SARITA BAGDI ,INDORE vs. THE ITO WARD-4(1), INDORE

PER MANISH BORAD, A.M

The above captioned appeal filed at the instance of the

assessee for Assessment Year 2011-12 is directed against the

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orders of Ld. Commissioner of Income Tax(Appeals)-II (in short ‘Ld.

CIT], Indore dated 11.10.2018 which is arising out of the order u/s

143(3)/147 of the Income Tax Act 1961(In short the ‘Act’) dated

16.12.2016 framed by ITO-4(1), Indore.

On the facts and in the circumstances of the cases:-

1.That, on the facts and in the circumstances of the case, Ld. Commissioner of Income Tax (Appeals) - Il, Indore has erred in conforming addition to the extent of Rs. 48,85,547/- to the total income of the appellant by disallowing the claim of exemption made U/s 10(38) of the Income Tax Act' 1956. 2.That, the Ld. Commissioner of Income Tax (Appeals)-Il, Indore has erred to confirm the addition made in the present case made by the Ld. A.O. merely on the basis of information received from Financial Investigation Unit-MOU, New Delhi relying on which investigation was carried out by DDIT (Inv.), Indore, however such addition is bad in law in absence of any further enquiry I investigation carried on by the Ld. A.O.

3.That, on the facts and in circumstances of the case, Ld. Commissioner of Income Tax (Appeals)-Il, Indore has erred to confirm the disallowance of exemption Us. 10(38) considering it to be not genuine, such act is totally bad in law, as all the transaction were held through banking channel and there was no finding or enquiry into the appellant case regarding generation of unaccounted money

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and that, it was her own money which was diverted as LTCG. 4.That, on the facts and in circumstances of the case, Ld. Commissioner of Income Tax (Appeals)-Il, Indore has erred to confirm disallowance of the exemption claimed on the ground, that transaction of purchase was effected through a derecognized entity, as appellant was totally un aware of such fact and was under the bona fide believe that such entity was duly recognized as also in all the communication made by such entity registration no. was mentioned, hence appellant was a bona fide purchase, who purchased security through banking channel and in fact security was ultimately transferred to the appellant.

5.That, Ld. Commissioner of Income Tax (Appeals)-II, further erred not to consider the genuine L TGC and exemption claimed ul s 10(38), more particularly the transaction was done through banking channel and sale was made through NSE, as well as STT was paid on the same. 6.That, the Ld. Commissioner of Income Tax (Appeals)-II, erred not to follow the principle of natural justice and not to provide opportunity of cross examination at any level during the course of assessment proceedings, especially when the fact of transaction effected with derecognized entity was the predominant reason of disallowing exemption U Is 10(38), and appellant was totally un aware of such de recognition and was a bona fide purchaser. 7.That, the Ld. Commissioner of Income Tax (Appeals)-II, erred to confirm the addition made in the present case relying upon various judicial pronouncement more particularly when such cases are clear distinguishable from the facts of present case and contrary decisions are also pronounced in favor of appellant. 8.That, the appellant, carves leave to add, amend or modify any of the grounds of the appeal. 3

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the assessee is an individual deriving income from warehouse

receipts, share in partnership firm, capital gains and other sources.

The return of income for Assessment Year 2011-12 was filed on

27.03.2012 declaring total income of Rs.9,10,070/- and also

claiming exemption u/s 10(38) of the Act at Rs.48,85,547/- for

Long Term Capital Gain (In Short ‘LTCG’) from sales of shares of VIP

Industries Ltd. There was an information received from Financial

Investigation Unit, New Delhi and in reference to it DDIT

(Investigation), Indore carried out investigation and observed that

high off market transfer in the clients DP account of 6000 shares of

VIP Industries Ltd has happened in the account of the assessee.

Summons u/s 131 of the Act was issued to the assessee namely

Smt. Sarita Bagadia for personal attendance along with required

documents. Summons were also issued to other connected parties.

Assessee’s case was reopened for reassessment proceedings. Notice

u/s 148 of the Act was issued on 28.3.2016 after recording reasons

and getting prior approval from the competent authority. Notice

u/s 142(1) of the Act was served upon the assessee. Copy of the

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return filed on 27.03.2012 declaring income of Rs.9,10,070/- was

again filed in response to notice u/s 148 of the Act. During the

proceedings it was submitted by the assessee that she had

purchased 9000 equity shares of VIP Industries Ltd from Eden

Financial Services, Mumbai during April, 2009 at a cost of Rs.

