TMI Blog2012 (3) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... eena (Accountant Member) For the Petitioner : Hardik Vora For the Respondent : Rahul Kumar ORDER T. R. Meena (Accountant Member) These are cross-appeals filed by the assessee and the Revenue arises from the order of Ld. Commissioner of Income -tax (Appeals)-VII, Ahmedabad dated 20- 09-2010 for the assessment year 2007-08. 2. The assessee challenged the addition of ₹ 22,93,718/- on account of unexplained cash credit u/s 68 of the IT Act before the learned CIT(A). The assessee had claimed long term capital gain of ₹ 19,78,515/- on sale of shares which was claimed exempt. The shares were claimed to have been purchased from the broker M/s. Swan Securities Pvt. Ltd. in April, 2005 and sold through the broker M/s. Motilal Oswal Securities Ltd. in March, 2007. The Assessing Officer called for various details and also issued letter u/s 133(6) of the IT Act to verify the claim of purchase from M/s. Swan Securities Pvt. Ltd. The broker M/s. Swan Securities Pvt. Ltd. although confirmed the purchase being made by the assessee and intimated that it was off market transaction but did not provide various details called for by the AO to prove the transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Korlay Trading Co, Ltd. 232 ITR 820 (Cal.) (f) The failure on the part of the broker to report the off market transaction of the purchase of shares to the Stock Exchange and also failure to give the address and name of the persons who sold the shares to the brokers, cannot be the basis for treating the transaction as sham transaction and cannot convert the profit earned on sale of shares into income from other sources. For this, the reliance is placed on the decision of Hon'ble ITAT, Jodhpur Bench .in the case of ITO vs Kusum Lata 105 TTJ 265 (Jd). (g) The burden of proving that the apparent is not real, is on the party who claims so as held by the Hon'ble Supreme Court, Hence, the onus was on the Assessing officer to prove that the transactions were bogus which the Assessing Officer has failed. Further, there is no evidence that the appellant tendered equivalent cash to the purchase of shares against the payments made by them to the appellant by way of purchase consideration for shares purchased by them. Hence, the addition cannot be made for unexplained cash credit treating the transaction, as sham as held by the Hon'ble ITAT Agra Bench in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2007. (iii) The sale of shares by the assessee is confirmed by the broker M/s. Motilal Oswal Securities Limited and the amount is received in the bank account in March.2007. (iv) The claim of purchase of shares in the month of April,2005, is not prove as the payment is made in the month of March,2007 and the shares are appearing in the demat account as purchase only on the date of month of March,2007 and not in April.2005. Although the broker M/s. Swan Securities Pvt. Ltd. claimed to have sold the shares to the appellant in April,2005 but he has not given various details like from whom the shares were purchased and also not intimated the transaction to the Stock Exchange as per prescribed procedure. Hence, the purchase date cannot be taken as April.2005. 4.2 In view of these facts, it is evident that the appellant has received the amount on sale of shares hence, it cannot be termed as unexplained cash credit. However, it is also a fact that the appellant has not proved that shares were actually purchased in April,2005 but evidences suggest that it were purchased in March, 2007. Hence, the appellant has not been able to prove that the shares were held for more than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2006. PB-12 to 16 are the debit notes of the broker for the purchase of shares in April, 2005. PB-22 is the balance sheet of the assessee as on 31-03-2006 showing liabilities on account of purchase of shares in the name of M/s. Swan Securities Pvt. Ltd. to prove that shares were purchased in April, 2005. The assessee has submitted the copy of assessment order u/s 143(3) of the IT Act dated 30-12-2009 in the case of the assessee in assessment year 2006-07 where returned income is accepted after scrutiny assessment to show that revenue department has accepted purchase of shares by the assessee in preceding assessment year. He has submitted that scrutiny assessment could not have been completed without profit loss account and balance sheet on record of the AO. He has submitted that law requires that the assessee should hold the shares on the date of the transfer; therefore, the documents filed on record clearly prove purchase of shares by the assessee in April, 2005. He has relied upon the CBDT Circular No.704 dated 28-04-1995 in which it was explained that in case the transactions took place directly between the parties and not through stock exchange, the date of contact of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is not clear whether PB- 22 i.e. balance sheet as on 31-03-2006 showing purchase of shares in earlier year was filed or not before the AO. He has submitted that since in the demat account shares were held in March, 2007, therefore, claim of the assessee was rightly rejected by the learned CIT(A). 