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Income Tax Appellate Tribunal, DELHI BENCH “F” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
The aforesaid appeal has been filed by the assessee against the impugned order dated 17.06.2014, passed by the CIT(Appeals)-XXVIII, New Delhi for the quantum of assessment passed u/s.143(3)/254 for the Assessment Year 2005-06. In the ground of appeal, the assessee has mainly challenged the treatment of Long-Term Capital Gain on account of shares as Short-Term Capital Gain by the authorities below.
2. The main issue relates to purchase of 14,000 shares of Sangotri Construction Ltd. (SCL), which has been stated by the assessee to have been purchased on 11.06.2003 through the broker ‘Bubna Stock Broking Ltd.’ and sold on between August, 2004 till January, 2005 for sum of Rs.10,75,280/-. This is the second round of appeal passed in pursuance of the Tribunal order dated 23.10.2009 in wherein the order of the ld. CIT(A) has been set aside and matter was restored back to the file of the Assessing Officer for the purpose of adjudicating, as to whether the assessee had purchased shares on 11.06.2003 or not. The Revenue’s case was that the purchase of the shares should be reckoned from the date when it was transferred to the DEMAT account of the assessee on 28.07.2004 and hence the sale of shares was treated as Short-Term Capital Gain and the exemption claimed by the assessee u/s.54 was denied. The relevant direction of the Tribunal has been incorporated by the Assessing Officer as well as by the ld. CIT(A) in the impugned order. The assessee claimed to have purchased 70,000/- shares of SCL through broker, M/s. Bubna Stock Broking Services Ltd. on 11.06.2003 which got transferred to DEMAT account of the assessee on 28.07.2004. In support of the claim that shares were purchased on 11.06.2003 the assessee had produced; i) contract note issued by the Broker dated 11.06.2003; ii) bill dated 13.06.2003 showing delivery of 14,000 shares of HCL for Rs.17,280/-; iii) ledger account of the assessee in the accounts of the broker for the period 31st March, 2004; iv) ledger account of sale upto 31st March, 2005; and v) the contract issued by Bubna Stock Pvt. Ltd. for sale of shares and other related documents. The Assessing Officer in the first round of proceeding have noted that in the contract note of the broker the trade time for purchase of shares was recorded as 13:19:00 and 13:19:19 dated 11.06.2003. However, as per the inquiry from Calcutta Stock Exchange the last trading of the said shares were 12:33:49. From this information the Assessing Officer has concluded that assessee could not prove the purchases. The ld. CIT(A) in the first round has accepted the assessee’s contention that the purchases were made on 11.06.2003. However, the Tribunal has remanded the issue back to the file of the Assessing Officer stating that the very transaction of purchase of share on 11.06.2003 has been disputed by the Assessing Officer and held that clinching evidences establishing the purchase of shares on 11.06.2007 is not on record and AO was directed to decide afresh. Again, in the set aside proceedings, the assessee filed the same set of documents for proving the purchases and Assessing Officer has referred to the various inquiries made during the course of original proceedings, however did not carry out any fresh enquiry. The relevant observation of the Assessing Officer reads as under: “There cannot be any dispute with regard to this fact, but the question to be examined in this case is as to whether or not the broker himself had those shares with him on the date when contract note was issued. Various enquiries were made during the course of original proceedings, and it was conceded by Calcutta Stock Exchange that there was absolutely no purchase of share in the account of M/s. Bubna Stock Exchange Broking Services ltd. before 22/10/2003, it was also confirmed that on 11.06.2003 the alleged date of purchase of shares of M/s. SCL there was no such deal carried out at the Calcutta Stock Exchange through M/s.
Bubna Stock Broking Services Ltd. Basing my order on the reasons given in the original order, I hereby hold that shares were actually purchased only when these were transferred to the DEMATs a/c. i.e. on 28.07.2004 and hence Short Term Capital Gain arose to the assessee and not Long Term Capital Gain. The exemption claimed by the assessee u/s.54F is also hereby denied.”
Ld. CIT(A) too has confirmed the action of the Assessing Officer holding that there is a difference in the timing of the trade for purchase of shares on 11th June, 2003 which was evident from the information received from Calcutta Stock Exchange which showed that the time of final transaction was 12:33:49 and all the transaction took place between the time 12:08:56 to 12:33:49. Thus, when the last transaction had taken place at 12:33:49, then trade timing noted in the brokers note at 13:19 does not indicate that assessee had actually purchased any shares by the broker on that date and no explanation has been filed by the assessee in this regard.
