HARSHIT KISHORE PATEL,MUMBAI vs. ITO WARD 33(1)(5), MUMBAI

The Assessee before the AO by filing letter dated 29.11.2017 claimed that he vide letter dated 21.09.2017 has given complete details along with evidence of purchase and sale of shares such as Dmat statement, broker notes and bank statements etc.. The Assessee further submitted that the payments for purchases and sale were done through cheques and the shares were bought and sold via stock exchange, STT was duly paid at purchase and sale of shares, shares were reflected in Dmat account, broker note reflects entire detail of transactions entered into, time of transaction and STT paid thereon. Therefore the transaction done by the Assessee cannot be treated as bogus/sham transaction and said capital gains cannot be said to be non genuine or bogus.

The Assessee, being aggrieved, challenged the said additions before the Ld. Commissioner, who affirmed the aforesaid additions by holding that the Assessee did not respond to any of the notices and the findings, observations and statements made by the AO in para-no. 6 to 10 of the assessment order are valid, relevant and hence confirmed. The Ld. Commissioner further held that the Assessee’s claim of exemption u/s 10(38) of the Act is rightly rejected and same is added back as unexplained cash credit u/s 68 of the Act.

The Assessee being aggrieved is in appeal before us and at the outset by drawing our attention to page No.58 & 59 of the paper book demonstrated that vide notice dated 26.12.2019 the Assessee was asked to attend the proceeding in person or through his representative on 06.01.2020 at 12:30 P.M.. In response the Assessee vide letter dated 06.01.2020 though had sought for adjournment, however, the Ld. Commissioner without taking into consideration the adjournment sought for by the Assessee, decided the appeal of the Assessee on merits. The Assessee further demonstrated that before the AO it has filed computation of income, balance sheet as on 31.03.2012 and income & expenditure account for the year ended 31.03.2012, capital account for the year ended 31.03.2012, broker’s ledger account, Dmat account, bank statements etc. and purchase bills to demonstrate the genuineness of its claim for purchasing the shares in hand. The Assessee further demonstrated that the purchase and sale transactions have been carried out on recognized stock exchange platform and the amounts have been paid/received through banking channel/cheques and no investigation has ever been carried out against the Assessee and even otherwise no role has been assigned to the Assessee for rigging the share prices and/or any manipulation and/or any irregularities. The AO by simply relying on the investigation wing and the statement of the promoter and exit provider, doubted the transaction carried out by the Assessee and made the additions which are not sustainable in view of the judgment passed in PCIT31, Mumbai vs. Indra Indravadan Jain HUF (ITA No.454 of 2018 decided on 12.07.2023) by the Hon’ble Jurisdictional High Court, which was taken into consideration by the Hon’ble Co-ordinate Bench of the Tribunal in the case of Shri Kishore Hargovind Patel HUF vs. Income Tax Officer, Ward 25(2)(5), decided on 19.08.2024 in deciding the identical additions.

On the contrary the Ld. D.R. refuted the claim of the Assessee and reiterated the orders passed by the authorities below.

We have heard the parties and perused the material available on record and considered the rival contentions of the parties and observe that in the case of Shri Kishore Hargovind Patel HUF (supra), the then Assessee had also purchased the share of Karma Ispat Ltd. which is under consideration before us and the Hon’ble Co-ordinate Bench of the Tribunal while analyzing the peculiar facts and circumstances of the case, as well as the judgment of the Hon’ble Jurisdictional High Court in the case of PCIT Mumbai Vs. Indravadan Jain HUF (supra), ultimately deleted the identical addition made on account of sale of shares of M/s Karma Ispat, by observing as holding as under:

As the Hon’ble Co-ordinate Bench of the Tribunal in the aforesaid case has also dealt with the identical scrip, facts and circumstances and issues as involved in this, hence respectfully following the decision of the Hon’ble Co-ordinate Bench of the Tribunal, we are inclined to delete the addition of Rs.56,61,715/- (sale proceeds on sale of shares) which was made and affirmed as unexplained cash credit u/s 68 of the Act and added to the income of the Assessee. As we have deleted the substantive addition, hence the addition of Rs.1,69,851/- being commission @ 3% of Rs.56,61,715/- (sale price of shares) as made and affirmed u/s 69C of the Act has lost its existence, hence the same is also deleted.