7. We have heard the rival submissions and perused the materials available on record. The assessee claimed long term capital gains on sale of shares. It was claimed that shares have been purchased from broker M/s. Swan Securities Pvt. Ltd. in April, 2005. The assessee filed conformation of the broker M/s. Swan Securities Pvt. Ltd. before the Assessing Officer who has confirmed purchase of shares by the assessee through them in April, 2005. Copy of the account was also furnished and the consideration was made through banking channel. PB-17 and is the ledger accounts of the party to confirm purchase of the shares through banking channel. PB-9 is debit note of the broker charging interest on the outstanding amount against the assessee in accounting year 2006-07. PB-17 is ledger account to show that shares have been purchased by the assessee in April, 2005 through the broker M/s. Swa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and Others (supra) considering the identical issue in the light of the case laws relied upon by the learned Counsel for the assessee deleted similar addition and held in Para 10 and 11 of the order dated 16- 09-2011 as under: 10. We have considered the rival submissions and material on record. During the year under consideration, the assessee claimed to have sold shares of 3 companies namely M/s, Globe Stock Securities Ltd., M/s. Herald Commerce Ltd. and M/s. Silicon Valley Infotech Ltd. As per the details noted in the assessment order, the assessee in the course of assessment proceedings filed the evidences for purchase and sales of shares which are brokers contract note for purchase and sale of shares, transaction statement of demat account in respect of credit of shares on account of purchase and debit on account of sales, delivery instructions, note for sale of shares, bank statement proving the receipt of sales consideration and payment of purchases, copy of the balance sheet of the earlier year, confirmation/ledger account of the assessee from the brokers books of accounts and the quotation of the stock exchange, letter of the Calcutta Stock Exchange (PB-8) confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine transactions. The details would show that the assessee proved the sources of the sale of the shares. Therefore, no addition was required to be made u/s 68 of the IT Act. Under the provisions of section 68 of the IT Act, the assessee is required to prove the source of the sum which was credited in the books of account maintained by the assessee. ITAT Ahmedabad Bench in the case of Shri Prakash Chand S. Sandh (supra) held that profit on shares and sale of shares/securities can never be cash credit entered as envisaged in the provisions of section 68 of the IT Act, because for considering a credit entry in the books of accounts, details of party in whose name the credit entry appears has to be there. The learned Counsel for the assessee submitted that the same CIT(A) who passed the impugned order has considered the identical issue in the case of Hiteshkumar Babulal Sanghvi (supra) and deleted the similar addition vide order dated 31-10-2007 copy of which is filed at page 17 of the paper book of the case law. The identical issue was considered by ITAT Ahmedabad 'B' Bench in the case of Mahesh Kumar Guipta Vs ITO in ITA No. 2814/Ahd/2007 and 2828/Ahd/2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine transactions. The details of the sources of the sale of shares have been proved. Therefore, no addition u/s 68 of the IT Act could be made as is made by the AO. The learned Counsel for the assessee submitted that the same CIT(A) who passed the impugned order has considered identical issue in the case of Shri Sanjaykumar Agarwal (supra) and deleted the similar addition vide order dated 29-05-2007 copy of which is filed at page 23 of the paper book. The order of the learned CIT(A) in the case of Shri Sanjaykumar Agarwal has been confirmed by the Tribunal in ITA NO.3142/Ahd/2007 dated 12-02-2010 and Para 7 of the order of the Tribunal reads as under: 7. We have heard the rival contentions of both the parties. Looking to the facts of the case and circumstances of the case, the CIT(A) has called for the Remand Report and the remand report of the A. O. it was seen that CSE vide their letter had clearly confirmed that the shares of both the companies were listed with the exchange. We find that the genuineness of the transactions of purchase and sales of shares. In the remand report it was clearly mentioned that the transaction has been clearly confirmed by the brokers but als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sales and purchases of the shares. The sources of sale of shares are explained through evidences and materials on record. Considering the facts and circumstances of the case in the light of the above decisions and evidences on record, we are of the view that the authorities below have wrongly made the addition u/s 68 of the IT Act. The transactions declared by the assessee shall have to be accepted by the revenue authorities for capital gains. Orders of the authorities below are accordingly set aside and the addition is deleted. 11. In the result, the appeal of the assessee is allowed. 8. The purchases and sales are, therefore, fully supported by the copies of the contract note and the details along with accounts and confirmation etc. of the brokers. The sales and purchases of shares have been made out of disclosed funds. According to the assessee the only requirement was necessary that shares should have been listed in recognized stock exchange and according to the learned Counsel for the assessee it is not necessary that shares should be sold through recognized stock exchange. According to proviso to section 2 (42A) of the IT Act, the requirement is that assessee sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to receive the consideration agreed to as on the date of contract. The Board are of the opinion 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 s note for purchase on behalf of the investors. In case the transactions take place directly between the parties and not through stock exchanges the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds. According to the above circular, in case transaction takes place directly between the parties and not through stock exchange, the date of contract of sale as declared by the parties shall be treated as date of transfer provided it is followed up by actual delivery of shares and the transfer deeds. The Board in their subsequent Circular No.768 dated 24-06-1998 while referring to the earlier circular No.704 (supra) furt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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