4,02,160/-. Payment for purchase was made during Financial Year

2010-11 and 9000 shares were sold through registered broker at

recognized stock exchange at a sale price of Rs.52,87,709/-.

On examining these details Ld. A.O observed that registration

certificate of M/s Eden Financial Services was cancelled by

Securities Exchange Board of India (In short ‘SEBI’) vide its order

dated 28.8.2004. Based on this fact Ld. A.O concluded that the

alleged transaction of purchase is a fraudulent transaction which

was done through derecognized entity and further held that the

profit of sale of shares of VIP Industries was got fraudulently so as

to enjoy the benefit of exemption u/s 10(38) of the Act and the same

deserves to be disallowed. Ld. A.O accordingly made the addition

for the net capital gain at Rs.48,85,547/- denying the benefit of

Section 10(38) of the Act. Income assessed at Rs.57,95,617/-.

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Aggrieved assessee preferred appeal before Ld. CIT(A) but failed to

succeed as the view taken by Ld. A.O was confirmed by the Ld.

CIT(A). Ld. CIT(A) apart from holding that the purchases are not

genuine also held that M/s VIP Industries Limited is a penny stock

company and the appellant is indulged in getting bogus Long Term

Capital Gain by entering into sham transaction just in order to take

benefit of exemption u/s 10(38) of the Act.

the written submissions contending that both the transactions of

purchase and sales are genuine and rightful claim has been made

for Long Term Capital Gain on sale of shares of VIP Industries

Limited and further added that as on date also VIP Industries

Limited is a listed company and the share price have increased

almost four times than the price at which they were sold during

financial year 2010-11 and the turnover of VIP Industries Limited

during financial year 2019-20 was Rs. 1718 crores and profit before

tax stood at Rs.147 crores which is sufficient to prove that VIP

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Industries is not a penny stock or a paper company. Relevant

extract of written submission by the assessee is reproduced below:-

That, during the course of reassessment proceedings the Ld. AO vide order dt. 16.12.2016 made an addition of Rs. 48,85,547/- by disallowing the exemption claimed u/s 10(38) of the Act. Further, the sole ground of disallowance of such exemption claimed was circular no. 421 dt. 10.09.2004, issued by National Stock Exchange of India Ltd. wherein it was informed that SEBI has cancelled the registration certificate of M/s Eden Financial Services (Intermediary of appellant) vide order dt. 28.08.2004. That, upon such contention, the appellant stated that the appellant has earned genuine long-term capital gain of Rs. 48,85,547/- from the sale of shares of VIP Industries Ltd, which can be substantiated from the following exhaustive & voluminous documents, which are also enclosed herewith for your ready perusal; • Bill of the broker “Eden Financial Services” certifying the purchase of the 4000 shares on 23.04.2009 and 5000 shares on 15.04.2009 (Page15-18). • Advice of the aforesaid broker dt. 31.12.2010, certifying the holding of the said shares. • Statement of shares reflecting the conversion of physical holding of shares to the Demat form during the concerned year and the sale of the same shares after the said conversion respectively. • Settlement statement of the broker “Angel Broking Ltd.” stating the sale of aforesaid mentioned shares on various dates during the year under consideration • NSECM ledger and BSECM ledger certifying the sale transactions of the above-mentioned shares through NSE and BSE stock exchanges respectively during the year under consideration. Thus, in light of the above documentation appellant submits that he has sufficiently proved all the bona fides of the transaction pertaining to 7

