TMI Blog2013 (3) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... e was assessed at Rs. .1,22,53,390. AO treated the entire sales consideration on sale of shares as income from other sources as he has considered that the purchase and sale of share transactions are bogus in nature. In appeal the learned CIT (A) directed AO to treat the income under the head capital gain . However, in respect of long term capital gain of Rs. .49,39,547 which has been claimed as exempt under section 10(38), the learned CIT (A) directed AO to tax the long term capital gain at the prevailing rates on the reason that assessee was not entitled for exemption under section 10(38) as no STT was paid. This order was confirmed by the ITAT. The learned AO initiated penalty proceedings originally in the assessment order for treating s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yad Chemicals Ltd and M/s Tallent Infoways Ltd. It would not be irrelevant to mention that assessee is a Chairman and Managing Director of the listed company viz., Banswara Syntex Ltd. It cannot be ignored that a chairman and managing director of a listed company whose shares are listed on Stock Exchange had preferred to engage in purchase and sales of two unknown companies. In the statement during the course of assessment proceedings (Page No.5 to 7 of assessment order) assessee expressed complete ignorance about these companies and not aware of person who advised him to purchase shares of these companies. At present, these companies are not found traceable on trading list of the Exchange. For the sake of curiosity, I tried to locate the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no requirement for payment of STT if the transaction is off market transaction. As per section 98 of Finance (No.2) Act 2004, the STT is chargeable in respect of the taxable securities A transaction of purchase or sale of an equity share in a company or a derivate or a unit of an equity oriented fund, entered into a recognized stock exchange Thus the statute itself provides that STT is payable only on transactions entered into a recognized stock exchange. In this case, after long drawn enquiry by AO, it was admitted that transactions are off market transactions. It may be mentioned that at initial stage there was an attempt to mislead that transactions were carried out at Ahmedabad Stock Exchange (Para 4.2 of assessment order) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 2% of returns for scrutiny. Hence there are 98% chances of escaping from taxation of real income chargeable to tax, if a person decides to make false claim. If the penalty is not leviable in such case, there would be nothing to loose for tax evader except for tax, which otherwise was payable had it been paid honestly. It is worth to note that in subsequent assessment year 2006-07 also, assessee had claimed exemption under section 10(38) on LTCG on transaction of these two companies. Hence, the plea of bonafideness is not tenable. On the contrary it divulges willful intention to evade tax. Assessee had relied on the decision of the Hon'ble Supreme Court in the case of Dilip Shroff. However, the said decision had been dissented by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention to conceal real income exigible to be taxed and also furnished inaccurate particulars of income liable to be taxed. In view of these facts, the order of AO levying penalty under section 271(1) (c) amounting to Rs. .16,62,651 is upheld and appeal filed by assessee is dismissed . 4. The learned Counsel submitted that the issue of claim of section 10(38) was never there before AO, as AO treated the entire sales consideration as income from other sources. It was submitted that assessee claimed exemption under section 10(38) being LTCG on the basis of the brokers bill, but in the absence of certificate from the broker as it was not paid by the broker, assessee was held to be not entitled for exemption under the LTCG. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. The order of the CIT (A) on this issue is as under: 7. As regards to the capital gain shown by the appellant, at Rs. .49,39,547 on account of capital gain earned on and after 1.10.2004, which has been claimed exempt under section 10(38), I find that no STT has been paid by the broker on this transaction. Therefore, it goes without saying that the condition of section 10(38) are not being satisfied. Hence, I hold that the appellant is not entitled for exemption under section 10(38) in respect of LTCG at Rs. .49,39,547. As a result of this finding, AO is directed to tax LTCG at the prevailing rate for the relevant assessment year. 7. Since the issue of claim of exemption was not examined by AO and has been crystallized by the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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