capital gain and thereby in not allowing exemption under section 10(38) of I.T. Act, 1961. 2) In the facts, circumstances and position of law Hon. Commissioner of Income Tax, Appeals-II, Nashik erred in not considering the date of purchase as the date of acquisition of the shares. 3. In the facts, circumstances and position of law Hon. Commissioner of Income Tax, Appeals-II, Nashik erred in not deleting the interest under section 234B at ₹ 2,34,663/-. 2. The facts which emerge from the record are as under. The assessee is in the manufacture and sale of wooden palletes and chemicals. It was noticed by the A.O that the assessee has shown the sale of penny stock and has also claimed the long term capital gain on such transactions. As per the details furnished by the assessee, he had purchased 12000 shares of Prime C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Market Ltd. shares in the settlement No. 331/04-05. The A.O has also noted that the information was called for in respect of each trading date in the aforesaid settlement and in respect of each broker, who was involved in the trading of the said shares. The Calcutta Stock Exchange has sent the names of the 4 brokers who were involved in the trading of those shares. As per the information given by the Calcutta Stock Exchange, M/s. D.K. Khandelwal Co. was not involved in the trading of shares of M/s. Prime Capital Market Ltd. During the course of the assessment proceedings, the assessee came forward and filed the letter dated 28.11.2008 in which he offered the Long Term Capital Gains of ₹ 20,48,900/- as his additional business income and agreed to pay the tax on the same. The A.O did not accept the offer made by the assessee and held that sum of ₹ 20,48,900/- should not be treated as additional business income and brought to tax ₹ 20,85,595/- (gross sale consideration) as an income from the other sources. The A.O did not give the benefit of deduction of the cost of purchases as in his opinion, the same was paid in cash and not proved by the assessee. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessee had purchased the shares on the date claimed. Under that circumstances, the Tribunal held that the Long Term Capital Gain claimed exempt by those assessees u/s. 10(38) of the Act was out of the sham transactions. The Ld Counsel relied on the following decisions in support of his plea : 1. CIT Vs. Korlay Trading Co. Ltd., 232 ITR 820(Cal) 2. Mukesh R. Marolia Vs. Additional CIT, 6 SOT 247 (Mum) 3. Acchyalal Shaw Vs. Income Tax Officer, 121 TTJ (Kol) 695 6. Per contra, the Ld. D.R. supported the order of the Ld CIT(A) on this particular finding. We find that in this case, the assessee has filed broker s note i.e. from M/s. D.K. Khandelwal Co. The assessee has taken consistant stand that it was off market transaction and after purchasing those shares, the assessee tried to sell off but he could not do so. We further find that the assessee has reflected those transactions in his books of account. The assessee has filed the Paper Book in which he has filed the Balance Sheet for the F.Y. Ending 31.3.2005 and under the head investment and deposit , the assessee has shown the shares of Prime Capital Market (page no. 36 of the Paper Book). We further find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into by the assessee were not available in their records. The assessee had made it very clear that the transactions were not concluded on the floor of the stock exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective stock exchange. We are of the considered view that (the materials collected by the assessing authority from the stock exchanges are not valid to dispel or disbelieve the contentions of the assessee.) 10.5 The next set of evidences relied on by the assessing authority are the statements obtained from various parties. When certain persons like Radha Ashok and Sandeep D. Shah made negative statements against the assessee, persons like Satish Mandovara and Mangesh Choksi had given positive statements in support of the contention of the assessee. But, the assessing authority sought to pick and choose the statements given by various parties. While accepting and rejecting such statements given by the parties, the AO has made a mistake of accepting irrelevant statements and rejecting relevant statements. During the relevant period in which the assessee transacted in shares, perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /acquisition of the shares as stated by assessee, contradicting his own findings in the appellate order that the purchase contract notes are not genuine and that the shares were not purchased by assessee in the FY 2004-05. 3. On the facts and in the circumstances of the case, the CIT(A) ignored the fact that once the documents/evidences produced by the assessee have been proved to be fabricated, the only logical conclusion that can be drawn is that the whole transaction is a sham transaction and assessee has tried to introduce his undisclosed income in the guise of long-term capital gain. 4. On the facts and in the circumstances of the case, the CIT(A) erred by applying the decision of Hon ble H.C. of Punjab and Haryana delivered in the case of Anupam Kapoor (299 ITR 179), when the facts of the cases are distinguishable. 12. The Revenue has objected to the finding of the Ld CIT(A) that the gains on the sale of the shares which were purchased in the off market is to be assessed as a capital gain only. The Ld CIT(A) accepted the contentions of the assessee that the shares of the M/s. Prime Capital Market Ltd. were purchased through the broker M/s. D.K. Khandelwal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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