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earning long term capital gain & such transaction has been undertaken through banking channel as well as on the recognized stock exchange. That, the only basis relying upon which the conclusion of non- genuineness of the long-term capital gain earned was drawn by the Ld. AO, is the information received from Financial investigation unit-MOU, New Delhi and enquiry conducted by DDIT(Inv), Indore in the present case, whereby the result of enquiry conducted by DDIT(Inv), Indore was predominated and totally based on the information received from Financial investigation unit-MOU, New Delhi. However, no any specific enquiry relating to the transaction undertaken by the appellant was been made by the Ld. AO and just on the basis of enquiry conducted by DDIT(Inv), Indore which was predominated by the information received from Financial investigation unit-MOU, New Delhi, particularly when appellant was not at all confronted for the statement made and material used behind his back, the huge addition of Long Term Capital Gain earned of Rs.48,85,547/- was made, which is totally unjustified and un lawful, particularly when no defect at all has been pointed out in the document submitted by the appellant to support such claim of Long Term Capital Gain Being earned. That, no efforts were made by the Ld AO. to enquire into the genuineness of the transaction entered into by the appellant and yet just on the basis of information received and enquiry conducted on the basis of such information, regarded the bona fide long term capital gain earned as not genuine, in spite of the fact proven by the appellant before him that transaction was genuine undergone through banking channel, STT was duly paid on the same, has been undertaken on recognized stock exchange through proper demat account, Further, there was no any denial from any broker or other person concerned regarding the genuineness of the transaction and also nothing was proved to the effect

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that it was appellants own unaccounted money that got credited in the form of long term capital gain. Thus, it is clear that department has not at all discharged its burden to prove that appellant’s transaction is in genuine and just on the basis of conjecture, surmises and guess work made huge addition in the hands of appellant which is grossly unfair, unjustified and illegal. That, the Ld. A.O. made addition substantially relying upon the fact that the transaction has been undertaken through derecognized entity, but it was submitted before him that appellant was totally un aware of such fact and this alone cannot become basis to consider the entire transaction of sale and purchase of share to be bogus, for such contention appellant relies upon the decision of ITAT Mumbai Bench in the case of ITO Vs. Arvind Kumar Jain HUF, ITA No. 4862/MUM/2014 wherein it is held by the Hon’ble court that; “When purchases payment has been made by account payee cheque, delivery of shares was taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same” Accordingly, the appeal was allowed, thus in the present case also the addition is not warranted and liable to be deleted. That, the assessee relies upon the following judicial precedents in support of his claim that he has entered into absolutely bona fide

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transaction and thus the addition made by the Ld. AO. is liable to be deleted at the appellate stage: • CIT v. Smt. Jamnadevi Agrawal [2010] 328 ITR 656/[2012] 20 taxmann.com 529 (Bom.) : In this case it was very clearly held by the Hon'ble Court that the fact that assessee in the group had purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus, especially when the documentary evidence was produced to establish the genuineness of transaction. Further, even the ground that some transactions of shares were off- market transactions, was held to be an invalid ground for holding that the transactions were sham. Hence, it was made clear that when an assessee, out of a group of assessees which bought same shares, is able to establish the genuineness of transactions entered into by him, he cannot be punished for buying the same share and thus, addition cannot be made. • CIT v. Udit Narain Agrawal [2013] 31 taxmann.com 76/213 Taxman 178 (Mag.)(All.) : In this case, it was contended by assessee's counsel that after the allotment of shares, the same were transferred to Demat account of the buyer and remained there during the period of holding, which signifies the genuineness of the transaction. Reliance was placed on the decision reported in Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC), Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC), CIT v. East Coast Commercial Co. Ltd. [1967] 63 ITR 449 (SC) and Anil Tibrewalav. ITO [2004] 1 SOT 90 (Mum) to support that suspicion even strong enough cannot take the character of evidence. • Himani M. Vakilv. DIT [IT Appeal No. 3106] (ITAT Ahd.) : In this case, it was observed that the assessee had furnished complete details before the A.O. which were not found false or bogus by the A.O. and only on doubts and suspicion the A.O. treated the capital gain declared by the assessee as unexplained credit under section 68. Accordingly, the appeal of the assessee was allowed.

