SHRI KAMLESH JOSHI,INDORE vs. ITO-5(4), INDORE

Assessment Year: 2014-15 Shri Kamlesh Joshi ITO-5(4) Indore Indore Vs. (Appellant / Assessee) (Respondent/ Revenue) PAN: AEXPJ 9282 L Assessee by Shri Rajesh Mehta & Shri Apurv Mehta, ARs Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 16.09.2022 Date of Pronouncement 23.09.2022 O R D E R Per B.M. Biyani, A.M.:

Feeling aggrieved by appeal-order dated 26.12.2018 passed by Ld. Commissioner of Income-Tax(Appeals)-II, Indore [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 22.12.2016 passed by learned ITO-5(4), Indore [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment Year [“AY”] 2014-15, the assessee has filed this appeal on following grounds:

“1. That the Ld. AO erred in making aggregate addition of Rs.27,89,890/- on account of rejection of LTCG claimed by the appellant on the sale of share and taxing the same as business income of the appellant on the basis of investigation carried out against third parties and reasoning that the alleged share is a penny stock and also CIT(A) erred in confirming the same without looking at the law and facts of the case. Thus, the entire addition needs to be deleted.

2. That the ld. AO has erred in making the addition of Rs. 27,89,890/- and Ld. CIT(A) has erred in confirming the same since the transaction of sales has taken place through banking channel and sold through recognized stock exchange having borne STT. Thus, the transaction entered into by appellant are genuine and hence addition needs to be deleted.

3. The ld. AO has erred in making said addition by treating the said LTCG claimed u/s 10(38) as “Adventure in the nature of trade” and as well as Ld. CIT(A) erred in confirming the same ignoring the fact that an assessee can have two portfolio one as investment and second as stock in trade and in the appellants case the alleged shares were held by appellant as investment. The addition is against the law and facts of the case hence needs to be deleted.

4. That the appellant craves leave to add, amend or withdraw any of the grounds of appeal, either before or during the course of hearing of the appeal.”

2. Briefly stated the facts are such that the assessee-individual filed return of income of the relevant assessment year on 30.07.2014 declaring a total income of Rs. 5,71,230/-. The case was selected under scrutiny and notices u/s 143(2)/142(1) were issued from time to time which were complied with by the assessee. During assessment-proceeding, Ld. AO observed that the assessee has declared to have earned long term capital gain [“LTCG”] of Rs. 27,89,888/- from sale of shares of M/s Turbo Tech Engineering Ltd., claiming the same as exempt u/s 10(38) of the act, resulting in non-payment of tax to department. Ld. AO observed that the scrip of M/s Turbo Tech Engineering Ltd. has been found by department as “Penny Stock”. Ld. AO, accordingly, made enquiries from assessee with respect to the genuineness of LTCG to which the assessee made detailed submissions. However, the Ld. AO was not satisfied with the claim of exemption u/s 10(38) of the act. Ld. AO also found that alternatively the LTCG declared by assessee is an “income from adventure in the nature of trade”. With such findings, Ld. AO made an addition of Rs. 27,89,888/- in the assessment-order. Aggrieved by order of Ld. AO, the assessee filed appeal to Ld. CIT(A) but did not get any relief. Now, the assessee has filed appeal against the order of Ld. CIT(A).

3. At the time of hearing, Ld. AR carried us to the assessment-order and submitted that vide Para No. 9 of the assessment-order, Ld. AO has made addition by denying exemption u/s 10(38) of the Act claimed by assessee. Thereafter vide Para No. 10 of the assessment-order, Ld. AO has made following conclusion:

“10. Alternatively, the LTCG shown at Rs. 27,89,888/- claimed exempted u/s 10(38) of the Act is treated as “Adventure in the nature of trade” as defined in section 2(13) of the IT Act 1961 on the following grounds: a. The assessee purchased share of M/s Turbo Tech Engineering Ltd. on the advice of the person known to him, who advised him that these shares will give a considerable profit during a short span of time. b. The intention of the assessee at the time of purchase of shares was to earn profit as is evident from his reply given to question No.12 of the statement recorded.” Thereafter, the Ld. AO has made final conclusion in Para No. 13 of the assessment-order as under:

“13. Subject to the above detailed discussion of all the facts and circumstances of the case, and after duly considering all the documents and papers available on record, the total income of the assessee is computed as under: Returned Income Rs.5,71,230/- Addition as per Para 09 & 10 above Rs.27,89,888/- Assessed income Rs.33,61,118/- Rounded off Rs.33,61,120/-

[Emphasis supplied by bold letters]

5. We confronted the Ld. DR appearing on behalf of revenue, who did not oppose this plea of assessee.

Order pronounced in open court on 23/09/2022.

Sd/- Sd/- (Madhumita Roy) (B.M. Biyani) Judicial Member Accountant Member Indore Dated : 23.09. 2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order COPY

Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation 19,9,22

4. Date on which the fair order is placed before the Dictating Member for pronouncement

6. Date on which the file goes to the Head Clerk