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Smt. Hamida J. Rattonsey, C/o. Dimexon Diamonds Ltd., Versus D.C.I.T. Central Circle-5, Aayakar Bhavan, Mumbai

2012 (8) TMI 1064 - ITAT MUMBAI

Gains on the sale of shares - computation of Long Term Capital Gains (LTCG) / Short Term Capital Gains (STCG) on sale of shares of a few companies - Held that:- CBDT Circular No.768 dtd. 24.6.1998 was issued to clarify the determination of date of transfer and the period of holding of securities held in demat form. It has been stated there in that earlier Circular No. 704 issued by the CBDT relating to the "date of transfer" and "period of holding" does not change when securities are held in the .....

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res become long term capital asset and the assessee's claim of long term capital gain is correct. In this view of the matter we set aside the order of the Id. CIT(A) and direct the A.O. to accept the long term capital gain declared by the assessee. - ITA No.5069/Mum/2009 - Dated:- 1-8-2012 - SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER Assessee by : Shri Sashi Tulsiyan Revenue by : Shri Goli Sriniwas Rao ORDER PER RAJENDRA, A.M. Following Grounds of Appeal were filed by .....

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Assessing Officer that the purchase of the shares can be considered only on the date of dematerialization and therefore the holding period becoming less than 12 months hence, the capital gains of ₹ 7,115,219 (50,095,894 - 42,980,675) be taxed as short term capital gains. 3. The learned CIT (A) further erred in holding that the purchase value of the shares Smt. Hamida J. Rattonsey, sold be taken at the average of high and low price of the shares traded on the NSE and BSE on the date of dem .....

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e long term capital gains shown by the appellant as exempt under section 10(38) of the Income-tax Act, 1961 may be accepted and additions confirmed by the CIT(A) may be deleted. 6. The appellant craves leave to add, amend, alter or delete any one of the above grounds of appeal." 2. Assessee had filed her return of income on 29.12.2006 declaring income of ₹ 1,18,77,770/-. Assessment was finalised by the Assessing officer (AO) u/s. 143(3) of the Income-tax Act, 1961 (Act) on 31.12.2008 .....

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The appellant had submitted that she had purchased certain shares from a broker namely M/s. Mahasagar Securities Pvt. Ltd. (MSPL) and had sold the same through M/s. Techno Shares and Securities Ltd. AO recorded the statement of Shri Mukesh Choksi, director of MSPL, who denied having sold the impugned shares to the appellant. However, during the cross-examination the same person confirmed accepting the checks from the appellant. Though the AO had doubted the purchase of the shares from MSPL, but .....

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notes for sale, distinctive numbers of the shares purchased and sold copies of share certificates and the quotation of shares on the dates of purchase and sale. After considering the material available with him the AO held that the purchase of shares through an MSPL was not genuine, that the impugned shares were dematerialised only on date of sale or 2 to 3 days before the date of sale. Invoking the provisions of section 68 of the Act AO held that the entire transaction of sale and purchase of t .....

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, that holding period of shares in the case of the assessee was less than 12 months, that capital gains amounting to ₹ 71,15,219 (5,00,95,894/- (-) 4,29,80,675/-) was to be taxed as short term capital gains, that purchase value of the shares sold should be taken at the average of high and low price of the shares traded on the NSE and BSE on the date of dematerialasation, that the purchase value was unexplained investment of the assessee, that the sale of share was genuine. 5. Before us, Au .....

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of the opinion that the assessee is entitle to exemption as envisaged by Section 10(38) of the Act on the long term capital gains. In our opinion transaction in question resulted in LTCG and not in STCG as held by the FAA. Investment made by the assessee in shares cannot be treated as unexplained investment u/s.68 of the Act. We would like to refer to the order of the husband of the assessee in this regard where it has been held : We have considered the rival arguments made by both the sides, pe .....

