VISHWAS MARKETING SERVICES PVT. LTD.,NEW DELHI vs. ITO WARD 26(4), NEW DELHI

The assessee company The assessee company is engaged in the business as buyer, sellers, as buyer, sellers, importers, exports marketi importers, exports marketing, stockists dealers, distributors agents, brokers, ng, stockists dealers, distributors agents, brokers, commission agents, forwarding and clearing agents. During the assessment commission agents, forwarding and clearing agents. During the assessment commission agents, forwarding and clearing agents. During the assessment proceedings, the Assessing Officer (“AO”) observed that the assessee has the Assessing Officer (“AO”) observed that the assessee has the Assessing Officer (“AO”) observed that the assessee has declared dividend income during the year and accordi declared dividend income during the year and accordingly, the assessee was ngly, the assessee was asked to file scrip-wise details and transactions of shares alo wise details and transactions of shares along gwith primary documents of purchase and sales. In response thereto, the assessee has documents of purchase and sales. In response thereto, the assessee has documents of purchase and sales. In response thereto, the assessee has submitted the details of transaction submitted the details of transactions of purchases and sales of of purchases and sales of scrips. The AO noticed that the assessee has purchased shares of SRK Industries Ltd. AO noticed that the assessee has purchased shares of SRK Industries Ltd. AO noticed that the assessee has purchased shares of SRK Industries Ltd. (“SRK”) in the month of December, 2013 and sold the same in the month of (“SRK”) in the month of December, 2013 and sold the same in the month of (“SRK”) in the month of December, 2013 and sold the same in the month of March, 2014 which resulted March, 2014 which resulted in a loss of INR 1,71,72,155/-. In order to verify . In order to verify the above said transactions, the AO issued notice u/s 133(6) of the Act to SRK tions, the AO issued notice u/s 133(6) of the Act to SRK tions, the AO issued notice u/s 133(6) of the Act to SRK and asked to file the various information mentioned in the above notice file the various information mentioned in the above notice. The file the various information mentioned in the above notice notice issued by the AO is reproduced at page 4 of the assessme notice issued by the AO is reproduced at page 4 of the assessment order. In notice issued by the AO is reproduced at page 4 of the assessme response thereto, SRK has submitted th response thereto, SRK has submitted the details vide letter dated 05.12.2016 ails vide letter dated 05.12.2016. After considering the above details, the AO observed that the details submitted After considering the above details, the AO observed that the details submitted After considering the above details, the AO observed that the details submitted Page | 2 by SRK are incomplete and this by SRK are incomplete and this scrip was used to get bogus exemption u/s exemption u/s 10(38) of the Act by various operators and 10(38) of the Act by various operators and according to AO, this tr this transaction itself falls under accommodation entry under accommodation entry in providing bogus Long Term Capital bogus Long Term Capital Gain (“LTCG”). The AO Gain (“LTCG”). The AO analyzed the scrips and modus operandi modus operandi used to provide bogus LTCG by various various operators and he analyzed the method of price and he analyzed the method of price rigging, further relied on the detailed investigation carried out by the Kolkata d on the detailed investigation carried out by the Kolkata d on the detailed investigation carried out by the Kolkata Investigation Wing, considering considering the unusual loss claimed by the assessee by the assessee. He made the detailed analysis of SRK scrips and relied on the various made the detailed analysis of SRK scrips and relied on the various statement made the detailed analysis of SRK scrips and relied on the various recorded by Kolkata Investigation Investigation Wing from Shri Bidyoot Sarkar, Shri Sanjay m Shri Bidyoot Sarkar, Shri Sanjay Vora, Shri Jai Kishan and Shri Anil Kedia. He came to the conclusion Jai Kishan and Shri Anil Kedia. He came to the conclusion fully Jai Kishan and Shri Anil Kedia. He came to the conclusion relying in the investigation carried on by the Investigation Wing, Kolkata relying in the investigation carried on by the Investigation Wing, Kolkata that relying in the investigation carried on by the Investigation Wing, Kolkata scrip is a penny stock and accordingly, the assessee was asked to is a penny stock and accordingly, the assessee was asked to submit the is a penny stock and accordingly, the assessee was asked to details of the transaction. In response thereto, the assessee has submitted details of the transaction. In response thereto, the assessee has submitted details of the transaction. In response thereto, the assessee has submitted reply dated 26.12.2016, same is reproduced by the A reply dated 26.12.2016, same is reproduced by the AO at pages 22 at pages 22-23 of the assessment order. In In the reply submitted by the assessee the reply submitted by the assessee, that the transactions carried on by the assessee are genuine and these transactions by the assessee are genuine and these transactions by the assessee are genuine and these transactions have been routed through through banking channels. By rejecting the submissions of By rejecting the submissions of the assessee, the AO relied upon the decision of Hon’ble Supreme the assessee, the AO relied upon the decision of Hon’ble Supreme Court in the the assessee, the AO relied upon the decision of Hon’ble Supreme case of Mac Dowell & Company & Company and Sumati Dayal. Cases to reject the ases to reject the claim of the assessee that all the m of the assessee that all the transactions are routed through banking routed through banking channels and the transactions are genuine. Ac channels and the transactions are genuine. Accordingly, he applied the cordingly, he applied the Human Probability Test and relied Test and relied on several other decisions to to disallow the losses claim by the assessee. the assessee.

