MINISH RAMESHBHAI VYAS,MUMBAI vs. ASST. CIT 32 (2), MUMBAI

The present appeal preferred by the Assessee is directed against the order, dated 19/07/2024, passed by the National Faceless Appeal Centre (NFAC), New Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘ the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 27/12/2018, passed under Section 143(3) read with Section 147 of the Act for the Assessment Year 2012-2013. 2. The Assessee has raised following grounds of appeal : Assessment Year 2012-2013

On the Facts and in the circumstances of the case and in law, the Id CIT (A) has erred in confirming the addition of Rs 1,95,753 i.e. 1% of Rs 1,95,75,356 of addition made as per above ground as unexplained expenditure

On the Facts and in the circumstances of the case and in law, Your Honor's are requested to restrict the addition to the extent of Profit or loss as declared by the Appellant instead of the Full sales amount.

All the Grounds of Appeal are without prejudice to each other.”

The relevant facts are in brief are that the Assessee filed return of income for the Assessment Year 2012-2013 on 29/02/2012 declaring ‘Nil’ income. Subsequently, reassessment proceedings were initiated in the case of the Assessee under Section 147 of the Act by issuance of notice, dated 30/03/2018, under Section 148 of the Act. On the basis of information received from Deputy Director of Income Tax (Investigation) Unit -6(2), Mumbai in relation to transactions undertaken by the Assessee in respect of alleged trading in penny stock scrip - VAS Infrastructure Ltd. [for short ‘VIL’]. The Assessing Officer completed assessment under Section 143(3) read with Section 147 of the Act vide Assessment Order, dated 27/12/2018, assessing the total income of the Assessee at INR.1,97,71,109/- after making addition of (a) INR.1,95,75,356/- under Section 68 of the Act holding the same to be unexplained cash credit and (b) INR.1,95,753/- under Section 69 of the Act holding the same to be unexplained expenditure incurred for obtaining bogus accommodation entry.

Being aggrieved, the Assessee preferred the appeal before the Assessment Year 2012-2013

We have heard both the sides and have perused the material on record.

From the material on record it emerges that Assessee is an individual engaged in the business of trading in shares and securities. The Assessee has placed on record copy of Computation of Income, Profit and Loss Account and Balance Sheet for the relevant previous years along with the Tax Audited Report which shows that Assessee was regularly trading in shares. During the assessment proceedings, the Assessee had filed stock-registers, the ledger account of the brokers [Religare Securities Limited and Emkay Global Finance Services Limited] supporting the contention that the Assessee was trading in stock on regular basis. The case of the Assessee is that the Assessee had purchased shares online through brokers and the payments made to brokers are reflected in the bank account. Similarly, the Assessee has transferred the shares through online platform of stock exchange through broker. We note that the Assessee also placed on record contract notes, ledger accounts of brokers and bank statements to establish that both the purchase and sale of shares of VIL was made through stock exchanges.

The Assessee had furnished following details of purchase/sale of shares of VIL before the Assessing Officer. Details of Purchases Date Qty Rate Amount 11/04/20211 35,000 110.62 38,67,611 Assessment Year 2012-2013

From the above, it is clear that Assessee had not claimed any exemption under Section 10(38) of the Act as was alleged while recording reasons for reopening the assessment. Further, as per the Trading, Profit & Loss Account for the year ended 31/03/2012 Assessment Year 2012-2013

The Assessee has also placed on record copy of order dated 30/09/2019 passed by the whole time Member, Securities & Exchange Board of India (SEBI) in the case of VIL whereby action was taken against VIL for failure to comply with the provisions contained in Section 11 and 11B of the Securities and Exchange Board of India Act, 1992 and regulation 44 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘SAST Regulations, 1997). There is nothing on record to show that any action was taken by SEBI against VIL and/or any person acting in concerned in relation manipulation of quoted price of shares of VIL listed on stock exchanges.

It is the case of the Assessee that the report of the Investigation Wing did not name VIL as penny stock company. We find that in Paragraph 9.1 of the Assessment Order, the Assessing Officer has recorded that all transactions of purchase/sale of shares of VIL were undertaken by the Assessee through the stock exchange. However, the Assessing Officer returned the finding that aforesaid purchase/sale transaction were in the nature of pre arrange transaction undertaken to evade tax on sale of shares and to root back unaccounted income (without any tax liability in the books of accounts of the Assessee). On perusal of the Assessment Order we find that no specific enquiry was carried out by the Assessing Officer and there is no material record to support the abovesaid findings recorded by the Assessing Officer except for the general observations/facts recorded in the report of the Investigation Wing referred to by the Assessing Officer in Paragraph 5 to 9 of the Assessment Order. On the other hand the material placed on record by the Assessee before the authorities below clearly shows that the Assessee is a regular trader who has undertaken the purchase/sales Assessment Year 2012-2013

The Assessment Order is silent about the role of the brokers of the Assessee and there is no allegation that they were involved in any dubious activity. The details of money trail mentioned in Paragraph 11 of the Assessment Order pertains to Blue Circle Services and has Assessment Year 2012-2013

Given the aforesaid facts and circumstances of the present case and keeping in view the material on record, we hold that the preponderance of possibility lies in favour of the Assessee and against the Revenue.

Therefore, addition of INR.1,95,75,356/- made by the Assessing Officer under Section 68 of the Act cannot be sustained. Since, we have deleted the addition as abovesaid the addition of INR.1,95,753/- made under Section 69C of the Act also does not survive and is therefore, deleted. As a result, the order passed by the CIT(A) and the Assessing Officer are overturned and aggregate addition of INR,1,97,71,109/- made in the hands of the Assessee is deleted.

In result, the appeal preferred by the Assessee is allowed.