Smt. Sarita Bagdi ITA No.06/Ind/2020

• Mahesh G. Vakilv. DIT [IT Appeal No. 218 of 2010] : In this case, the question of short term capital gain which was held to be bogus by A.O. came before the Ahmedabad Bench of ITAT. The main reason for not allowing the claim of the assessee by the A.O. was the sharp rise in the price of shares. The ITAT found that the assessee had substantiated their claim with the relevant documents for example, bank statement, demat account statement and contract notes etc. which were not found false or bogus by the A.O. thus, it was held that the claim of the assessee regarding the capital gain was genuine and the addition made by A.O. was therefore, deleted. • MukeshR.Marolia v. Addl. CIT [2006] 6 SOT 247 (Mum) : In this case, it was observed that the assessee was earning agricultural income which was duly declared in his return for the last few years and the assessee had sufficient cash in hand for buying the shares. Hence, it was opined that the purchase of shares was made against cash available with the assessee. With regard to off market transaction of purchase and sale of share, it was found that the off-market transactions are not illegal. It was also observed that the assessment has to be completed on the basis of records and material available before the assessing authority and that personal knowledge and excitement on events should not lead the A.O. to a state of affairs where relevant evidences are overlooked. • CIT v.Arun Kumar Agarwal (HUF) [2012] 210 Taxman 405/26 taxmann.com 113 (Jharkhand) : In this case too, the issue of alleged bogus long term capital gain was dealt with for a group of assessees, where the A.O. had passed the assessment order on the basis of the report of SEBI wherein detailed findings were made with regard to shares whose prices rose very high in short span of time. The A.O. observed that the same modus operandi was followed. The CIT(A) had observed that the purchase of shares were shown by the assessees in their balance sheet, the purchase consideration was paid through bank account and that shares were there in the demat account. Accordingly, it was held by CIT(A) that the transaction entered into by the assessee was genuine. ITAT also affirmed the order passed by the CIT(A). Accordingly, the matter reached before 11

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High Court, which observed that the A.O. was much influenced by the enquiry report prepared by the SEBI wherein finding related to involvement of some of the share brokers in unfair trade practices were made. 1. The Hon'ble High Court made landmark observation that even in a case where a share broker was found involved in unfair trade practices or acting against the SEBI norms then merely because of this fact a person who bought the shares of a company from such broker with a bona fide belief and without knowing that such share broker had some arrangement for dealing in the share of that particular company in collusion with others, such person cannot be assumed to have entered into a sham transaction as the fact of tinted share broker may be relevant for suspicion which requires further enquiry in individual case. However, such further enquiry was not conducted in that case. In view of this, the appeal of the revenue was dismissed. • In case of CIT Vs. Shyam R. Pawar [2015] 54 taxmann.com 108 (Bombay) it was observed that Assessee declared capital gain on sale of shares of two companies - Assessing Officer, observing that transaction was done through brokers at Calcutta and performance of concerned companies was not such as would justify increase in share prices, held said transaction as bogus and having been done to convert unaccounted money of assessee to accounted income and, therefore, made addition under section 68 - On appeal, Tribunal deleted addition observing that DMAT account and contract note showed credit/details of share transactions; - Whether on facts, transactions in shares were rightly held to be genuine and addition made by Assessing Officer was rightly deleted - Held, yes From the above cited decisions in the favor of the assessee, it is clear that the assesee has entered into bona fide transactions and genuinely incurred short term capital loss on such transaction. 12

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That, it is specifically held by hon’ble courts that, merely on the basis of investigation report of the income tax officer or survey conducted at the premises of other assessee/company concluding the involvement of accommodation entries, no addition in the hands of assessee can be made, particularly when no specific enquiry relating to the transaction of the assessee has been made and no any opportunity of cross examination has been provided to the assessee. Hence in such circumstances addition made is liable to be deleted. Reliance is also placed on; � CIT Vs. Rahul Vineet Traders [2014] 41 taxmann.com 86 (Allahabad HC) � Abhik Jain Vs. ITO [2013] 33 taxmann.com 577 (Delhi Trib) � ACIT Vs. Bahubali Dyes Ltd. [2015] 55 taxmann.com 357 (Delhi Trib.) � Bharti Syntex Ltd. Vs. DCIT [2012] 19 taxmann.com 361 (Jaipur Trib.) � CIT Vs. Priyanka Ship Breaking Co. (P.) Ltd. [2012] 26 taxmann.com 321 (Delhi HC) � CIT Vs. Gangeshwari Metals Pvt. Ltd. [2013] 30 taxmann.com 328 (Delhi HC) � CIT Vs. Vijay Kumar Jain [2014] 41taxmann.com 433 (Allahabad HC) � CIT Vs. Fair Finvest Ltd. [2014] 44 taxmann.com 356 (Delhi HC) � ITO Vs. Neelkanth Finbuild Ltd. [2015] 61 taxmann.com 132 (Delhi Trib.) � ACIT Vs. Jogia Properties Ltd. ITA No. 6106 and 6107 M/2012 (Mum. Trib.)