Aggrieved from the above order, the assessee preferred appeal before from the above order, the assessee preferred appeal before from the above order, the assessee preferred appeal before Ld.CIT(A)-24, New Delhi and filed a detailed submissions. After considering the 24, New Delhi and filed a detailed submissions. After considering the 24, New Delhi and filed a detailed submissions. After considering the detailed submissions of the assessee, Ld.CIT(A) dismissed the grounds of submissions of the assessee, Ld.CIT(A) dismissed the grounds of submissions of the assessee, Ld.CIT(A) dismissed the grounds of appeal raised by the assessee. raised by the assessee.

Aggrieved with the above order, the assessee is in appeal before us, with the above order, the assessee is in appeal before us, with the above order, the assessee is in appeal before us, raising following grounds of appeal: raising following grounds of appeal:-

The ld. CIT(A) erred d. CIT(A) erred in upholding the order of the ld. A.O. that short . A.O. that short- term capital loss of Rs. 1,71,72,155/ term capital loss of Rs. 1,71,72,155/- incurred on sale of shares of incurred on sale of shares of SRK Industries Ltd. is not admissible to the appellant in computing SRK Industries Ltd. is not admissible to the appellant in computing SRK Industries Ltd. is not admissible to the appellant in computing its income.

These grounds are These grounds are without prejudice to one another.

On the other hand, Ld.Sr.DR for the Revenue submitted that the the other hand, Ld.Sr.DR for the Revenue submitted that the the other hand, Ld.Sr.DR for the Revenue submitted that the assessee has held the scrip scrip of SRK less than six months and absorbed absorbed huge loss. In this regard, he brought loss. In this regard, he brought to our notice page 16 of the assessment orde o our notice page 16 of the assessment order wherein the statement of wherein the statement of Shri Bidyoot Sarkar was recorded and stated recorded and stated that he involved in various scrips of SRK industries and provide various scrips of SRK industries and provided bogus LTCG to d bogus LTCG to various beneficiaries. He further submitted that Shri Bidyoot Sarkar has e further submitted that Shri Bidyoot Sarkar has e further submitted that Shri Bidyoot Sarkar has specifically mentioned about the pr about the prices of SRK scrips were rigged. He also ces of SRK scrips were rigged. He also brought to our notice page 6 of the assessment order wherein Kokata brought to our notice page 6 of the assessment order wherein Kokata brought to our notice page 6 of the assessment order wherein Kokata Investigation Wing has been carried out detailed investigation of SRK been carried out detailed investigation of SRK Industries and notices u/s 133(6) of the Act, were issued to them and these Industries and notices u/s 133(6) of the Act, were issued to them and these Industries and notices u/s 133(6) of the Act, were issued to them and these notices were returned back unserved with remark notices were returned back unserved with remark “no such company/person “no such company/person exist”. As As As per per per the the the Investigation Investigation Investigation Report, Report, Report, the the the AO AO AO made made made physi physical physi verification/inquiry and no such industries was in existence. verification/inquiry and no such industries was in existence. Further, he verification/inquiry and no such industries was in existence. brought to our notice page 13 of the assessment order wherein summons were brought to our notice page 13 of the assessment order wherein summons were brought to our notice page 13 of the assessment order wherein summons were issued to the Directors of the assessee company u/s 131 of the Act and it was issued to the Directors of the assessee company u/s 131 of the Act and it was issued to the Directors of the assessee company u/s 131 of the Act and it was specifically asked that why why the assessee did not invest in shares of SRK after the assessee did not invest in shares of SRK after Assessment Year 2014-15.

