TMI Blog2023 (2) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... es desired by the client was received in parts as and when the seller was available. All the equity shares so purchased first came in the Demat account of the assessee broker and then has been transferred to the client s Demat account. No discrepancy in these transactions and the alleged cash credits are nothing but an advance sum received for purchase of equity shares and the said transaction has been duly completed and brokerage for carrying out such transaction has been charged by the assessee and therefore, no addition is called for u/s 68 of the Act. As decided in SMT. HARSHILA CHORDIA VERSUS INCOME-TAX OFFICER [ 2006 (11) TMI 117 - RAJASTHAN HIGH COURT] both the lower authorities failed to appreciate the case of the assessee that these were the trade advances and not cash credits and against such advance, the assessee has supplied the material in due time as per details available on record - Based on this finding addition u/s 68 of the Act was deleted. We, thus, reverse the finding of ld. CIT(A), delete the addition made u/s 68 of the Act and allow the effective ground raised by the assessee on merits. - I.T.A. No.: 1917/KOL/2019 - - - Dated:- 16-2-2023 - Sri Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on such investigation about huge amount of cash deposits and the transactions carried out including movement of cash through the bank account of Shakambhari Tradex, cash trail and ultimate beneficiaries and the statement of Mr. Pranab Kumar Modi it was found that various shell companies are being run which are engaged in providing accommodation entry in the form of bogus share capital and share premium, bogus LTCG/STCL etc. On examination of this cash trail, ld. AO noticed that the beneficiaries also included M/s. Sutanuti Distributors Pvt. Ltd. (renamed as Gitanjali Udyog Ltd.). Further, on examining the transactions carried out by one of the alleged beneficiary paper companies i.e. M/s. Sutanuti Distributors Pvt. Ltd., ld. AO found that the assessee is a beneficiaries of some of the amounts which totalled to Rs. 3.30 Cr received from M/s. Sutanuti Distributors Pvt. Ltd. (Gitanjali Udyog Ltd.). Ld. AO also noticed that the assessee was also beneficiary of a sum of Rs. 1.25 Cr from Raj Laxmi Ornaments Stone, Rs. 50 lakh from Krisna Infotech. In total, ld. AO noticed that the assessee received Rs. 5.05 Cr from the alleged paper companies which were part of the cash trail which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it can be seen that all the amounts received by the assessee amounting to Rs. 5.05 crore, were received by way of bogus transactions with bogus shell companies whereby the assessee was the final beneficiary. Therefore, the total sum amounting to Rs.5,05,00,000/- (Rs.3,30,00,000/- + Rs.1,25,00,000/- + Rs.50,00,000/-) is disallowed u/s 68 of the LT. Act 1961 and added back to the total income of tire assessee for the Financial Year 2009-10 relevant to Assessment Year 2010-11. 4. Aggrieved, the assessee preferred appeal before ld. CIT(A). The assessee again filed all the submissions to show that it has in its regular course of business, purchased the shares for its clients and all documentary evidences are available to show that the alleged companies are assessee s clients and contract notes have been signed for purchase of equity shares. However, ld. CIT(A) confirmed the action of ld. AO by merely reproducing the assessment order as well as the submissions made by the assessee and finally in the finding stated that the appeal filed by the appellant is treated as dismissed. There is no specific finding on the issues raised by the assessee. 5. Aggrieved, the assessee is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable to the sellers of the shares through the broker shall be paid. This is because the exchange pays or receives the intra-day balance and naturally the excess is to be paid only to the seller of the shares. The assessee cannot withdraw any money from the client account or settlement account except to the extent of brokerage element in the transactions or his own investment if any made in client account. The client account and the pool account are subject to deep and random audit by the SEBI. In case of violation, the registration as broker will be cancelled. The settlement account and client account of the appellant was also subjected to audit by the SEBI and such audit was in fact done in the case of assessee vide paper book page 28 to 36 of the paper book. All transfers to and from the client account is only in the settlement account or payment to sellers of the shares except very nominal amount which related to brokerage earned by the assessee. Therefore, for receipts in this account is assessee is only as trustee for sending the funds immediately on purchase to the stock exchange. (iv) In case of sale of shares by any client, the client transfers the shares to the dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely on the next working day and in turn transferred by the assessee from the said account to the client Sutanati which is also stated in the pool demat account. This is also verifiable from demant (pool) account with regard to the receipt of shares and transfer to Sutanati. The purchase of all the shares so transferred on respective dates and value thereof is also verifiable from the contract notes placed at page 73-78,85, 89, 93,98, 103, 107 of the paper book The brokerage received by the assessee on such purchase for Sutanati is also verifiable from the above contract notes as well as from page 