SHIVKRIPA DEVCON P LTD,INDORE vs. ITO 5(1), INDORE

Feeling aggrieved by appeal-order dated 29.11.2021 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”], which in turn arise out of assessment-order dated 06.12.2019 passed by learned ITO-5(1), Indore [“AO”] u/s 147 read with section 143(3) of Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2012-13, the assessee has filed this appeal.

Heard the learned Representatives of both sides at length and case records perused.

The facts leading to this appeal are such that the AO received an information from DDIT(Inv.)-Unit 8(2), Mumbai which showed that the Shivkrips Devcon Pvt.Limited,Indore vs. ITO Wd.5(1), Indore. A. Y. : 2012-13 assessee had done transactions in the shares of M/s Banas Finance Ltd. [“Banas”]. The AO further observed from report that the shares of ‘Banas’ had been used to facilitate arrangement of bogus capital gain or loss to beneficiaries. Based thereon, the AO made up his mind that the assessee has also taken advantage resulting into escapement of income from assessment. Accordingly, the AO issued notice u/s 148 on 29.03.2019 for proceeding u/s 147. In response, the assessee filed return of income declaring a total income of Rs. 38,630/-. Then, the AO issued statutory notices u/s 143(2)/142(1). Finally, the AO made an addition of Rs. 3,28,153/- treating the loss declared by assessee from shares of ‘Banas’ as bogus and thereby assessed total income at Rs. 3,66,783/-. Aggrieved by action of AO, the assessee carried matter in first-appeal but could not succeed. Now, the assessee has come in next appeal before us.

With this background, Ld. AR firstly carried us to a very recent decision of Hon’ble Mumbai High Court in the case of PCIT, Mumbai Vs. Indravandan Jain HUF, Income-tax Appeal No. 454 of 2018, order dated 12.07.2023, copy of the order is filed before us. Ld. AR read over Para No. 3 to 5 of the order line by line in the open court. These paras are re-produced below for an immediate reference:

The A.O. did not accept respondent’s claim of long term capital gain and added the same in respondent’s income under Section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under Section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it Page 3 of 6 Shivkrips Devcon Pvt.Limited,Indore vs. ITO Wd.5(1), Indore. A. Y. : 2012-13 was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent’s bank account has been debited. The shares were also transferred into respondent’s Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent’s bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under Section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.”

Ld. AR submitted that the present case of assessee is fully covered by this decision on facts and in law. To demonstrate this, Ld. AR pointed out following facts relating to the case of assessee from the documents placed in the Paper-Book filed by assessee:

Ld. AR submitted that the documents clearly establish that the shares were purchased on the floor of stock-exchange (not from broker); the contract note of purchase was issued; shares were sold on the floor of stock exchange; contract note of sale was issued; the deliveries were taken into and given from De-mat A/c within normal time; the payment and receipt of considerations were made through bank a/c (not in cash). Therefore, the transactions are well-explained with the support of all documentary evidences and there is no infirmity or fallacy at any stage of transactions. Ld. AR submitted that these facts and features of transactions are very much identical to the case before Hon’ble High Court of Mumbai in Indravandan Jain HUF (supra). Therefore, the said decision is squarely applicable and must be applied.

Ld. DR for the revenue supported the orders of lower-authorities.

We have considered rival contentions of both sides and perused the documents filed in the paper-book, the orders of lower-authorities and the decision of Indravandan Jain HUF cited above. After a careful consideration, we find that the facts of present case before us are fully covered by the decision and we do not find any deviation in facts. Ld. DR for the revenue though dutifully supported the orders of lower-authorities but could not spell out any reason for non-applicability of the said decision. Therefore, following Page 5 of 6 Shivkrips Devcon Pvt.Limited,Indore vs. ITO Wd.5(1), Indore. A. Y. : 2012-13 the said decision, we hold that the AO is not justified to disallow the short- term loss declared by assessee. Consequently, the addition made by AO is deleted. The assessee succeeds in this appeal.

Before parting we make it clear that this appeal is decided on the basis of particular set of facts surrounding the issue before us. No binding proposition has been laid down. Therefore, this decision should not be treated as a binding precedence for cases of bogus capital gain/loss without going into facts of those cases.

Resultantly, this appeal of assessee is allowed.