Thus, your honor in light of the above fact & circumstances as well as on the basis of decisions of various hon’ble courts, please consider our humble submission that the addition made in the present case is unlawful and it is prayed that the same shall be deleted.

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referring to the finding of both the lower authorities and also relying

on the decisions relied by Ld. CIT(A) and Ld. A.O.

placed before us and carefully gone through the decisions referred

and relied by both the parties. Through Ground No.1 to 7 assessee

has challenged the finding of Ld. CIT(A) denying the benefit of

exemption of LTCG from sale of equity shares of VIP Industries Ltd

at Rs. 48,85,547/-. We note that assessee purchased 9000 equity

shares of VIP Industries Ltd during April 2009 (Financial Year

2009-10)at a cost of Rs. 4,02,162/- under a contract note issued by

Eden Financial Services, Mumbai. The payment to broker remained

outstanding for 18 months and on 25.1.2011 it was paid through

Cheque No. 998105 of State Bank of Bikaner & Jaipur, Indore of

Rs. 4,02,161.99. All the 9000 shares were sold at the market rate

appearing on the portal of the recognized stock exchange (under the

portal of SEBI) during the fourth quarter of financial year 2010-11.

Just before entering into sale transactions, 9000 equity shares of

VIP Industries Ltd were transferred to the Demat account of the

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assessee from the pool account of broker (as claimed by the

assessee). These shares were sold through registered broker M/s

Angel Broking Ltd, Indore (Member of National Stock Exchange Ltd)

and contract cum bill have been issued for the sales transactions.

Sale consideration of Rs.52,87,709/- was received through banking

channel and net LTCG of Rs.48,85,547/- claimed exempt u/s

10(38) of the Act by the assessee in the return of income.

of transaction of purchase. Ld. A.O has not doubted the sale

transaction and the fact that 9000 equity shares of VIP Industries

Ltd have been transferred from the Demat account held in the name

of the assessee to another buyer after effecting the sale through

registered broker on a recognized stock exchange. Ld. A.O has

doubted the purchase transaction since the registration of Eden

Financial Service was cancelled by SEBI and this information was

given to National Stock Exchange of India Ltd vide Circular No.421

dated 10.09.2004 which was made public. Revenue’s contention is

that when the party which has sold the shares to the assessee is

itself not a legal entity to trade and sell the shares to the assessee,

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all what has is happened since purchase is fraudulent and is a

managed affair to evade tax by getting an accommodation entry and

claim exempt income.

correctness of the fact that registration certificate of Eden Financial

Services is cancelled but it was submitted that the assessee was

not aware of this fact at the time of purchase and a contract note

was issue in lieu of purchase and payment has been made through

banking channel and 9000 equity shares were transferred to the

Demat account of the assessee.

the Demat account of the assessee and the payment has also been

made at Rs.4,02,161.99 on 25.1.2011. So one cannot deny the fact

that 9000 equity shares of VIP Industries Limited have moved from

the Demat account of the seller to that of the purchaser i.e.

assessee for consideration of Rs.4,02,161.99. There is no evidence

on record placed by the revenue authorities about the seller who

has transferred the equity shares to the assessee. However there is

a suspicion with regard to the timing of the payment of purchase.

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Contract note of Eden Financial Services are issued in April, 2009

and the payments have been made almost after 21 months and that

too at the time when the share have been sold by the assessee.

Surprisingly payment for the purchase has been made after

completing 3 transactions of sale of the equity shares of VIP

Industries Limited. So one cannot deny that there is some flow in

this transaction. However the fact remains that the VIP Industries

Limited is a listed company and as on date also it is regularly

traded and as submitted by the Ld. Counsel for the assessee the

current price are almost four times of the price the assessee

received at the time of sale. So sale transaction is far from any

dispute as it has been entered through the registered broker on

recognized stock exchange and consideration received. As far as

purchase is concerned there is a purchase on record and 9000

equity shares have come into the Demat account of the assessee

and consideration has been paid. So one cannot doubt the

transaction of purchase and sales but doubt can be raised about

the period of holding of the equity shares.

