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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Vivek Raghu Shetty Vs. Asst. Commissioner of 1/1, Shrinagar Building, Income-tax Circle-32(3) Chandavarker Road, M.K. Road, New Marine Borivali (West), Lines, Churchgate, Mumbai – 400092 Mumbai- 400020 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAEPS2750D Appellant .. Respondent [ Appellant by : Anuj Kisnadwala Respondent by : Ajeya Kumar Ojha Date of Hearing 19.10.2023 Date of Pronouncement 11.12.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal filed by the assesse is directed against the order passed by the ld. CIT(A) NFAC, dated 11.03.2022 for A.Y. 2011-12. The assessee has raised the following grounds before us: “1. The learned CIT (A) has erred in law and on facts in confirming the contention of Assessing Officer that shares of M/s Comfort Intec Ltd is a Penny Stock.
2. The learned CIT (A) has erred in not considering the fact that the appellant is engaged in business of trading in shares and offered the income generated from the same under the head of 'Profit and Gain from Business and Profession and not claimed benefit of exemption under Long Term Capital Gain.
3. The learned CIT (A) has erred in law and on facts in not deleting addition of entire sale consideration amounting to Rs.20,46,524/- made by the Assessing Officer u/s. 68 of the Act alleging the same to be transaction in penny stock.
P a g e | Vivek Raghu Shetty Vs. ACIT, Circle 32(3)
4. The learned CIT (A) has erred in law and on facts in not deleting addition of Rs.61,395/- made by the Assessing Officer u/s 69C alleging the same to be commission charges paid for the alleged penny stock transaction of the 5. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal.”
Fact in brief is that return of income declaring total loss of Rs.43,93,512/- for A.Y. 2011-12 was filed on 30.09.2011. The return of income was processed u/s 143(1) of the Act. The case of the assessee was reopened u/s 147 of the Act after issuing a notice u/s 148 on 31.03.2018 on the basis of information received from the directorate of investigation in respect of generating bogus entries of long term capital gain in penny stock as a result of investigation carried out throughout the country. During the course of investigation it was found that Ms/ Comfort Intech Ltd. was a bogus entity. During the course of reassessment proceedings the AO stated that assessee has made transaction in script M/s Comfort Intech which was a penny stock. The AO further stated that as per the information received assessee has purchased 191985 shares of the aforesaid script out of which he has sold 91160 shares for Rs.20,46,524/- and claimed capital gain of Rs.13,51,914/- during the year under consideration. The assessee has shown business profit of Rs,686,118/- during the year from the share trading in the receipt of M/s Comfort Intech Ltd. The assessing officer was of the view that since assessee was involved in creating artificial gain to evade taxes, therefore, business profit of Rs.686,118/- shown by the assessee cannot be allowed. Therefore, the assessing officer treated the amount of Rs. 20,46,524/- received on sale of shares as bogus accommodation entry and added to the total income of the assessee. The assessing officer has also estimated expenses as commission @ 3% on the aforesaid amount at Rs.61,395/- and added to the total income of the assessee.
P a g e | Vivek Raghu Shetty Vs. ACIT, Circle 32(3) 3. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
During the course of appellate proceedings before us the ld. Counsel submitted that assessee was engaged in share trading i.e buying and selling shares of stock exchange of almost day to day basis. The ld. Counsel further submitted that assessee has not claimed any long term capital gain as exempt income and there was trading profit of Rs.6,86,118/- and the same was reflected as normal trading transactions. The ld. Counsel further submitted that assessee has purchased the share of M/s Comfort Intech Ltd. at average price of Rs.14.50 per share and not at average price of Rs.7.62 shares as mentioned by the assessing officer in the assessment order. On the other hand, the ld. D.R. supported the order of lower authorities.
Heard both the sides and perused the material on record. After perusal of material placed on record i.e profit and loss A/c balance sheet and return of income etc. it is noticed that assessee has shown business profit of Rs.6,86,118/- during the year from the share trading in the script of M/s Comfort Intech Ltd. The profit earned from the trading of the shares has been offered to tax under the head profit from business and assessee has not claimed any capital gain exemption in the income tax return. All the trading of M/s Comfort Intech shares were made on the plateform of recognised stock exchange (NSE or BSE). The lower authority has not controverted this material fact that assessee has not claimed any income as exempt under the head long term capital and he has offered the profit earned as business income on which due taxes has been paid. Therefore the AO is directed to delete addition of Rs.20,46,524/- and the corresponding estimated commission of P a g e | Vivek Raghu Shetty Vs. ACIT, Circle 32(3) Rs.61,395/-. Accordingly, ground no. 1 to 4 of the appeal of the assesse are allowed. Additional Ground of Appeal: “1. The Hon’ble CIT(A) ought to have held that the ld. Assessing Officer has erred in initiating proceedings u/s 147 of the Income Tax Act, 1961 by issuing notice u/s 148 of the Act. The Hon’ble CIT(A) ought to have held that the proceedings initiated u/s 147 of the Income Act is bad in law and hence then notice issued u/s 148 of the Act is itself void and needs to be quashed.”