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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri Rajesh Kumar& Shri Sonjoy Sarma]
Per Rajesh Kumar, AM:
This appeal is preferred by the assessee against the order of the Ld. Commissioner of Income Tax(Appeals)-6, Kolkata (hereinafter referred to as the Ld. CIT(A)”] dated 20.09.2018 for the AY 2014-15.
The grounds of appeal raised by the assessee is reproduced as under:
1. For that the order of the Ld.CIT(A) is arbitrary, illegal and bad in law.
2. For that on the facts and circumstances of the case the Ld. C,I.T(A) erred in confirming the action of the AO in treating the sale consideration of shares of M/s. Unishire Urban Infra Limited on which long term capital gain was shown as unexplained cash credit u/s. 68 of the I.T. Act
Assessment Year: 2014-15 Shri Deepak Agarwal
3. For that the Ld. CXT(A) erred in confirming the addition u/s. 68 when all the evidences were filed to prove the genuineness of the transactions and the addition made simply on suspicion on the basis of information from the Investigation Wing is unjustified and not in accordance with law.
For that the Ld. C.I.T(A) erred in confirming the addition u/s. 68 when he should have examined the persons whose statement have been relied upon by him and should have allowed the assessee to cross examine them which was specifically asked for.
5. For that on the facts and circumstances of the case the Ld. C.I.T(A) erred in confirming the action of the AO in treating the short term capital loss of Rs. 66,16,432/- as not genuine which was unjustified and not in accordance with law.
6. For that on the facts and circumstances of the case the order of the CIT(A) be modified and the- assessee be given the relief prayed for.
7. For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing.
Though the assessee has raised various grounds of appeal challenging the confirmation of addition in respect of long term capital gain arising from sale of share of M/s Unishire Urban Infra Ltd. u/s 68 of the Act admittedly a penny stock and also challenged the confirmation by the Ld. CIT(A) of AO’s action wherein the AO has rejected the short term capital loss of Rs. 66,16,432/- as not genuine thereby denying the benefit of setting off against the above long term gain.
4. At the time of hearing, the ld. Counsel for the assesse, without going into the merits of the issue raised, submitted that the issue of long term capital gain on penny stock is covered against the assessee by the decision of Hon’ble Calcutta High Court in the case of PCIT vs. Swati Bajaj in IA No. GA/2/2021 & Ors. Dated 14.06.2022 and therefore he is not arguing this on merit as admittedly it has to be decided against the assessee however the assessee is vociferously praying for allowing the short term loss sustained on sale of shares of Rs. 66,16,432/- which was arising from the sale of penny stocks which was rejected by the AO. The Ld. A.R. submitted that though the quantification of short term loss was not in dispute and has been examined by the AO, and given a finding that this loss was bogus loss and thus denied setting
Assessment Year: 2014-15 Shri Deepak Agarwal off of the said loss of Rs. 66,16,432/- against long term capital gain which may be allowed as any income has to be assessed only after computation of various positive and negative income arising from the same source of income.
Facts in brief are that during the assessment, the assessee filed return of income on 31.07.2014 showing total taxable income of Rs. 2,63,320/- which was processed u/s 143(3) of the Act. Thereafter the case of the assessee was selected for scrutiny and statutory notices were duly issued and served on the assessee. The AO during the assessment proceedings, observed that the assessee has sold scrips of M/s Unishire Urban Infra Ltd. amounting to Rs. 72 lacs and after deducting the expenses from the sales considerations, a profit of Rs. 70,59,800/-was shown and the said amount was adjusted against the short term capital loss of Rs. 66,24,570/-. The AO held short term capital loss to be bogus and accordingly issued a show cause notice to the assesse as to why the same should not be disallowed. Finally after discussing modus operandi as to how the profit was earned and loss was incurred, the AO added the entire sale of shares from M/s Unishire Urban Infra Ltd. of Rs. 72 Lacs and rejected the short term capital loss on sale of shares of SRK Industries which was also bogus and framed the assessment accordingly.
The Ld. CIT(A) simply dismissed the appeal of the assessee on ground that the transaction were suspicious and bogus in nature.
After hearing the rival parties and perusing the material on record, we find that the assessee has shown long term capital gain on sale of shares from M/s Unishire Urban Infra Ltd. of Rs. 70,59,800/- and also short term capital loss of Rs. 66,16,432/- from sale of shares of M/s SRK Industries Ltd. According to AO, both these shares are penny stocks. We find that the AO added the entire sale consideration realized from sale of shares of M/s Unishire Urban Infra Ltd. while the entire loss sustained on sale of shares of M/s SRK Industries ltd. was treated as bogus and no set off was allowed. In our considered view, though the case of the assessee falls within the ambit of the ratio laid down by the Hon’ble Calcutta High Court in the case of Swati
Assessment Year: 2014-15 Shri Deepak Agarwal Bajaj (supra) that the gains on the penny stocks are taxed and no exemption is available u/s 10(38) of the Act however the long term capital gain has to be computed in totality on all the shares as a whole and should be brought to tax accordingly. In our considered view, the authorities below cannot be allowed to treat one transaction as income and reject on the other on the ground that it has incurred loss and is bogus and suspicious. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to allow the set off of short term capital loss of Rs. 66,16,432/- from long term capital gain from the sale of shares of M/s Unishire Urban Infra Ltd. and tax the net income from capital gain which is also in accordance with the provisions of Section 70(3) of the Act. Accordingly, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 28th November, 2022