TMI Blog2011 (10) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... long term capital gains. The order of the learned CIT(A) to that extent is, therefore, liable to be set aside. The order of the learned CIT(A) to that extent holding transaction to be short term capital gain is set aside and we direct the AO to accept the claim of the assessee for long term capital gains. - ITA No. 3232/Ahd/2010 & ITA No. 3157/Ahd/2010 - - - Dated:- 14-10-2011 - SHRI G. D. AGARWAL, VP AND SHRI BHAVNESH SAINI, JM For the Appellant: Shri Rasesh Shah, AR For the Respondent: Shri Vinod Tanwani, Sr. DR O R D E R PER BHAVNESH SAINI: Both the cross appeals by the assessee and the revenue are directed against the order of the learned CIT(A)-II, Ahmedabad dated 20-09-2010 for assessment year 2007-08. 2. The assessee challenged the addition of ₹ 32,21,302/- 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 ₹ 27,93,559/- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old by the appellant, (e) Even if some of the details solicited from M/s. Swan Securities Pvt. Ltd. u/s.133(6) of the I.T. Act were not supplied by the same party, the appellant cannot be held responsible for such non compliance and for this non compliance, the purchase transaction or sales cannot be held as bogus. For this, reliance is placed on the judgment of Hon'ble Kolkata High Court in the case of CIT vs 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 (Jd) 265. (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 transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly, in respect of other shares also the purchases are on various dates in March,2007 and the sale of respect of shares are within one or two days from the purchase in the month March,2007 itself. Thus, the demat account shows that all the share were purchased and sold within two three days itself and all in the month of March,2007. Thus, the shares were held only for two-three days in the month of March,2007 and not held from April,2005 to 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions were carried out through account payee cheques. PB-11 to 13 are the ledger accounts of M/s. Swan Securities Pvt. Ltd. PB-15 is the debit note of the same party charging interest on the outstanding amount against the assessee in accounting year 2006-07. PB-16 and 17 are the ledger account for the year ending March, 2006 to show that the assessee made purchases and of shares in April, 2005 which are also recorded in the books of accounts properly and showing closing balance as on 31-03-2006. PB-18 to 22 are the debit notes of the broker for the purchase of shares in April, 2005. PB-27 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. PB-28 is the assessment order u/s 143 (3) of the IT Act dated 30-04-2008 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 accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the AO rightly held these to be sham transactions. He has submitted that no transaction took place through stock exchange. Since the purchases were doubtful, therefore, the sales were also rightly held to be doubtful. The learned DR submitted that it is not clear whether PB- 27 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 considered the rival submissions and material 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 AO 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-11 and 13 are the ledger accounts of the party to confirm purchase of the shares through banking channel. PB-15 is debit note of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed cash credit involved in this case and as such the learned CIT(A) rightly held that the sale proceeds of the shares cannot be termed as unexplained cash credit. ITAT Ahmedabad Bench in the group cases of Smt. Vimlabrani Biharilal Batra 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 paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en doubted which according to the assessee have been reflected in the balance sheet in the financial year 2002-03. Thus, the above evidences and explanations of the assessee support the explanation of the assessee that the assessee entered into 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n doubted. Even if the sale transactions were off market transactions, they were properly documented and supported by the above evidences. The above facts and evidences on record clearly support the case of the assessee that the assessee entered into the 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 conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is accordingly deleted. In the result, ground No.2 of the appeal of the assessee is accordingly allowed. The issue is, therefore, covered by the above orders of the Tribunal. The facts and circumstances noted above clearly prove that the assessee explained genuine transactions 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 necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the securities are transacted through stock exchanges, it is the established procedure that the brokers first enter into contracts for purchase/sale of securities and thereafter, follow it up with delivery of shares, accompanied by transfer deeds duly signed by the registered holders. The seller is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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