ALPANA SUNIL SHAH ,MUMBAI vs. THE CIT NFAC , MUMBAI

This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax/NFAC, Delhi dated 30.09.2021 for assessment year 2011-12.

None appeared for the assessee. The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the addition on account of Sale of shares as unexplained money u/s 68 of the Income Tax Act, 1961 (hereinafter “the Act”) of Rs.1,41,761/- and commission on it to the tune of Rs.2,835/-. The assessee /Alpana Sunil Shah is carrying on the business of trading and investments in shares, bonds, debentures, securities and financial instruments. The assessee had e-filed its return of income for the previous year ended on March 31, 2011 relevant to AY. 2011-12 on March 15, 2012, declaring 2 A.Y. 2011-12 Alpana Sunil Shah taxable income of Rs.5,46,400/-. Pursuant to the notice u/s 148 of the Act (reopening) dated 21.03.2018, the assessee reiterated the return of income which was originally filed. In the reasons recorded for reopening, the AO has alleged that in the relevant assessment year, the assessee had traded in stock of M/s G. S. Auto International Ltd. (in short “GSAIL) and that he received information that M/s. GSAIL is a penny-stock listed on BSE and this scrip was being traded in highly suspicious manner. According to AO, the sharp rise in the market price of the entity is not supported by the financial fundamentals of the company and the ibid share is one of the penny stocks whose prices were rigged to gain huge profit/loss through manipulated affairs. And the AO noticed that the assessee has traded in this shares and the total trade value is to the tune of Rs.1,38,815/-. Therefore, the AO was of the opinion that Rs.1,38,815/- has escaped assessment. And therefore he reopened the assessment. In the assessment order, the AO notes that the assessee’s total income for the year under consideration consists of income from other sources and income from capital gain and that the assessee has also declared Long Term Capital Loss on sale of shares. The AO on perusal of return of income and details furnished during the course of assessment proceedings, noted that assessee has claimed Short Term Capital Loss of Rs.4,546/- on sale of shares of the scrip “M/s. G. S. Auto International Ltd/ GSAIL. (Scrip Code: 513059) the details of which are mentioned in the table below:

Having heard the Ld. CIT-DR and after perusal of the records carefully, it is noted that the assessee an individual was carrying on the business of trading and investment in shares. The assessee had filed return of income of Rs.5,46,400/-. The AO has reopened the assessment based on information from Investigation Wing that the assessee has traded in the relevant assessment year scrips of M/s. G. S. Auto International ltd/ GSAIL, which according to the Investigation Wing is a penny stock listed on BSE. According to the information, 4 A.Y. 2011-12 Alpana Sunil Shah the assessee has traded in this shares of total value of Rs.1,38,815/- and added u/s 68 of the Act of Rs.1,41,761/- and commission Rs.2,835/- which was confirmed by the Ld. CIT(A).

It is noted that the appellant had purchased shares of this scrip on various dates between 05.04.2010 to 20.04.2010 (refer chart) (supra) for total price of Rs.1,43,307/-; and sold the shares (3,725 shares) between 19.04.2010 and 21.04.2010 for an amount of Rs.1,38,761/- and thus made a loss of Rs.4,546/-. The assessee in order to prove the genuineness of the transaction had filed following documents: -

It is noted that the assessee has purchased the shares which fact is evident from the documents aforestated, as well as the Demat account shows purchase and sale of shares of M/s. GSAIL of 3,725 shares and the assessee has sold the same on three (3) occasions 5 A.Y. 2011-12 Alpana Sunil Shah wherein the assessee has received gain on two (2) occasions and loss on other five (5) occasions between 19.04.2020 and 21.04.2010. The assessee had Short Term Capital Gain of only Rs.4,546/-. The assessee has traded through broker M/s. R. K. Global Shares and Securities Ltd. Thus, from the aforesaid fact, it cannot be said that assessee was part of the modus operandi, as suggested by the investigation wing. The AO could not find any adverse material against the assessee, whereas the assessee has proved to have purchased and sold these shares in a bonafide manner. It may be true that few persons might have conspired and be part of modus-operandi to claim bogus claims/LTCG etc, however genuine traders/innocent traders cannot be said to be part of such nefarious activity without any material against them, particularly when the trading is taking place on the electronic platform/exchange. In the light of the facts noted (supra), I cannot agree with the action of AO/Ld. CIT(A), so I direct deletion of the addition. Therefore, no addition was warranted. Therefore, I direct the deletion of both addition made of Rs.1,41,761/- and Rs.2,835/-.