Before us, ld. counsel for the assessee, Mr. Rajiv Saxena has given following chronology of events of entire evidences and inquiry conducted in the case of the assessee: - 11-06-2003 Contract note issued by Bubna Stock Broking Services Ltd. for purchase of shares of Sangotri company. 13-06-2003 Bill showing delivery of 14,000 shares of Sangotri construction for Rs 70,280/- Ledger account of the assessee in the accounts of Bubna Stock Broking Services for the period 20 March 2003 to 31 march 2004 showing purchase of shares for Rs 70,280/- Ledger account for the subsequent period upto 31st march 2005 showing sale of shares in Bubna Stock Broking Services Ltd.
23-08-2004 Contract Notes issued by Bubna Stock Services Ltd. for 30-11-2004 sale of shares on various dates. 31-01-2005 24-09-2007 Letter from Shivmangal Securities Pvt. Ltd. Dp of Bubna Stock Broking Services Ltd. to ACIT Kolkata in response to notice u/s 131 27-09-2007 Letter from Bubna to ACIT Kolkata submitting ledger account, Demat statement of shares transactions done with the assessee confirming sale and purchase. 30-11-2007 Another letter from Bubna to ACIT Kolkata confirming sale and purchase by submitting ledger copies. 07-02-2006 Letter from Asst. Roc West Bengal to ITO Ward 31(3) New Delhi u/s 133(6) in the case of assessee. 03-04-2007 Letter from Sam Global Securities Ltd. to ITO Ward 31(3) New Delhi u/s 133(6) in the case of assessee. 09-11-2010 Submissions before AO submitting contract note, Bill, statement of account and 2 letters from Bubna Stock Broking Services Ltd. in connection with confirmation of purchase and sale of shares through them and seeking opportunity to cross examining the witnesses. -11-2010 Another submissions to Assessing Officer 09-04 2014 Submissions before CIT(A) 25-04-2014 Letter to Bubna Stock Broking Services Ltd. from the AR of the assessee. 03-06-2014 Another submissions before AO requesting to summon broker who has already confirmed again and again. 13-04-2007 Letter from Maheswari Data matics Pvt. Ltd. to Assessing Officer. 19-12-2207 Letter from Calcutta Stock Exchange Association Ltd. to Assessing Officer.
From the perusal of the entire evidences, Ld. Counsel submitted that, it can be seen that assessee has given all the relevant documents in support of purchases that it was made on 11.06.2003 which is evidenced by the bills, broker’s note, copy of ledger account, etc. The letter from Stock Exchange does not goes to conclusively prove that the broker had not purchased the stock on 11.03.2006 from Stock Exchange. Thus, treating the date of purchase from the date it was transferred to the DEMAT account so as to deny the Long- Term Capital Gain is not correct.
On the other hand, learned DR has strongly relied upon the order of the ld. CIT(A) and submitted that, once the assessee has not been able to prove by way of any evidence and there is a discrepancy in the timing of the trade as noted in the broker’s note and the information received from Calcutta Stock Exchange, then it can be safely presumed that no such transaction has been taken place on 11.06.2003. Thus, order of the Assessing Officer and ld. CIT(A) needs to be confirmed.