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Services is itself in dispute having no authority to trade but the

moment the share are transferred to the Demat account then from

that moment there is hardly any possibility to question the

genuineness of purchase unless until anything contrary had been

unearthed by the revenue authorities.

which the equity shares are sold i.e. VIP Industries Limited is not a

penny stock company and sale effected through registered broker,

we are satisfied with the genuineness of sale transactions. As

regards purchase which is made by the payment of Rs.4,02,161.99

through account payee cheque, there is a corresponding receipt of

9000 equity shares of VIP Industries Limited in the Demat account

of the assessee. Had the identity of the broker has not been in

doubt then this transaction of earning LTCG would be covered

under the provision of Section 10(38) of the Act but since the

identity of broker is in dispute the alleged transaction needs to be

examined with the period of holding of equity shares in the Demat

account of the assessee. As the identity of seller is in doubt and

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9000 equity shares are held in the Demat account for less than 12

months, the net gain deserves to be taxed as Short Term Capital

Gain.

in the case of Smt. Annapurna Maheshwari V/s ACIT ITA No.

315/Ind/2012 dated 31.10.2018 wherein transaction of LTCG was

in dispute and revenue authorities questioned the genuineness of

purchase but since the shares were finally transferred to the

Demat account and have been further transferred at the time of

sale the transaction was held to be taxable as Short Term Capital

Gain from sale of equity shares chargeable to tax U/s 111A of the

Act @15% and benefit u/s 10(38) of the Act was denied observing as

follows:-

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27.09.2006 of 35,000/-, 15,000/- and 40,000/- equity shares of IFCI Ltd for a sum of Rs.2,86,412/-, Rs.1,43,250/- and Rs.4,23,591/- respectively. These purchases were made through Settlement No.0607079, 0607127 and 060712B issued by the Stock broker M/s. Vijay Bhagvandas & Company who is the member of Stock Exchange, Bombay and registered with SEBI Reg. No.INB 011194819. All the above referred equity shares of IFCI Ltd were duly transferred into the d-mat account held by the assessee and the shares were sold on 15.5.2007, 15.7.2007 and 14.8.2007 at the sale consideration of Rs.16,43,711/-, 7,04,448/- and Rs.26,34,606/- respectively. Revenue has not disputed this fact that the alleged equity shares of IFCI Ltd were transferred in the d-mat account of the assessee after the purchase and transferred out from the demat account at the time of sale. Revenue has also not disputed that the payments have been made through account payee cheque and similarly genuineness of sale consideration has also not been doubted which were made through a registered broker of recognized stock exchange.

Smt. Sarita Bagdi ITA No.06/Ind/2020

“7. We have heard rival contentions and perused the records carefully.

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extra ordinary increase in the prices of the equity shares. As mentioned by the Ld.A.O in the impugned assessment order that National Stock Exchange denied of having any transaction of purchase of IFCI td. shares by the assessee due to this reason the purchases were doubted and the transaction was treated as spam and the alleged sale receipt from sale of shares was treated as unexplained income. When the matter came up before the Ld.CIT(A), he ignored the existence of any purchase made on 17.10.2006 and calculated the short term capital gain by taking cost of equity shares on the date of dematizing of 12000 equity shares. This resulted into the short term capital gain loss totaling Rs.18,504/-. The Ld.CIT(A) accordingly treated Rs.6,62,870/- as income from unknown sources after giving benefit of purchase cost of Rs.1,19,530/- against the sale consideration.

“Whether on facts and circumstances of the case and in law, the Hon'ble ITAT is right in deleting the addition of Rs.36,72,631/ - made u/s 68 by the Assessing Officer by treating the Short Term Capital Gain as unexplained cash credit?"

