TMI Blog2018 (11) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... reat the alleged profit from sale and purchase of equity shares of IFCI Ltd as short term capital gain and tax accordingly. In the result appeal of the assessee is allowed. Profit earned by the assessee wherein the delivery of shares have not been taken through demat account because the shares were sold in short span of time i.e. within 7 to 8 days of the purchase and for this reason the gain has been treated as business profit - Held that:- We find that the assessee is not a regular trader of shares as it earned income from salary and house property. This is not the case of an intra day trading nor of the forward market trading for derivatives. It is simply a case that share have been purchased and they were held in the demat account of the broker and as the assessee has sold them in a very short period they were not transferred to her demat account. It is not the case of revenue that the broker i.e. HDIL Financial Ltd has not received the delivery of shares purchased and has not delivered the shares at the time of sale. In such situation treating of income of ₹ 2,49,045/- as business income will not be justified. We therefore set aside the finding of lower authorities an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act ) dated 30.12.2010 15.03.2013 28.12.2010 respectively framed by ACIT-4(1) , ITO 4(1) ACIT-3(1), Indore. 2. The relevant grounds in each three appeals reads as follows; I.T.A. No.315/Ind/ 2012 in respect of Smt. Annapurna Maheshwari pertaining to Assessment Year 2008-09 1. That the Learned CIT(A) erred in confirming the action of the AO of treating the short term capital gain of ₹ 41,29,512/- taxable u/s ll1A @ 10% as income from other sources by holding these transactions as sham and bogus. That on the facts and in the circumstances of the case and in law these transactions are genuine and the treatment of the said transaction by the Assessing Officer is wrong and bad in law and it is prayed that the short term capital gain of ₹ 41,29,512/- be accepted as such. 2. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises. I.T.A. No.252/Ind/ 2016 in respect of Smt. Annapurna Maheshwari pertaining to Assessment Year 2010-11 1. That the Learned CIT (A) erred in upholding the action of the AO of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the common issue is regarding treating the transaction giving arise to Short Term Capital Gain and Long Term Capital Gain from purchase/sale of shares as bogus and sham and taxing them as unexplained credit u/s 68 of the Act by both the lower authorities. As the issues raised are common these three appeals were heard together and being disposed off by this common order for sake of convenience and brevity. 4. For the purpose of adjudication we will take up the facts of Smt. Annapurna Maheshwari for Assessment Year 2008-09 relating to I.T.A. No.315/Ind/2012 and our decision on the common issue referred above shall be applied on the remaining two appeals to be dealt in forthcoming paragraphs. 5. Brief facts relating to Smt. Annapurna Maheshwari for Assessment Year 2008-09 as culled out from the records are that the assessee is an individual having regular source of income from salary, house property, capital gain and income from other sources. Income of ₹ 46,16,412/- declared in the income tax return submitted on 31.07.2010. Return filed were processed u/s 143(1). Case selected for scrutiny. Statutory notice u/s 143(2) of the Act duly served upon the assessee. While s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such transactions were not genuine. The aforesaid facts have to be again examined and analyzed with appreciation of the constraints and limitations within which the AO has to function and operate. Firstly, these transactions which are normally welldocumented and are secretly negotiated are scrutinized by the AO after a sufficient gap of time i.e. nearly two years from the end of the relevant F.Y and then when the appellant/assessee and the other persons abetting the assesee in such manipulation are confronted by the AO, there is usual tendency to evade the replies or in the least to delay the replies. The AO again has to finalize the proceedings within the statutory limitation involved and then he cannot devote the entire time available at his disposal to a particular case. Here, it will be pertinent to make reference to the observation of the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT 214 ITR 8()l(SC) made in the context of sale and purchase transactions of prize winning lottery tickets which are very much applicable to the facts of the case. The same are as extracted here under: The matter has to be considered in the light of human probalities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and substance of the transaction is to be considered. 