SHOBHA M.MAKANA ,RAICHUR vs. THE INCOME TAX OFFICER WARD-1, RAICHUR

In both the years, the assessee is contesting the rejection of claim of long term capital gain arising on the sale of shares and consequently assessing the entire sale consideration as income of the assessee.

The ld counsel appearing for the assessee submitted that the assessee is investing in shares of various companies for the past several years. During the years relevant to the asst. years 2007-08 to 2009-10, the assessee had purchased and sold certain shares through the concerns belonging to a share broker named Shri Mukesh Choksi. The above said broker appears to have admitted before the tax authorities that he and his group of companies were giving only accommodation entries without actual purchase and sale of shares. Accordingly the assessee’s claim of capital gain was rejected in the above said years and the sale consideration received on sale of shares was assessed as income of the assessee in AY 2007-08 to 2009-10. When the matter reached the Tribunal, the SMC Bench of ITAT, vide its order dated 16-06-2017 passed in 480 and 937/Bang/2017, restored the matters to the file of the AO with the direction to allow the assessee to cross examine Shri Mukesh Choksi.

The ld AR submitted that the AO, following the orders passed by him for asst. years 2007-08 to 2009-10 has assessed the sale consideration received by the assessee on sale of shares as income of the assessee in both the years under consideration also, rejecting the claim of capital gains. The ld AR submitted that the assesese, during the years under consideration, has not either purchased or sold any of the securities through Shri Mukesh Choksi Group. Accordingly he contended that the tax authorities are not justified in rejecting the claim of Capital gains by the assessee. He submitted that the assessee has purchased and sold shares of reputed companies, which have not been dealt by Shri Mukesh Choksi at all. The ld AR further submitted that the ld CIT(A) has referred to the shares of two companies viz. M/s Universal credit and M/s Zen Savings in his order. The assessee has purchased those shares in the earlier years through Shri Mukesh Choksi Group, but held the same as investment in his books of account i.e those shares have not been sold by the assessee during the year under consideration. Accordingly the ld AR submitted that the ld CIT(A) was not justified in confirming the asst. order in both the years by considering the shares purchased in the earlier years.

The ld DR, on the contrary, submitted that the contentions of the assesee require examination.

In the rejoinder the ld AR submitted that the assessee has furnished proofs in its paper book to show that the shares sold during the years under consideration were purchased and sold through brokers, who are not connected with Shri Mukesh Choksi Group. He also submitted that the matters may be restored to the file of the AO for examining the claim of the assessee.

We heard the rival contentions and perused the record. We noticed that the AO has rejected the claim of capital gains only for the reason that the assessee has purchased and sold shares through Shri Mukesh Choksi Group . The contention of the assessee is that the shares sold during the years under consideration, have been purchased and sold through brokers who are not connected with the Shri Mukesh Choksi Group. According to ld AR the assessee has furnished relevant documents in the paper book. If the assessee has purchased and sold the shares through other brokers, the stand taken by the Revenue with regard to dealing with Shri Mukesh Choksi Group, in our view, cannot be applied on those shares. The AO should examine the transactions independently without being influenced by the stand taken by the revenue in respect of shares purchased and sold through Mukesh Choksi group. However, as submitted by ld DR, the claim of the assessee requires examination at the end of the AO by duly considering various evidences furnished by the assessee. Accordingly we are of the view that various contentions of the assessee require examination at the end of AO. Accordingly we set aside the orders passed the ld CIT(A) in both the years under consideration and restore them to the file of the AO for examining the claim of the assessee. After affording adequate opportunity of being heard and also by duly considering explanations of the assessee and various documents that may be furnished by him, the AO may take appropriate decision in accordance with the law.

In the result, the appeal filed by the assessee is treated as allowed for statistical purpose.