Smt. Sarita Bagdi ITA No.06/Ind/2020

consideration the assessee claimed long term capital gain of Rs.34,65,171/ - on a scrip named Shri Nidhi Trading Limited. On scrutinizing the complete transaction the total sale value came to Rs.36,72,631/- and total purchase value came to Rs.2,07,460/-. The assessee accordingly showed capital gain of Rs.34,65,171/-. The Assessing Officer after seeking details from the parties treated the sum of Rs.36,72,631/- credited in the books of accounts unexplained cash credit under section 68 of the Act and brought it to tax. The assessee carried the matter in appeal before the Commissioner (Appeals) who allowed the said ground of appeal and directed the Assessing Officer to accept the claim of the assessee of Rs.34,65,171/ - as capital gains. The revenue carried the matter in appeal before the Tribunal, but did not succeed.

Smt. Sarita Bagdi ITA No.06/Ind/2020

case of the selling broker the Service tax Securities Transaction tax and Education Cess were separately mentioned. As regards the point raised by the Assessing Officer that there was absence of broker-client agreement, the Tribunal accepted the submission of the assessee that the genuineness of the transactions was already proved by the contract notes for sale and purchase, the bank statement of the broker, the Demat Account showing transfer in and out of shares, as also abstract of transactions furnished by the CSE. The Tribunal, after appreciating the evidence on record, concurred with the findings recorded by the Commissioner (Appeals) that the assessee had furnished complete details which were not found false or bogus by the Assessing Officer and that it was only on suspicion that the Assessing Officer had treated the capital gain declared by the assessee as unexplained cash credit under section 68 of the Act. In the light of the aforesaid findings of fact recorded by it, the Tribunal dismissed the appeal of the revenue.

Smt. Sarita Bagdi ITA No.06/Ind/2020

1.Contract note cum bill of broker from whom shares were purchased;

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proceedings and till the proceedings before the appellate authority, revenue authorities have ever doubted the source of amount of sale consideration of Rs.7,64,346/- which the assessee received through banking channel from sale of shares held in Dmat account through the recognized stock exchange which is verifiable from the contract note.

Smt. Sarita Bagdi ITA No.06/Ind/2020

contract note has been issued showing complete details of the shares purchased, settlement number, order number, security name, purchase rate, service tax charged and all the necessary ingredients are mentioned in the contract note for the purchase of equity shares of well known company i.e. IFCI Ltd, then in such situation the purchase cannot be doubted. Therefore if the purchase and sale are not doubted as the payments made for purchase and sale consideration received are also genuine, demat account has been used for the alleged transactions of purchase and sale, then mere delay in payment itself cannot prove that the transactions are sham and bogus. We therefore respectfully following the decision of Co-ordinate Bench and in view of our above finding set aside the order of the lower authorities and allow the ground raised by the assessee and direct the Ld. Assessing Officer to treat the alleged profit from sale and purchase of equity shares of IFCI Ltd at Rs.41,29,512/- as short term capital gain and tax accordingly. In the result appeal of the assessee is allowed. 14. We therefore on examining the facts of the instant case in the

light of above decision which is applicable to a great extent on the

facts and issue of instant appeal hold that the assessee had earned

capital gain at Rs.48,85,547/- after making a genuine sales of

Rs.52,87,709/- and claiming cost of acquisition of shares at

Rs.4,02,162/- by payment through banking channel and

transaction of purchase and sale effected through Demat account.

Since the source of purchase has been disputed as the registration

of broker was cancelled much before the transaction of purchase 27

Smt. Sarita Bagdi ITA No.06/Ind/2020

made by the assessee, period of holding of equity share is reckoned

from the date on which the 9000 equity shares of VIP Industries

Limited were credited to the Demat account of the assessee up to

the date when the shares were sold and equity shares sold were

debited to the Demat account. This period in the instant case is

less than 12 months, we therefore hold that the capital gain of

Rs.48,85,547/- is “Short Term Capital Gain” liable to be taxed u/s

111A of the Act. Assessee get part relief and Ground No.1 to 7

raised by the assessee are partly allowed.

adjudication.

The order pronounced as per Rule 34 of ITAT Rules, 1963 on 25.05.2021. Sd/- Sd/-

(MADHUMITA ROY) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER

�दनांक /Dated : 25.05. 2021 /Dev

Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, 28

Smt. Sarita Bagdi ITA No.06/Ind/2020

Asstt.Registrar, I.T.A.T., Indore