4.3.2 Further judicial notice in the aforesaid facts is required to be taken of prevailing malpractice in the filed of manipulation of stock prices of such dubious companies by the operator and manipulators with or without the active help and assistance of to spread rumours or highly exaggerated growth/profit prospects' of such companies leading to such phenomenal price rise. Reference can be made to the following decisions: ( a) CWT v. Rohtas Industries Ltd., 67 ITR 283 (SC), wherein it was held that In the absence of any direct evidence, a judicial or quasijudicial Tribunal can base its conclusions on the basis of what arc known as notorious facts bearing in mind the principles of section 144 of the Evidence Act. ( b) 'Attar Singh Gurmukh Singh v. ITO 191 ITR 667(SC) wherein, while interpreting the provisions of section 40A(3), it was held that In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under circulation in our country. ' 4.3.3; AO's finding that it is a case of dubious tax planning, it has to be necessaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s action in treating the sale consideration of shares as income from undisclosed sources is fully justified and accordingly confirmed . 7. Aggrieved assessee is now in appeal before the Tribunal. 8. At the outset Ld. Senior Counsel for the assessee submitted that the issue raised in the instant appeal is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench in the case of Shri Omprakash Phatandas Phajwani v/s ACIT, I.T.A.No.968/Ind/2016 order dated 19.1.2018 wherein similar facts relating to sale of IFCI Ltd shares and abnormal delay in making the payment of purchase to the share broker were there for adjudication and the Co-ordinate Bench allowed the assessee s appeal holding that for the alleged short term capital gain both the lower authorities erred in treating the Short Term Capital Gain as income from other sources. Ld. Senior Counsel for the assessee has also submitted that no proper opportunity was given to the assessee to cross examine Shri Vishal J Shah who is the son of the share broker and the statement of Shri Vijay V Shah was recorded by the DDIT, Mumbai and not by the Assessing Officer himself. Thus the truthfulness of the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement given by Mr. Vishal Vjay J Shah who is the son of the proprietor of the stock broking firm M/s. Vijay Bhagvandas Company who denied the alleged transaction of purchases were denied. However nothing odd was noticed about the payment for purchases made through account payee cheque. These two reasons lead the way of the alleged treatment of Short Term Capital Gain from sale of shares declared by the assessee as income from other sources along with treating them as sham and bogus transactions. 12. We find that very same set of facts came up before the Coordinate Bench in the case of Shri Omprakash Phatandas Phajwani v/s ACIT (supra) wherein the shares of IFCI Ltd were purchased and there was a significant gap in between the date of purchase as per the contract note and date of payment for the purchases. The Tribunal decided the issue in favour of the assessee observing as follows; 7. We have heard rival contentions and perused the records carefully. 8. In Ground No.1 to 6 raised by the assessee, the sole grievance is against the order of Ld.CIT(A) partly confirming the addition made by Ld. A.O by treating the short term capital gain of ₹ 6,62,870/as income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the Short Term Capital Gain as unexplained cash credit? 2. The assessment year is 2006-07 and the relevant accounting period is 1.04.2005 to 31.3.2006. The respondent - assessee, an individual, filed her return of income showing total income of ₹ 8,72,299/- including short term capital gain of ₹ 2,78,413/ - and long term capital gain of ₹ 3,41,683/-. During the year under consideration the assessee claimed long term capital gain of ₹ 34,65,171/ - on a scrip named Shri Nidhi Trading Limited. On scrutinizing the complete transaction the total sale value came to ₹ 36,72,631/- and total purchase value came to ₹ 2,07,460/-. The assessee accordingly showed capital gain of ₹ 34,65,171/-. The Assessing Officer after seeking details from the parties treated the sum of ₹ 36,72,631/- credited in the books of accounts unexplained cash credit under section 68 of the Act and brought it to tax. The assessee carried the matter in appeal before the Commissioner (Appeals) who allowed the said ground of appeal and directed the Assessing Officer to accept the claim of the assessee of ₹ 34,65,171/ - as capital gains. The revenue carried t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial or that any relevant material has been ignored, nor is he able to point out any material to the contrary so as to dislodge the concurrent findings of fact recorded by the Tribunal. Under the circumstances, the impugned order being based upon concurrent findings of fact recorded by the Tribunal upon appreciation of the evidence of record, does not give rise to any question of law, much less, a substantial question of law so as to warrant interference. The appeal is, accordingly, dismissed. 