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Deputy Commissioner of Income-tax, Circle-35, Kolkata. Versus Kedar Nath Agarwal (HUF)

I.T.A. No. 2094/Kol/2009 - Dated:- 9-4-2010 - Sri D. K. Tyagi, JM & Sri C. D. Rao, AM Appellant by : Sri M. K. Singhania & Smt. Jyoti Kumari Respondent by : Sri R. Salarpuria O R D E R Per D. K. Tyagi, JM : This appeal preferred by the revenue is directed against the order of the Ld. CIT(A), Kolkata dated 30.10.2009 for assessment year 2004-05 on the following sole ground : Ld. CIT(A) erred both in facts and in law in allowing the disallowance of ₹ 15,29,049/- without proper apprec .....

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500/- by making disallowance of ₹ 15,29,049/- being the short term capital loss. At the time of assessment the AO found that, during the relevant previous year, the assessee has incurred capital loss to the tune of ₹ 15,29,049/- on sale of 12 scrips listed both on CSE & BSE/NSE. And, out of the short term capital loss, the loss of ₹ 11,37,975/- was on sale of only 3 scrips listed on CSE. In such capital loss, long term capital loss of ₹ 1,05,294/- was also included. I .....

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AO that with regard to investment in the case of Nageshwar Investment, the Stock Exchange has informed that the concerned broker has not carried out transaction on the on-line system of the Exchange. It was further observed by the AO that in the cases of one scrip, the concerned brokers have entered into cross deals and in an other scrip, the broker has transacted on his own code. The discrepancies noted by the AO were communicated to the assessee for its explanation In response, the assessee h .....

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e made through account payee cheques. Similarly the shares were delivered on sale through Demat account and the consideration was received by cheque. However, the AO was not convinced with the submission of the assessee and after making several observation he disallowed the capital loss to the extent of ₹ 15,29,049/- by observing as under : (i) In the case of scrip of Nageshwar Investment, the transaction was not carried out on the on-line system of the Exchange. The share of Easum Capital .....

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anies in which the assessee has invested were not worth investing as those companies had small loss/profit and small capital base and the assessee could have purchased shares of better companies at the prices at which he has purchased penny stocks. Thus, in view of above mentioned observations, it was held by the AO that the purchase and sale transactions of scrips listed in CSE, in which the assessee had incurred the loss of ₹ 15,29,049/- were not genuine. Hence, the loss incurred by the .....

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all the materials on record, and after confronting the assesse s argument has disallowed capital loss of ₹ 15,29,049/- . The Ld. CIT(A) on the other hand, without proper appreciation of the argument put forward by the AO during passing the order u/s. 143(3) has held that the loss incurred by the assessee on sale of shares listed on CSE was a genuine trading loss and directed to delete the additions. He lastly urged before the bench to set aside the order of the Ld. CIT(A) and restore that .....

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ssment order. The judicial pronouncements relied upon by the appellant are also considered. In the assessment order, the AO has disallowed the capital loss of ₹ 15,29,049/- suffered by the appellant on account of shares invested by the appellant. Out of these scrips, 3 scrips were listed on Calcutta Stock Exchange and others on BSE/NSE. During the course of assessment proceedings, the appellant has submitted copies of purchase and sale contract notes issued by the brokers along with the co .....

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contract notes vis-à-vis the information submitted by the Stock Exchange. On being confronted, the appellant submitted that he has carried out all the transactions of purchase and sale of these shares through registered share brokers of Calcutta Stock Exchange and they have issued the contract note which have already been submitted. The consideration for the purchase and sale of these shares has been paid/received through the banking channels. The copies of bank statements have also been .....

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,29,049/- According to the AO, the appellant has incurred loss in those shares which were listed on the Calcutta Stock Exchange. However, I do not agree with this observation of the AO because the appellant has suffered total loss of ₹ 15,29,049/- on scrips which were listed both on BSE/NSE. Thus, it would be wrong to conclude that the appellant has incurred losses only in those shares which were listed at CSE. The AO has observed in his order that in the cases of some scrips, the respecti .....

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t brought anything on record to prove that under which law such transactions are prohibited and by executing such transactions how the manipulation in the share transactions has been done by the broker and the appellant. In my opinion, as far as appellant is concerned, he has entered into transactions of purchase and sale through the brokers and he is not responsible for the manner in which the broker has carried out the transaction. The appellant is concerned only about the receipt of shares on .....

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f small companies. In this regard, I intend to agree with the appellant that the AO cannot dictate his terms or impose his thoughts on the appellant that what he should have done and what not. From the assessment order it is apparent that the AO has disallowed the capital loss of ₹ 15,29,049/- only on the basis of information submitted by the Stock Exchange. The AO himself has not brought anything on record to prove that the transactions of purchase and sale of the shares in which the appe .....

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through the Demat account and the payments were made /received through the account payee cheques. The AO has not doubted about the correctness of these documents submitted by the appellant before him. The AO has also failed to examine any of the share brokers if he was having any doubt about the .transactions carried out by the appellant. His entire observations and conclusions in assessment order are based solely on the information submitted by the CSE. Iam of the opinion that the loss suffere .....

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