INCOME TAX OFFICER 20(1)(1),MUMBAI, MUMBAI vs. HASINA KASIM SAKRIWALA, MUMBAI

In this case, the Assessee, during the year under consideration, sold 3,000 shares of a scrip, namely M/s Scan Steels Ltd., for a consideration of Rs. 4,52,820/-, whereas, as per the contract notes, the sale consideration was Rs. 4,51,230/-. Subsequently, information was received from the DGIT (Inv.), Mumbai that a search and seizure action was carried out on Shri Naresh Jain and his associates throughout the country by the DCIT (Inv.), wherein it was unearthed that Shri Naresh Jain was providing accommodation entries to various beneficiaries. The Assessee had also undertaken transactions in the shares of M/s Scan Steels Ltd. and sold the shares of the said scrip for a consideration of Rs.4,52,820/-, which was identified, as one of the penny stocks.

Thus, the Assessing Officer on the basis of above information reopened the case of the Assessee u/s 147 of the Act by issuing notice u/s 148 of the Act on 30.01.2019. Thereafter, the Assessing Officer issued statutory notices, in response to which the Assessee filed relevant documents, such as computation of income, copy of Demat account, contract notes, etc., which were neither controverted nor doubted by the Assessing Officer. However, the Assessing Officer, by considering the financials of the scrip and the findings of the investigation proceedings, ultimately held the consideration amount of Rs. 4,52,820/- as non- genuine and consequently added the same to the income of the Assessee u/s 68 of the Act, as undisclosed income.

The Assessee being aggrieved preferred the first appeal before the ld. Commissioner, challenging the said addition. The ld. Commissioner dismissed the appeal filed by the Assesse, affirming the addition under consideration.

We have heard the parties and perused the material available on record. The Assessee, before the authorities below, submitted that she had purchased 28,000 shares of Mittal Securities Ltd. in April, 2006 from SLRT Finance, which was a sub-broker of Khambhatta Securities Ltd., for a consideration of Rs. 1,36,067.67/-. Before the authorities below, the Assessee had contended that since the shares were purchased about 12 years back, she was unable to produce complete purchase-related documents. However, in support of her claim of purchase, she produced a statement of April, 2007, wherein the said 28,000 shares of Khambhatta Securities Financial Ltd. were duly reflected. The Assessee further claimed that the name of Mittal Securities Ltd. was changed to Clarus Finance and Securities Ltd. in the year 2007, while the business of the company remained the same.

Out of the aforesaid 28,000 shares, the Assessee on dated 16.09.2011, sold 3,000 shares of Clarus Finance and Securities Ltd. through share broker Sunidhi Securities Pvt. Ltd. for a consideration of Rs.4,50,435.17/- and consequently, earned long-term capital gain of Rs.4,36,651/-, which was shown as exempt income in the return of income.

The Assessee further claimed that a copy of the said contract note was submitted before the Assessing Officer. The scrip company’s name was specifically changed to Scan Steels Ltd., of which 25000, shares are still held by the Assessee in her Demat Account.

We observe from the orders passed by the authorities below that the authorities have not doubted the documents submitted by the Assessee and it is a fact that the Assessee had transacted in the shares about 12 years back and is still holding remaining 25,000 shares. Thus, on the aforesaid reasons, the genuineness of the shareholding of the Assessee and/or the sale of 3,000 shares in the market and earning of capital gains therefrom, cannot be shrouded with doubts, as has been done by the authorities below.

Thus, in view of the above, the addition is deleted.

In the result, Assessee’s appeal is allowed.