In reply, they submitted that t In reply, they submitted that the main aim of the assessee was he main aim of the assessee was to invest in shares of SRK and the same are grouped under the head in shares of SRK and the same are grouped under the head “investment in its “investment in its balance sheet”. In the statement, it was submitted that the investment was In the statement, it was submitted that the investment was In the statement, it was submitted that the investment was made, based on the past performance sed on the past performances and financials of SRK. However, the and financials of SRK. However, the Director was unable to tell profit/turnover of previous assessment year. Director was unable to tell profit/turnover of previous assessment year. Director was unable to tell profit/turnover of previous assessment year. Further, he submitted that the assessee again , he submitted that the assessee again bought the shares in bought the shares in Assessment Year 2015-16. He submitted that the two statements are 16. He submitted that the two statements are 16. He submitted that the two statements are contradictory and all these losses and all these losses recorded by the assessee are manufactur manufactured losses.

Ld.Sr.DR for the Revenue further submitted that there Ld.Sr.DR for the Revenue further submitted that there are no Ld.Sr.DR for the Revenue further submitted that there fundamentals in SRK shares SRK shares even then the prices has gone up. The assessee . The assessee has sold these shares at loss. Therefore, the transactions are these shares at loss. Therefore, the transactions are itself these shares at loss. Therefore, the transactions are questionable considering the conduct of the assessee. the conduct of the assessee.

In re-joinder, Ld.AR of the assessee objected to the above submissio joinder, Ld.AR of the assessee objected to the above submissions of joinder, Ld.AR of the assessee objected to the above submissio Ld.Sr.DR for the Revenue, , he brought to our notice page 66 of the Paper Book he brought to our notice page 66 of the Paper Book which is letter dated 04.10 letter dated 04.10.2023 and the request was made to the AO for copy 3 and the request was made to the AO for copy of summons and statement recorded u/s 131 of the Act for AY of summons and statement recorded u/s 131 of the Act for AYs 2014-15 & of summons and statement recorded u/s 131 of the Act for AY 2015-16. Further, he bro 16. Further, he brought to our notice at page 67 of the Paper Book ught to our notice at page 67 of the Paper Book where similar reminders were made to the AO where similar reminders were made to the AO however, he submitted that AO however, he submitted that AO has not provided any information . F information . Further, he brought to our notice at page ur notice at page 68 of the Paper Book wherein the assessee has applied t 68 of the Paper Book wherein the assessee has applied through RTI hrough RTI for above information relating to summons issued to Shri Vikram Singh Rawat and summons issued to Shri Vikram Singh Rawat and summons issued to Shri Vikram Singh Rawat and collected relevant summons and summons and statement through Public Relation Officer, statement through Public Relation Officer, Page | 8 Income Tax, New Delhi. F . Further collected details submitted by the SRK details submitted by the SRK Industries dated 05.12.2016, details rel .12.2016, details relating to denial of allotment of shares to allotment of shares to the assessee and Form 20B, certificate of registration, Memorandum of and Form 20B, certificate of registration, Memorandum of and Form 20B, certificate of registration, Memorandum of Association, further details of information received from further details of information received from Share India Securities Share India Securities Limited and the details of share Limited and the details of share investment by the assessee. He submitted that . He submitted that all these information are kept on record from page all these information are kept on record from pages 69 to 125 of the Paper 69 to 125 of the Paper Book.

