ITO 34 (1)(6), MUMBAI vs. SHRI ANURAG SHIVCHARAN AGARWAL, MUMBAI

The grounds of appeal of the revenue is against the action of the Ld. CIT(A) deleting the addition of Rs.11,67,597/- made by AO holding that the purchase and sale transaction in the shares of M/s.

Brief facts are that the assessee had filed the return of income for AY. 2009-10 on 30.07.2009 declaring total income at Rs.4,08,330/- which was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter “the Act”). Later, the AO received an information that the assessee had carried out transactions of a penny-stock and the assessee is one of the beneficiary. According to the AO, the assessee has sold shares of M/s.JMD Telefilms Ltd. at Rs 13,03,070/- in the year under consideration. And therefore, according to the AO, the assessee has received accommodation entry as per the information received from DCIT, OSD (Inv.-II) related to transaction of Penny-stock. And therefore he disallowed the claim of exemption on Long Term Capital Gain (LTCG) transaction of Rs.11,67,597/- which was added u/s 68 of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) which was decided in favour of the assessee by allowing the appeal. Aggrieved, the revenue is before us by preferring the appeal whereas the assessee have filed the cross-objection raising the legal ground against the reopening carried out by the AO u/s 147 of the Act which was not adjudicated by Ld. CIT(A), since the assessee got relief in the quantum assessment.

Having heard both the parties and perused the records. We note that the Ld. CIT(A) has found that the assessee had purchased 65,000 shares of Rs.10 each of M/s.JMD Telefilms Ltd. which was earlier known as M/s. Avtar Finance & Management Consultants Ltd on C.O. 145/Mum/2021 A.Y. 2009-10 Anurag Shivcharan Agarwal 29.09.2001 i.e. AY. 20002-03. According to the Ld. CIT(A), this fact of assessee purchasing these shares was supported by annual return for year ending 31.03.2002 of the company M/s. Avtar Finance & Management Consultants Ltd. The assessee also brought to the notice of the Ld. CIT(A) that the shares after being purchased were Demated on 26.05.2007; and the assessee had sold 45,560 shares on 13.01.2009 for net consideration of Rs.8,68,810/- (sale price of Rs.19.06 per share) and the balance shares i.e. 19,440 shares of M/s. JMD Telefilms Ltd. were sold on 03.02.2009 for net consideration of Rs.4,28,788/- (sale price of Rs.22.05 per share). Thus the total net consideration received in AY. 2009-10 on sale of 65,000 of JMD Telefilms Ltd was to the tune of Rs.12,97,597/-. The Ld. CIT(A) has noted that the assessee has held the shares of M/s. JMD Telefilms Ltd. for more than eight (8) years. The Ld. CIT(A) acknowledges that evidence of this fact has been furnished before him. And based on the aforesaid fact that the assessee had purchased the shares as early as on 29.09.2001; and held it for more than eight (8) years before selling the same and sold the same when price increased moderately of Rs.19.06 & Rs.22.05 shares, he was of the opinion that the said sale transaction cannot be disallowed only on the plea that it is a penny-stock. I concur with the aforesaid reason of Ld. CIT(A) that the assessee having held the shares from year 2001, and sold the same in this assessment order after holding for a period of months eight (8) years and also had sold the same when price increased moderately of Rs.19.06 & Rs.22.05 per share. The action of the Ld. CIT(A) accepting the claim of assessee cannot be held it to be unreasonable in the facts and circumstance of