MRS. REKHA JAIN,DELHI vs. ITO, NEW DELHI

The ld AR submitted that the order u/s 143(3) was passed by the Assessing Officer disregarding the direction ITAT and treated short term capital gain as income from other sources. He further submitted that a set of losses of Rs. 29710/- was also not allowed. He further submitted that when copy of the bill of the sale broker is provided wherein, the SEBI registration code and Delhi Stock Exchange Code are provided the same cannot be charged to tax under the income from other sources. He further submitted that script- wise detail was also provided. Therefore these transactions are on account of shares. He further stated that merely the summons issued to the share broker returned back unserved it does not show that the transactions are bogus.

Against this the ld DR relied on the order lower authorities and submitted that the assessee has failed to prove that in fact she has entered into any share transactions and therefore the income is rightly held as income from other sources.

We have carefully considered the rival contentions. The assessee has produced the bills of the broker which shows that such broker is registered under Delhi Stock Exchange and also registered with SEBI. According to those bills assessee has purchased and sold certain shares and has earned profit to the tune of Rs. 121650/-. On enquiry the Delhi Stock Exchange has stated that no such transactions have been entered into on those days and in those scripts. However, it is apparent that the broker is registered with Delhi Stock Exchange and also is registered member of SEBI. This fact has neither been denied by the stock exchange nor any adverse material was found by the Assessing Officer. Regarding examination of the broker it is not clear whether summons were issued to the broker u/s 131 or enquiry letter was sent u/s 133(6) of the Act. This contradiction is apparent on reading para No. 4 of the assessment order and para 4.7 of the ld CIT(A)’s order. The transaction were entered into by the assessee in April 2003 whereas the set aside assessment proceedings were carried on in 2013, therefore it may be possible that over a period of 10 years have elapsed between the date of transaction and the date of enquiry. In such a long Page 3 of 4 period it may happed that such broker might have transferred his addresses, however, the assessee has submitted the SEBI registration certificate, certificate of incorporation and certificate of commencement of business as well as the copy of permanent A/c No. of the broker. Further the return of income of the broker for AY 2002-03 was also furnished. In view of this it is apparent that such broker does exist on the record of the revenue. It is also apparent that vide letter dated 14.12.2009 the broker has responded to the letter of Assessing Officer. Further, the observation of the ld CIT(A) that assessee has not been able to prove with material evidence that the broker does not exist is devoid of any merit in view of the such overwhelming evidence submitted about the identity of the broker. However, on perusal of the bills submitted by the assessee before us it is apparent that those bills are not time and date stamp but merely that fact cannot lead to a conclusion that assessee has not purchases and sold those shares. It can also be an off market value though may not be permitted as per SEBI Act but certainly is a transaction in share. The ld Assessing Officer has failed to make any enquiry with the SEBI of the broker that whether transactions are permitted as per Securities Contract Regulation Act or not. The bills produced by the assessee cannot be discarded. In view of the fact that the enquiry made by the Assessing Officer is half hearted even after the setting aside the issue twice to the file of the Assessing Officer. The treatment of short-term capital gain on sale of shares cannot be treated as income from other sources. Further, the similar additions were made in the hands of the relative of the assessee were also not brought on record. The requisite direction issued by the ITAT vide order dated 14.10.2011 was also not complied fully. Furthermore, in the hands of the mother-in-law of the assessee coordinate bench in and 2752/Del/2008 dated 12.06.2009 has already declined to decide the issue as it will not have any tax impact. In view of this we agree with the view of the coordinate bench if the income is either assessed under income from other sources or as short term capital gain will not have any tax impact. In view of this we allow the appeal of the assessee holding that the sum of Rs. 121650/- is chargeable to tax as short term capital gain and not as income from other sources. Consequently, the assessee is also entitled to loss under the head short term capital gain of Rs. 29710/-.