11. Now in order to appreciate and examine the facts in the light of above judgment, we find that the assessee placed following documents before the lower authorities; 1.Contract note cum bill of broker from whom shares were purchased; 2. Confirmation of accounts from the same broker 3. Copy of ledger accounts of Broker 4. Copy of bank account of the assessee 5. Copy of D-mat account of the assessee 6. Copy of statement of affairs of the assessee 7. Copy of contract note cum bill for sale of shares 12. Now above referred details except for the genuineness of purchase, the Ld.A.O has not challenged the genuineness of other details most i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred out of the demat account of the assessee at the time of purchase and sale respectively. The alleged addition made u/s 68 of the Act for unexplained cash credit do not apply in the given facts when the sale consideration has itself been found to be genuine. Therefore for the only reason that payments have been made after significant time which is also in the range of 8 to 9 months and the denial of the share broker of the alleged transaction even when the contract note has been issued showing complete details of the shares purchased, settlement number, order number, security name, purchase rate, service tax charged and all the necessary ingredients are mentioned in the contract note for the purchase of equity shares of well known company i.e. IFCI Ltd, then in such situation the purchase cannot be doubted. Therefore if the purchase and sale are not doubted as the payments made for purchase and sale consideration received are also genuine, demat account has been used for the alleged transactions of purchase and sale, then mere delay in payment itself cannot prove that the transactions are sham and bogus. We therefore respectfully following the decision of Co-ordinate Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays of the purchase and for this reason the gain of ₹ 2,49,045/- has been treated as business profit. We find that the assessee is not a regular trader of shares as it earned income from salary and house property. This is not the case of an intra day trading nor of the forward market trading for derivatives. It is simply a case that share have been purchased and they were held in the demat account of the broker and as the assessee has sold them in a very short period they were not transferred to her demat account. It is not the case of revenue that the broker i.e. HDIL Financial Ltd has not received the delivery of shares purchased and has not delivered the shares at the time of sale. In such situation treating of income of ₹ 2,49,045/- as business income will not be justified. We therefore set aside the finding of lower authorities and direct the Assessing Officer to tax the income of ₹ 2,49,045/- treating it as Short Term Capital Gain from sale of shares. Ground No.2 of the assessee is allowed. 17. Ground No.3 is general in nature which needs no adjudication. 18. In the result the grounds raised by the assessee for Assessment Year 2010-11 are allowed. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the preceding paragraphs and accordingly find no merit in the finding of both the lower authorities of treating the alleged transactions giving rise to Long Term Capital Gain as sham and bogus and therefore the addition should not have been made for unexplained cash credit u/s 68 of the Act. 22. However whether the alleged income is to be treated as short term capital gain or long term capital gain still needs to be looked into. For the purpose of claiming the exemption for Long Term Capital Gain the listed equity shares should be held by the assessee for more than 12 months. From perusal of facts we observe that the alleged income of ₹ 17,23,052/- was earned from two transactions, firstly from selling 10,000 equity shares of IFCI Ltd giving a gain of Rs.,4,05,418/- and another transaction of selling 25,000 equity shares of IFCI Ltd giving gain of ₹ 13,17,634/-. In both these transactions the purchase date i.e. date of contract note is 16.06.06 and 25.7.06. The payment for these purchase was made on 04.05.2007 and most importantly as discenable from paper book Page-21 the equity shares purchased came in to the demat account of the assessee as on 25.6.2007, which me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erify whether such purchases of respective shares were actually made by broker on behalf of the assessee and shares so purchased were credited to its demat account and were lying there till same were transferred to demat account of the assessee after a period of more than one year . Examining the facts of the instant appeal and our discussions in the preceding paragraphs on this issue we are of the considered view that the alleged transaction claimed by the assessee to have resulted into Long Term Capital Gain is not sustainable and the alleged transaction of earning income of ₹ 17,23,052/- should be taxed by the Assessing authority treating it as Short Term Capital Gain because the equity shares sold in these transactions were held for less than 12 months and therefore they were in the category of Short Term Capital Assets. In the result Ground No.2 of the assessee is partly allowed. 25. Ground No.3 is general in nature which needs no adjudication. 26. Accordingly appeal of the assessee is partly allowed. 27. In the result I.T.A.No.315/Ind/2012 I.T.A.No.252/Ind /2016 in the case of the assessee Smt. Annapurna Maheshwari is allowed and I.T.A.No.53/Ind/2014 in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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