PREETI AGGARWAL,DELHI vs. ITO, WARD- 61(5), NEW DELHI

The facts in brief are that assessee is a doctor by profession and has declared income by way of income from profession, income from salary and income from other sources. Besides this, assessee has also declared ‘Short Term Capital Gain on sale of several scrips at Rs.16,01,696/- and Long Term Capital Gain at Rs.9,46,457/- after indexation on sale of shares. The Assessee has been regular investor in shares and has been showing capital gain from such shares every year. In so far as the issue relating to Short Term Capital of Rs.1,23,273/-, the assessee had shown these gain from sale of equity shares of ‘M/s. Pearl Agriculture’ and ‘PSIT Infrastructure’ which were 550 scrips and 5000 scrips (500 shares of Rs.10 each were split into 5000 scrips of Rs.1 each) respectively. The sale consideration for these shares were shown at Rs.1,94,477/- (M/s. M/s. Pearl Agriculture’) and Rs. 2,72,544/- (PSIT Infrastructure). Out of 550 equity shares of M/s. Pearl Agriculture, 50 shares were sold through broker, SMC Global Securities, New Delhi; and balance 500 shares of M/s. Pearl Agriculture and 500 shares of PSIT Infrastructure were sold through Broker, Religare Securities Ltd., New Delhi. On these shares, assessee has claimed Short Term Capital Gain at Rs.1,23,172/-.

Ld. Assessing Officer noted that Directorate of Investigation, Kolkata had carried out investigation to unearth the organized racket of generating bogus entries of Long Term Capital Gain/Short Term Capital Gain and has also incorporated the modus operandi adopted by these entry providers. He also noted that these companies did not have financial strength in order to justify the share price. He also noted that, looking to the meager profit shown by these companies, it does not justify the choice of these companies as an investment option. In response to the show cause notice, assessee has given detailed reply, however same has been rejected by the Assessing Officer and proceeded to treat the Short Term Capital Gain as bogus and has taxed the same u/s.69A r.w.s. 115BBE @ 30%. He also noted one important fact that assessee was engaged in trading shares, and therefore, was well aware of ups and downs of share market and how such a person can make investment in company with no financial understanding and dismal future prospects.

Ld. CIT (A) too has confirmed the said addition.

After hearing both the parties and on perusal of the impugned material placed on record, we find that firstly, assessee has been regular investor in shares and had shown Long Term Capital Gain and Short Term Capital Gain in sale of several scrips. The only controversy is only to the extent of Short Term Capital Gain of Rs. 1,23,173/- which has been treated as bogus. Neither the purchase nor the sale has been doubted for the reason that gross sales have not been added by the Assessing Officer. The assessee had shown purchases of these shares aggregating to Rs.4,67,021/- which have been purchased between March, 2014 to May, 2014 and were sold between May, 2014 to November, 2014 at Rs.5,90,193/- and thereby have shown Short Term Capital Gain at Rs.1,23,173/-. Nowhere the Assessing Officer has pointed out the historical data of prices of these scrips and whether there was an astronomical rise of price from the date of purchases to the date of sales, leading to any dubious nature in marginal of gain of Rs.1,23,173/- on sale of 5550 share. Hence it cannot be inferred that gain was on account of astronomical price rise of the shares. It appears that Assessing Officer has merely gone by the fact that during the investigation carried out by the Department in Kolkata, one of these scrips were found to be used by brokers for providing accommodation entries, but that material fact alone without any other further inquiry or any other material to link that assessee to be involved in any sham transaction or beneficiary of any accommodation entry. Theoretical discussion made by the Assessing Officer cannot nail the assessee. The sales turnover of PSIT Infrastructure goes to show that it had the sale turnover at Rs. 328.38 crore in March, 2016 and similarly in case of Pearl Agriculture also sales turnover was Rs. 23.89 crore in March, 2014. Thus, to hold that these companies were purely a paper company without any business credential cannot be accepted. As discussed above, the assessee had dealt in several scrips over the period of time and has been regular investor in shares and has been showing gain and loss in the shares on year to year basis. No other transaction has been doubted except for two small scrips for over all transaction of 1.23 lacs. This goes to show that bonafide and it cannot be held to be that the assessee was involved in some kind of money laundering or any kind of accommodation entry. No material whatsoever has been brought on record to show that assessee has routed her unaccounted money or any other facts are coming on record. Assessee has also incurred Short Term Capital Loss in dealing with more than 250 companies and has incurred Long Term Capital Loss of Rs.53,227/-; and Short Term Capital loss of Rs.2,42,000/-. Such a negligible amount of Short Term Capital Gain cannot be held to be bogus sans any inquiry or material. Accordingly, treating Short Term Capital Gain of Rs.1,23,273/- as bogus cannot be sustained.