75, 80, 83, 87, 91, 95/96, 101, 105 and 108 of the paper book. No amount from the said Sutanati was received in assessee's own bank account. The ledger account of Sutanati is enclosed vide paper book page 55 which shows the receipt of money and the shares debited to his account. To the query of the AO about the receipt of Rs. 3,30,00,000/- from this party the assessee duly submitted to AO that he received only Rs. 2 crores and there was no other receipt vide letter dated 2-6.12.2017 paper book page 294 and again on 27th December 2017 vide paper book page 296 and produced all bank acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in letter dated 19th December 2017(Paper book page 292-293. Further this amount was received in bank account maintained as client account on the dates stated in the pages of the bank statement mentioned in the attached sheet which was also received for purchase of shares of Oasiscin. These shares were purchased at the portal of stock exchange and amount was paid from client account in accordance with SEBI rules hereinbefore stated. The page wise details of paper book are stated in the attached sheet. No amount was transferred to assessee's own bank account. The shares were transferred by the exchange to assessee's demat account vide paper book pages stated in the attached sheet and these shares were transferred to the demat account of the purchaser vide paper book pages stated in the attached sheet. The brokerage of the assessee is also stated in the contract notes and brokerage account for which page nos of the paper book are stated in the attached sheet. Full details of business with this party are attached in the paper book pages 256-291. 7. The assessee during the year earned more than 34 lakhs as brokerage which is evident from Profit and Loss account at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entry provider. We, thus, dismiss the legal ground raised by the assessee in ground nos. 1 2. 9. As regards ground no. 3, the addition u/s 68 of the Act of Rs. 5.05 Cr is in dispute before us. We notice that the assessee is a broker registered with Calcutta Stock Exchange and he carries out the transactions of purchase and sale on behalf of the its customers/clients. As evident from the profit and loss account the assessee is only showing income from share brokerage and income from other sources and there is no self-trading of shares. Ld. AO based on the investigation report referring to various shell companies had an information that some of the shell companies which are part of the cash trail and layering of funds is made from one company to another for the purpose of providing accommodation entries/bogus LTCG/share capital etc. Such investigation report contains the names of M/s. Sutanuti Distributors Pvt. Ltd. (renamed as Gitanjali Udyog Ltd.), Raj Laxmi Ornaments Stone and Krishna Infotech. As per ld. AO, the assessee has received 3.30 Cr from M/s. Sutanuti Distributors Pvt. Ltd., 1.25 Cr from Raj Laxmi Ornaments Stone and Rs. 50 Lakh from Krishna Infotech. While ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Now, the pattern of utilization of the amount is similar for all the three parties. The alleged sum has been received in part on various dates. In case of amount received from M/s. Sutanuti Distributors Pvt. Ltd. during the period 08.06.2009 to 06.07.2009, the assessee broker purchased the shares of the scrips namely Vindusho and Emralcom of different quantities during the period from 08.06.2009 to 06.07.2009. The details of contract note and Sauda book have been provided. Delivery of shares were taken by the broker and the same have subsequently been transferred to the Demat account of the client. For carrying out these transactions the assessee has charged the brokerage. Similarly, in the case of Raj Laxmi Ornaments Stone against the sum received during the period from 13.01.2010 to 04.03.2010 the assessee purchased shares of the scrip namely Oasiscin and after taking the delivery transferred it to the client s Demat account. The same is the case in Krishna Infotech wherein also the scrip namely Oasiscin were purchased and after taking delivery transferred to the client s Demat account. The flow of all these transactions clearly shows that these have been carried out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee broker and then has been transferred to the client s Demat account. We do not find any discrepancy in these transactions and the alleged cash credits are nothing but an advance sum received for purchase of equity shares and the said transaction has been duly completed and brokerage for carrying out such transaction has been charged by the assessee and therefore, no addition is called for u/s 68 of the Act. 15. We find support from the decision of Coordinate Bench Nagpur in the case of M/s. Heera Steel Limited vs ITO (2005) 4 ITJ 437 wherein it has been held that Both the lower authorities failed to appreciate the case of the assessee that these were the trade advances and not cash credits and against such advance, the assessee has supplied the material in due time as per details available on record. Based on this finding addition u/s 68 of the Act was deleted. Similar view has also been taken by this Tribunal in the case of Sanjay Agarwal ITA No. 2463/KOL/2018 dated 07.06.2019 wherein reliance has been placed on the judgement of Jurisdictional High Court in Crystal Networks (P) Limited -vs.- CIT (ITA No. 158 of 2002 dated 29.07.2010) 16. We, therefore, under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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