JYOTI SWAROOP KASHUKA(HUF),KOLKATA vs. ITO, WARD-30(1), KOLKATA

Present appeal by the assessee is against the order of Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi vide order no. ITBA/NFAC/S/250/2021- 22/1037888892(1) dated 17.12.2021 against the assessment order passed by Income Tax Officer, Ward – 30(1), Kolkata u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act) dated 12.12.2017 for AY 2015-16.

Sole issue involved in the present appeal relates to addition made by the ld. AO of ₹ 6,86,400/- as unexplained cash credit u/s 68 of the Act in respect of sale of shares of GCM Securities Ltd, for which Jyoti Swaroop Kashuka (HUF) AY 2015-16 grounds of appeal taken by the assessee are four in number. Same are not reproduced for the sake of brevity.

Brief facts of the case are that assessee is an HUF who filed its return of income on 28.08.2015 reporting a total income of ₹ 2,61,690/. In the course of assessment, ld. AO noted that assessee has sold 8000 shares of one scrip GCM Securities Ltd for sale consideration of ₹ 6,86,400/- on 09.12.2014. Since name of the company of which the shares were sold was appearing in the report of the Directorate of Investigation of the Department, which was marked as a penny stock, and name of the assessee was also appearing in the list of beneficiaries, ld. AO show caused the assessee as to why the said transaction of sale of shares of GM Securities Ltd be not treated as non-genuine, bogus and sham and the resultant long-term capital gain arising out of the sale of these shares be treated as unexplained cash credits u/s 68 of the Act.

Ld. AO enquired certain facts from the broker relating to the sale transaction of shares who confirmed that 8000 shares of GCM Securities Ltd were sold on 09.12.2014 for ₹ 6,86,400/-.

Assessee submitted its reply before the ld. AO stating that a mistake had occurred on the part of the broker who had punched the transaction of other client code against the code of the assessee. It was pointed out that assessee had no holding of shares of the said script which were first sold inadvertently in the name of the assessee by the broker on 05.12.2014. Instantaneously, the mistake was identified and in order to make good the mistake, same quantity of shares of the said script were purchased on 08.12.2014 and were subsequently transferred on 10.12.2014 at the same value to the individual that is Jyoti Swaroop Kashuka (HUF) AY 2015-16 Shri Jyoti Swarook Kashuka, who was actually holding the quantity of shares of the said script and whose shares were sold by mistake in the name of the assessee. To substantiate the claim, copy of ledger from the broker and the relevant contract notes for sale and purchase of the said shares were placed before the ld. AO. Submissions made by the assessee did not find favour with the ld. AO, who by considering the report of the Directorate of Investigation, surrounding circumstances and observing that there was no purchase available in the hands of the assessee, made the addition. Aggrieved, assessee went in appeal before the ld. CIT(A).

From the perusal of lengthy order of ld. CIT(A), running into as many as 86 pages, reference is made to para 3 wherein the statement of facts is culled out from Form no. 35. In the statement of facts, assessee has categorically mentioned about the mistake which has occurred in respect of sale of shares of GCM securities Ltd, details of the same already narrated above.

Before the ld. CIT(A), assessee made a submission dated 28.09.2021 explaining the factual matrix of the case which has been reproduced by the ld. CIT(A) in paragraph 4. The same is reproduced hereinbelow for ease of reference:

While dealing with the matter, ld. CIT(A) laid his entire emphasis on the report of the Investigation Wing of the Department and made an extensive write-up on the subject matter of black money and plugging of loopholes in the system by the Revenue which has been garnered in the form of bogus long-term capital gain by the assessees through typical features of penny stock companies. The appeal of the assessee was dismissed. Aggrieved, assessee is in appeal before the Tribunal.

Before us, Shri K.K. Goswami, Advocate represented the assessee and Shri Biswanath Das, Addl. CIT represented the Department.

Ld. Counsel for the assessee reiterated the factual matrix as reproduced above. He pointed out that assessee had by mistake sold 8000 shares of GCM Securities Ltd on Friday, 05.12.2014 for ₹ 6,86,400/-. Assessee was not in possession of the said shares. These shares were in the holding of account of the individual i.e. Shri Jyoti Swaroop Kashuka, with the same broker. Therefore, to comply with the delivery norms and avoid penalty towards non-delivery by the stock exchange, assessee borrowed the shares from the individual account.

Thereafter, assessee, on the next working day (6th and 7th being Saturday & Sunday as non-working days of the stock exchange) i.e. Monday, 08.12.2014, purchased 8000 shares of the same company from the broker and upon receiving their delivery on 10.12.2014, returned the same on the very next day i.e. 11.12.2014 into the individual account for its settlement. Ld. Counsel submitted that the Jyoti Swaroop Kashuka (HUF) AY 2015-16 two transactions have been seen in solidarity by the ld. AO which has been confirmed by the ld. CIT(A), NFAC without giving proper and meaningful cognizance to the submissions made by the assessee on the facts of the case, duly supported by corroborative documentary evidence.

Ld. Counsel further submitted that the individual i.e. Shri Jyoti Swaroop Kashuka had declared the sale proceeds consideration in respect of sale of shares of GCM Securities Ltd under the Income Disclosure Scheme, 2016 (IDS 2016) and paid taxes thereon in individual capacity.

Ld. Counsel also referred to the assessment order passed under section 143(3) dated 24.11.2017 in the case of the individual Shri Jyoti Swaroop Kashuka for the same assessment year i.e. AY 2015-16, placed in the paper book at page 16 to 20, to submit that long-term capital gain on sale of shares of GCM securities Ltd was duly considered in the assessment by the concerned Assessing Officer. In the same assessment order of the individual, the concerned Assessing Officer has noted that Shri Jyoti Swaroop Kashuka (individual) has disclosed the long-term capital gain being the sale proceeds under the IDS 2016 and paid taxes accordingly which was cross verified from the records available with the Department. Accordingly, the concerned Assessing Officer accepted the returned income of the individual.

Thus, ld. Counsel stated that shares were actually held by the individual who had declared the sale consideration of shares of GCM Securities Ltd in IDS 2016 and paid taxes there on. Since these facts have already been considered in the scrutiny assessment of the Jyoti Swaroop Kashuka (HUF) AY 2015-16 individual, addition made in the hands of the present assessee ought to be deleted.

Per contra, ld. Sr. DR placed reliance on the order of ld. AO and ld. CIT(A).

We have heard the rival contentions and paid used the material placed on record. Admittedly, it is a fact that assessee has brought on record all the details relating to the mistake committed by the broker in respect of executing the sale transaction of 8000 shares of GCM securities Ltd, both before the ld. AO and the ld. CIT(A), along with relevant corroborative documentary evidence. Submissions made by the assessee before both the authorities have been reproduced in their respective orders. In our understanding, once the mistake is brought to fore and is in knowledge of the authority, it is incumbent upon the authority, who is possessed with all the powers, to take a deep dive into the matter to ascertain the correct facts and understand the mistake as well as see how the effect of mistake was mitigated. The factual matrix in the present case evidently demonstrates that a mistake was committed which was mitigated by the assessee and the relevant income arising from the transaction of sale of shares erroneously executed in the account of the assessee, was duly reported in the return of income of the individual, which was offered by the individual in the IDS 2016 and was accepted in the scrutiny assessment made under section 143(3) of the Act of the individual. We note that addition made by the ld. AO and sustained by the ld. CIT(A) is without going into the actual facts of the case.

From the perusal of the records placed in the paper book containing 20 pages, we agree with the submissions made by the ld.

In the result, appeal of the assessee is allowed.