DEEPALI BHALLA NAYAR,MUMBAI vs. ACIT 29(1) (ERSTWHILE ITO 20(2)(1), MUMBAI

O R D E R

PER MAHAVIR SINGH, JM:

12500 nos. of shares in the share holding of the assessee. But, consequently the same was entered in the share holding of the assessee’s capital account as gifted from her husband. The balance 15000 nos. of shares were purchased on 11-04-2003 for a total consideration of Rs.20,147/- from Goldstar Finvest Pvt. Ltd. Thereby, the assessee has purchased total 27,500 nos. of shares for a sum of Rs.65,251/- in April and May, 2003. The 12,500 nos. of shares purchased of Mahasagar Securities Pvt. Ltd. were held by the assessee in physical form which were sold by the assessee through Mahasagar Securities Pvt. Ltd. and payment was received by cheque reflected in assessee’s HDFC Bank Account No.05431000011113, Andheri (East) Branch, Mumbai. The details are as under: Date Cheque No. Amount (Rs.) 01/12/2004 0323674 2,50,000/- 02/12/2004 0104578 7,00,000/- 07/12/2004 0957843 1,84,399/- Total 11,34,399/- Similarly, the assessee also sold 15000 shares through Mahasagar Securities Pvt. Ltd. in two lots of 7000 and 800 shares vide contract note dated 27-05-2004 and 18-06-2004. The sale proceeds were also deposited by the assessee on the same HDFC Bank Account and the details are as under:- Date Cheque No. Amount (Rs.) 01/06/2004 0179697 5,04,187/- 24/06/2004 0179820 5,70,214/- Total 10,74,402/- 4. During the course of assessment proceedings the assessee filed complete details in respect of long term capital gain i.e. brokers notes for sales and purchases, statement of capital gain, details of Demat account and parties’ accounts. The AO issued notice u/s 133(6) of the Act to Golstar Finvest Pvt. Ltd. and Bombay Stock Exchange to find out the genuineness of purchases and sales of shares of Talent Infoways Pvt. Ltd. during the financial year 2004-05 relevant to assessment year 2005-06. Mahasagar Securities Pvt.

Ltd. vide letter dated 19-10-2011 informed the AO that the books of accounts for the relevant period was impounded by the Department during the search and the same are lying with DDIT, Unit 4, Mumbai. Bombay Stock Exchange informed vide letter dated 28-10-2011 that Goldstar Finvest Pvt. Ltd. is neither registered as Stock Broker nor as Sub-broker and nor the shares of Talent Infoways Pvt. Ltd. were listed on the stock exchange. The assessee replied to the AO that the broker, Mahasagar Securities Pvt. Ltd. issued contract notes and is a registered broker of the Stock Exchange and the transactions were made by account payee cheques and the assessee sold the shares and earned long term capital of Rs.21,43,551/-. According to the assessee, all the details were reflected in the accounts and the details like contract notes, Demat account and the parties’ accounts were filed during assessment proceedings. The AO was not convinced with the reply of the assessee for the reason that the Bombay Stock Exchange denied Goldstar Finvest Pvt. Ltd. having registered as broker or sub-broker and that the books of accounts were not produced by Mahasagar Securities Pvt. Ltd. Accordingly, the AO treated the sale proceeds as unexplained cash credit u/s 68 of the Act. Aggrieved, the assessee preferred appeal before the CIT (A). The CIT (A) also confirmed the action of the AO on the same reasoning. The CIT (A) also enhanced the addition by the amount of Rs.65,251/- being purchase price of shares, which falls in financial year 2003-04 relevant to assessment year 2004-05 i.e. immediately previous year. The CIT (A) also disallowed the commission payment of Rs.3,250/- incurred in relation to purchase of the shares. Aggrieved against the action of the CIT (A), the assessee filed second appeal before the Tribunal.

husband and due to this the accountant missed to incorporate these shares in the share holding of the assessee. Subsequently, the accountant on realizing this fact, he entered the shareholding in the name of the assessee as gift from her husband. The assessee held 12,500 nos. of share in physical form and sold the same vide contract note dated 29-11- 2004 of Mahasagar Securities Pvt. Ltd. for a consideration of Rs.11,35,370/- which is placed at pages 5 to 8 of the assessee’s paper book. The sale consideration of these shares also reflected in the assessee’s HDFC Account No.05431000011113 with Andheri (East) Branch. Copy of the assessee’s bank statement is also placed on pages 11 to 12 of the assessee’s paper book. Further, I find that the assessee purchased 15,000 nos. of shares on 11-04-2003 at a total consideration of Rs.20,147/- from Goldstar Finvest Pvt. Ltd. the these were de-mated with the assessee’s bank account with HDFC Bank. Out of these de-mated shares, the assessee vide contract notes dated 27-05-2004 and 18-06-2004 sold 7000 shares and 8000 shares at Rs.5,04,350/- and Rs.5,04,350/- respectively. The receipt of the sale consideration is also reflected in assessee’s above HDFC Bank Account. From this, it reveals that the assessee submitted all the relevant details regarding the above transactions before the AO which has also been admitted by him in Para 6 page 3 of the assessment order. Further, in Para 7 of the assessment order the AO has admittedly stated that the assessee earned long term capital. In view of the above fact that the assessee has produced complete details during the assessment proceedings and even before the CIT (A) i.e. the transactions of sale and purchase of shares, address of the brokers, contract notes in concerned form with brokers, copy of demat account and the AO has not examined the payment details in respect to sale of shares which were through bank accounts, in such circumstances, the long term capital gain declared by the assessee cannot be treated as income from other sources or cash credit being profit arising out of sale of shares. The details produced by the assessee before the lower authority clearly shows that the assessee has clearly discharged its basic Revenue to clearly establish the transactions as bogus. Accordingly, we are of the view that the Revenue has erred in treating the sale transaction of shares as bogus relying on non- verification of books of accounts of the broker, which were seized by the Department itself during search. In view of these facts, I am of the view that once the assessee has discharged its onus and Revenue failing in its duty to proceed further, the transactions of sale of shares cannot be held as bogus. I direct the AO to treat the profit arising out of sale of shares as long term capital gain as declared by the assessee.