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the name of his company has been wrongly used and no transaction mentioned in the ledger has been carried out through them. The A.O. had also another proposition that the total purchase price on the date of dematerialisation comes to ₹ 44110775/- which becomes unexplained investment in shares. After deducting the investment in shares from sale price the short term capital gain comes to ₹ 80,03,027/-. However, since he considered the entire receipt on the sale of shares as un- account .....

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s.68 of the Act. The Revenue is not in appeal before us against the ld.CIT(A). However, the ld. CIT(A) upheld the alternate proposition of the A.O. that the purchase price on the date of dematerialisation of shares become unexplained investment in the hands of the assessee and the difference between in sale and purchase of shares has to be treated as short term capital gain since the assessee could not substantiate the purchases. Therefore, the question that has to be answered in the grounds rai .....

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yee cheque issued to MSPL dtd. 1.12.05 for ₹ 12,40.565/- is placed at paper book page 45 and was also filed before the A.O. and CIT(A). The copy of ledger A/c of MSPL n the books of the assessee and the copy of the ledger account of the assessée in books of MSPL were also filed before the A.O. Similarly the copies of contract notes and sale bills of all the shares transferred to Techno Shares & Stocks Ltd. Photocopy of D-Mat account and copy of confirmation letter dtd. 28.10.200 .....

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. 19 to 23 are as under: Q No. 7:- Do you know Shri Jafferali K. Rattonsey and Smt. Hamida Rattonsey? Ans. No. I do not know them. Q No. 8:- I am showing you the ledger account of Mahasagar Securities Pvt.Ltd. in the books of Shri J.K. Rattonsey and Smt. Hamida J. Rattonsey.From this account it is seen that the assessee have carried out regular transaction with Mahasagar Securities Pvt. Ltd. Pl. confirm the ledger account furnished by the assessee with the Copy Of ledger account of J.K. Rattonse .....

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the alternate proposition of the A.O. that total purchase price date of dematerialisation of shares amounting to ₹ 4,41,10,775/- unexplained investment since the Purchases are not recorded in of the assessee on that date and the difference between the sale and the purchase price amounting to ₹ 80,03,027/ become short term capital gain, since the holding period of the shares is less than 12 months. 9.4.However we find during the Course of cross examination by the assesee before the A .....

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re as under: Q.3 Question put up by Shri Digant Bhat We have received the shares in Demat Account of - Shri Jafferalli K. Rattonsey and Hamida Rattonsey from Sunchan Securities Ltd., on your behalf, kindly confirm. Smt. Hamida J. Rattonsey, Ans. I have not given any instructions. Q.4 Question put up by Dr. Mahesh Akhade * In the statement recorded u/s.131 of the IT. Act on 24.12.2008, you have denied in the answer to Question No.8, 9, 12 & 13 that Mahasagar Securities Pvt. Ltd. and Alliance .....

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ons to Sunchan Securities. Q.No.5 Question put up by Dr. Mahesh Akhade Kindly furnish the statement of bank - accounts of Mahasagar Securities Pvt. Ltd. in which the above mentioned two cheques amounting to ₹ 12,40,565/- and Rs .l1,91,378/- have been deposited. Ans. At present they are not available with me, I will furnish the same after receipt of the same. 9.5 From the above, it is clear that Mr. Mukesh Choksi is double speaking in his statements i.e. one given before the A.O. and the on .....

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n which one of us the Accountant Member is a party) following the decision of Hon'ble Calcutta High Court upheld the order of the ld. CIT(A) in holding that the A.O. cannot make any addition in the assessee's hands despite the assessee not having made any payment to the entities mentioned by Shri Choksi, whose statement is being relied upon by him. The CIT (A) also noted that Mr.Mukesh Choksi has been vacillating right through and has given different at different stages of the proceeding .....

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considerable time. Therefore, when there is no dispute to the demateralization of shares before the date of sale, therefore, the shares were purchased much prior to the date of sale. 9.7 The CBDT Circular No. 704 dtd. 28.4.1995 states 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 .....

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