INCOME TAX OFFICER-22(1)(6), MUMBAI vs. JITENDRA NIRANJAN KEWALRAMANI, MUMBAI

In the instant case, the Assessing Officer (in short, “the A.O.”), vide assessment order dated 28.05.2023, made an addition of

Being aggrieved, the Assessee preferred an 1st appeal before the ld. Commissioner and challenged the aforesaid addition on account of the alleged fictitious loss made by the Assessee on the basis of information received by the A.O. during the assessment proceedings, as under:

During the appellate proceedings, the Assessee furnished written submissions, inter alia, substantiating the transactions carried out by him.

The ld. Commissioner dealt with the additions aggregating to Rs.36,26,761/-, bifurcating into Rs.3,52,125/-, Rs.32,59,158/- and Rs.15,477/-, as made by the A.O. and depicted in the chart.

We observe from the impugned order that the ld. Commissioner first considered the addition of Rs.3,52,125/- relating to the loss incurred in M/s. Tilak Ventures Ltd. The ld. Commissioner observed 2

The ld. Commissioner, after considering the peculiar facts and circumstances of the case and the relevant documents, observed that the purchase and sale of shares were carried out through a recognized stock exchange. The payment and receipt transactions were routed through banking channels. The loss incurred was found to be genuine and fully verifiable. The A.O. had also not provided the Assessee with an opportunity to cross-examine the person, whose statement was relied upon, despite a specific request. Moreover, there was nothing on record to establish any privity of contract or connection between such person and the Assessee with regard to the alleged cash transactions. Accordingly, the ld. Commissioner deleted the addition of Rs.3,52,125/.

We have given thoughtful consideration to the decision of the ld. Commissioner in deleting the addition of Rs.3,52,125/- and observe that the same is based not only on the peculiar facts and circumstances of the case but also on the relevant documentary evidence and independent verification carried out by the ld. Commissioner. Accordingly, the deletion of the addition of Rs.3,52,125/- is sustained.

Coming to the addition of Rs.32,59,158.57/- on account of loss incurred in F&O transactions, the ld. Commissioner specifically observed that the Assessee had furnished documentary evidence in the form of broker ledger accounts and contract notes. The A.O. relied upon the statement of Mrs. Mousmi Deb Roy, proprietor of Goodluck Securities. However, no cogent material or evidence was brought on 3

We further observe that the ld. Commissioner perused the statement of Mrs. Roy and found that there was no mention whatsoever that the Assessee had incurred any bogus premeditated loss or exchanged cash in lieu thereof. Further, the A.O. did not dispute the documentary evidence produced in support of the losses incurred, which establishes that the losses were neither bogus nor fictitious.

We further observe that the ld. Commissioner also relied upon the judgment of the Hon’ble Apex Court in the case of S. Kadar Khan (2008) 300 ITR 157 (MAD.), wherein it was held as under: -

Upon consideration of the aforesaid findings, we are of the considered view that the ld. Commissioner has duly considered the relevant material and documentary evidence available on record in support of the Assessee’s claim and has also taken into account the peculiar facts of the case, namely that the purchase and sale transactions were carried out through a recognized stock exchange, the payments were made and received through banking channels, and there was no SEBI violation attributable to the Assessee. Further, any violation committed by the broker, for which penalty was imposed by SEBI, cannot be a ground for treating genuine transactions of the Assessee as bogus. Accordingly, we find no reason to interfere with the decision of the ld. Commissioner in deleting the addition of Rs.32,59,158/- made by the A.O. under section 69A of the Act, as the same neither suffers from perversity nor illegality.

Coming to the addition of Rs.15,477/-, relating to the loss incurred on the sale of shares of Steel Exchange Ltd., allegedly operated by Shri Naresh Jain, the ld. Commissioner observed that the Assessee had purchased 250 shares of the said scrip on 19.12.2007 for a consideration of Rs.28,635/- and sold the same on 16.09.2014 for a consideration of Rs.15,477.50/-. In support thereof, the Assessee furnished a copy of the broker ledger, which revealed that the shares were held in the Demat Account for nearly seven years before being sold, resulting in a long-term capital loss of Rs.13,157/- . The said loss was duly reflected in the books of account and, therefore, did not appear to be a case of fictitious loss from any angle. 5

We have given thoughtful consideration to the facts of the case. As noted above, the Assessee purchased the shares in the year 2007 and sold them in the year 2014 after holding them for nearly seven years. Further, by producing the relevant documentary evidence, the Assessee established the genuineness of the claim, whereas the A.O. failed to bring any material on record to support the allegation of fictitious loss, as rightly observed by the ld. Commissioner. Accordingly, the decision of the ld. Commissioner in deleting the addition of Rs.15,477/-, is also sustained.

Thus, the order passed by the ld. Commissioner is upheld.

In the result, Revenue’s appeal is dismissed.