INCOME TAX OFFICER, WARD - 3(3)(5), AHMEDABAD, PANJARAPOLE, AHMEDABAD vs. VIKASH MORE, BODAKDEV, AHMEDABAD

Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The Ld. DR submitted that the CIT(A) was not right in deleting the addition of Rs.1,47,12,954/- on account of accommodation entries for sale of penny scrip of M/s. Kushal Tradelink Pvt. Ltd. which was treated as unexplained money under Section 69A read with Section 115BBE of the Act. The Ld. DR submitted that the assessee sold the shares of M/s Kushal Tradelink Pvt. Ltd. on account of transfer of shares at Rs.1,35,72,928/- as claimed as LTCG and the same was claimed as exempt income under Section 10(38) of the Act. The Ld. DR submitted that the Assessing Officer rightly made addition under Section 69A of the Act as the assessee could not establish the sale consideration received by the assessee on transfer of shares and of M/s. Kushal Tradelink Pvt. Ltd. The Assessing Officer has categorically mentioned that there was SEBI order from which modus operandi of price manipulation in the scrip of M/s Kushal Tradelink Pvt. Ltd. for the period was categorically mentioned by the Assessing Officer. In fact, the said scrip was defunct in case of Ketan Parikh dated 14.07.2013 and there was manipulation prior to purchase of the scrip of M/s Kushal Tradelink Pvt. Ltd. and after the scrip was sold at that time also the pricing of this Assessment Year: 2016-17 ITO vs. Vikash More Page 3 of 5 share was manipulated. In fact, the beneficiary was aware about the booking price of the period upon which the assessee will incur loss/gain. Thus, the Ld. DR submitted that the Assessing Officer has made addition correctly as the assessee could not explain the said transaction of the scrip and its manipulation. Thus, the Ld. DR submitted that the CIT(A) was not right in deleting this entire addition without any reference to the SEBI proceedings in the said order. As regards to the addition of Rs.4,41,388/- on account of undisclosed commission expense under Section 69C of the Act, the Ld. DR relied upon the Assessment Order and submitted that the accommodation entries from sale of penny scrip has certainly gained commission expenses and, therefore, the addition was rightly done by the Assessing Officer.

The Ld. AR submitted that the CIT(A) has rightly taken into account that the reasons recorded was mainly on the basis that the assessee has received accommodation entries from Kushal Group amounting to Rs.1,47,12,954/- but in fact during the year under consideration the assessee has purchased and sold shares of M/s Kushal Tradelink Pvt. Ltd. for which the assessee has received payment amounting to Rs.1,46,79,424.85 during the year under consideration through Bank. Both purchase and sale of shares was carried out by SEBI registered stock brokers Sharekhan Limited through DMAT account was properly recorded in books of the assessee. The CIT(A) has rightly taken cognisance of the evidences and, therefore, has rightly deleted this addition.

As regards ground no.2 of the Revenue’s appeal, the Ld. AR submitted that the question of earning commission which is undisclosed commission expenses was not established by the Assessing Officer and has rightly deleted. The Ld. AR relied upon the order of the CIT(A).

We have heard both the parties and perused all the reverent material available on record. It is pertinent to note that the assessee during the assessment proceedings has given copy of bills of stock broker Sharekhan Limited for the scrip of M/s Kushal Tradelink Pvt. Ltd., Trading chart comparison, Bank statement reflecting receipts of the share/scrip, D-mat holding and transaction statement reflecting purchase and sale of shares of Kushal Tradelink. The Ld. AR also pointed out the order passed by the SEBI dated 22.12.2017 and 31.05.2019. From the perusal of the records, it appears Assessment Year: 2016-17 ITO vs. Vikash More Page 4 of 5 that the assessee has very well transacted thereby purchasing and selling of the scrip of M/s Kushal Tradelink Pvt. Ltd. From the perusal of the records, the transaction was properly established by the assessee and there was no doubt expressed by the Assessing Officer in the Assessment Order that the transaction of purchase and sale is bogus. The order of the SEBI related to the scrip of M/s Kushal Tradelink Pvt. Ltd. will not be the sole and whole criteria for making addition under Section 69A read with Section 115BBE of the Act as the assessee whether actually has given the accommodation entries through its regular books of accounts or outside the books of account, this case was not established by the Assessing Officer/revenue. Thus, the CIT(A) has rightly held that the assessee has explained his transaction through the evidences and, therefore, it cannot be treated as unexplained money. The base of the Assessment Order was solely on the SEBI report and the SEBI orders which does not deal with the assessee’s linkage with this scrip malpractice, therefore, the CIT(A) has rightly deleted this addition. The question of undisclosed commission expenses also will not arise as the assessee has given brokerage to its broker company and that cannot be held as unexplained/undisclosed commission expenses. Thus, ground nos.(a) & (b) of Revenue’s appeal are dismissed.

In the result, appeal filed by the Revenue is dismissed.