Ld.AR for the assessee further submitted that all these crucial Ld.AR for the assessee further submitted that all these crucial Ld.AR for the assessee further submitted that all these crucial information are received by the AO information are received by the AO before completion of the assessment order assessment order and kept on record without even discussing about this in the assessment and kept on record without even discussing about this in the assessment and kept on record without even discussing about this in the assessment order. AO merely relied ed upon the Kolkata Investigation Wing and applied Wing and applied Human Probabilities Test and proceeded to disallow Test and proceeded to disallow the claim of the assessee. claim of the assessee. He further brought to our notice at page 24 of the Paper Book wherein contract ght to our notice at page 24 of the Paper Book wherein contract ght to our notice at page 24 of the Paper Book wherein contract note of purchase from Share India Securities Ltd. H Share India Securities Ltd. He submitted that the e submitted that the assessee has purchased shares from share market therefore, the transactions assessee has purchased shares from share market therefore, the transactions assessee has purchased shares from share market therefore, the transactions are genuine and he prayed that this issu are genuine and he prayed that this issue may be remitted back to the file of remitted back to the file of AO in order to appreciate the proper facts on record. to appreciate the proper facts on record.

Considered the rival submissions Considered the rival submissions of both parties and perused the and perused the material available on record material available on record. We observed that in this case, the AO has . We observed that in this case, the AO has observed from the statement of sale/purchases of scrips tatement of sale/purchases of scrips that the assessee has that the assessee has booked loss on sale of SRK scrips and merely relying on the Kolkata booked loss on sale of SRK scrips and merely relying on the Kolkata booked loss on sale of SRK scrips and merely relying on the Kolkata Investigation Wing report and the finances Investigation Wing report and the finances of the SRK, came to the conclusion , came to the conclusion that the assessee has involved in booking bogus l that the assessee has involved in booking bogus loss without properly verifying oss without properly verifying Page | 9 the transactions carried on by the assessee. This is clearly visible from the the transactions carried on by the assessee. This is clearly visible from the the transactions carried on by the assessee. This is clearly visible from the information collected by the assessee through R information collected by the assessee through Right to Information Act (“R ight to Information Act (“RTI”) wherein several important information are collected by him and not important information are collected by him and not carried important information are collected by him and not out proper verification/investigation before rejecting the claim of the assessee. proper verification/investigation before rejecting the claim of the assessee. proper verification/investigation before rejecting the claim of the assessee. As per the assessment record available on record, the AO has completed the As per the assessment record available on record, the AO has completed the As per the assessment record available on record, the AO has completed the assessment hurriedly without properly appreciating the assessment hurriedly without properly appreciating the various information various information collected by him during the assessment proceedings. We observe that the im during the assessment proceedings. We observe that the im during the assessment proceedings. We observe that the information collected by the assessee through “RTI” goes to the root of the information collected by the assessee through “RTI” goes to the root of the information collected by the assessee through “RTI” goes to the root of the investigation and the relevant addition proposed by the AO. investigation and the relevant addition proposed by the AO. Therefore, we deem it fit and proper to remit this issu deem it fit and proper to remit this issue back to the file of AO to redo the e back to the file of AO to redo the assessment denovo after giving proper opportunity of being heard to the after giving proper opportunity of being heard to the after giving proper opportunity of being heard to the assessee and to consider the information available in the assessment records consider the information available in the assessment records consider the information available in the assessment records itself. Grounds raised by the assessee are accordingly, allowed for s by the assessee are accordingly, allowed for statistical by the assessee are accordingly, allowed for s purposes.

In the result, the appeal filed by the assessee is allowed for statistical In the result, the appeal filed by the assessee is allowed for statistical In the result, the appeal filed by the assessee is allowed for statistical purposes.

Now, we take up the appeal of the assessee for the Assessment Year Now, we take up the appeal of the assessee for the Assessment Year Now, we take up the appeal of the assessee for the Assessment Year 2015-16 i.e. ITA.No.3572/Del/2019. 16 i.e. ITA.No.3572/Del/2019.

Facts in this case are also identical and similar as in ITA Facts in this case are also identical and similar as in ITA Facts in this case are also identical and similar as in 2014 No.3827/Del/2019 [AY 2014-15] except figures.

In the result, appeal of the assessee is allowed for statistical purposes. In the result, appeal of the assessee is allowed for statistical purposes. In the result, appeal of the assessee is allowed for statistical purposes.

In the final result, both appeals of the assessee in In the final result, both appeals of the assessee in Nos.3827 & 3572/Del/2019 for the for the Assessment Years 2014-15 & 20 & 2015-16 are allowed for statistical purposes. istical purposes.