We have heard the rival submissions and also perused the relevant facts and material on record. Here, the only issue is, whether the purchases and sale of shares of Sangotri Construction Ltd. is to be treated as Short Term Capital Gain or Long-Term Capital Gain. The assessee’s claim is that it was purchased on 11.06.2003, whereas the Revenue’s case is that the date of purchase should be reckoned from the date when the shares were transferred to DEMAT account. From the perusal of the contract note issued by the broker, it is seen that assessee had purchased 14,000 shares in two lot (10,000 + 4,000) for sum of Rs.70,280/-. The settlement ending date has been given on 11.06.2003 and trade time for purchase has been shown at 13:19:08 or at 13:19:19. Further, in his bill dated 13.06.2003 the said shares have been delivered to the assessee, the copy of which is appearing at page 2 of the paper book. From the copy of the ledger account of the assessee in the broker’s book, it is seen that the shares have been delivered on 13.06.2003 and amount has been received by him on various dates starting from 24.06.2003 to 31.03.2004. Thereafter, the assessee had sold the shares from 23.08.2004 to 31.01.2005 for a sum of Rs. 10,75,280/-, which transaction is not disputed. From the records, it is seen that Assessing Officer had written a letter to Calcutta Stock Exchange, wherein they have given the trade details of shares of Sangotri Construction Ltd. carried out on 11.06.2003, which showed that the trade timing started from 12:08:56 to 12:33:49. Based on this information, it has been concluded by the Assessing Officer and by the Ld. CIT(A) that the broker of the assessee had not purchased the shares on 11.06.2003. After considering all the material facts discussed in the impugned order, we find that sole reliance placed by the Assessing Officer and ld. CIT(A) to draw adverse inference is with regard to the trade date and time of purchase of shares Sangotri Construction Ltd. from the Kolkata Stock Exchange. The broker has shown the trade timing at 13:19 hours. Simply based on this information of Kolkata Stock Exchange, it cannot be held that; firstly, the broker of the assessee had not trade in the purchase of shares or the shares were not available with the broker, when on the other hand, the broker has adduced ample evidence directly before the Department to prove not only the purchase but also the delivery of the shares to the assessee; secondly, the broker ‘Bubna Stock Broking Ltd.’ was neither examined or inquired by the Department despite matter was restored back to the file of the AO, especially when, in response to one letter written by ACIT, Kolkata, the broker has furnished the copy of ledger account, DEMAT statement and also confirmation regarding purchases and sale. This information received by the Department from the said broker have neither been rebutted nor any cross- examining has been done from the broker to ascertain the fact about the correct timing of trade, because it is the broker alone who could have explained these facts. After a lapse of substantial time, in the year 2014, assessee had written a letter to the broker to clarify this point but no reply had been received. If the broker had claimed that he has made the purchases of the SCL shares on 11.06.2003 and had also issued contract note and bill and when AO had sought all the information from him, then the time of purchase also should have been sought who alone could verified this fact. In so far as assessee is concerned, he has duly adduced all the evidences which was available from the broker to prove the purchases. Now to cast the onus upon the assessee to prove the timing of purchase under these facts and circumstances may not be appropriate when assessee has otherwise proved the purchase and delivery of shares on 11.06.2003 and 13.06.2003 respectively. Simply because, there is a difference in trade time, therefore, the entire purchases is to disbelieved to have been made on 11.06.2003 would not be appropriate and at the same time to reckon the purchase date only from the date of transfer of shares to DEMAT account so as to deny the claim of Long-Term Capital Gain may not be correct. In our opinion, when the matter was remanded to the AO to verify this fact then AO should have enquired from the broker and simply because there was a discrepancy in the trade timing as noted by the broker and as informed by the Stock Exchange about the purchase transaction, adverse inference cannot be drawn upon the assessee, when there is no other material or information that either limb of the transaction, that is, purchase or sale are not genuine or is a sham transaction. Here it is not a case of claim of bogus Long-term Capital gain through some accommodation entry, albeit issue is, whether the transaction of shares has resulted into a short-term gain or long-term capital gain. Even if one goes by theory of ‘preponderance of probability’ on the basis of material on record then the probable factors in favour of the assessee are: - i) Broker’s contract note confirming the purchase of the shares on 11.06.2003. ii) Bill for purchase of shares for the same date given by the Broker. iii) Copy of ledger account of the assessee in the books of the broker iv) Confirmation by the company M/s. Sangotri Construction Ltd. that shares were transferred in the names of the assessee.
v) The broker might have purchased the shares from the Stock Exchange and the information given by the Kolkata Stock Exchange may not be complete or share must have been procured by the broker from the other buyers.
To controvert these factors and material on record AO has not made any specific enquiry from the broker to ascertain the correct time and date of purchase after the information from the stock exchange even after second round of proceedings. The assessee can prove from the documents which are made available from the broker and if there is any discrepancy at the end of the broker regarding timing of purchase then broker alone could have clarified. Thus, in view of material on record, we hold that the purchases made by the assessee on 11.06.2003 cannot be disbelieved and accordingly the transaction of share is treated as Long Term Capital Gain.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 29th October, 2018.