DIGVIJAY COMMERCE PVT. LTD.,KOLKATA vs. DCIT, CIRCLE - 8, KOLKATA, KOLKATA

This appeal by assessee is arising out of order of CIT(A)-VIII, Kolkata vide Appeal No. 333/CIT(A)-VIII/Kol/08-09 dated 15.09.2011. Assessment was framed by DCIT, Circle-8, Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2006-07 vide his order dated 26.12.2008.

The first issue in this appeal of assessee is against the order of CIT(A) confirming the disallowance made by AO of loss incurred from transactions of shares of Sarang Viniyog Ltd.

Briefly stated facts are that the assessee purchased 17000 shares of Sarang Viniyog Ltd. for a sum of Rs.44,14,426/- on 28.09.2000. These shares were sold by assessee on 17.11.2005 for a sum of Rs.7,96,130/- thereby the assessee claimed short term capital loss of Rs.36,18,313/-. The AO during the course of assessment proceedings required the assessee to explain the loss and also filed contract notes for purchase and sale of shares. The AO after going through the contract notes and other details filed by assessee, made enquiry through Calcutta Stock Exchange and noted that the assessee has made purchases through Subh Stock Broking Pvt. Ltd. and M/s. Deepak Kumar Jhunjhunwala & Co. these shares and the payments are made as under: Date No. of shares Nature of Broker for transaction in col.3 Name of counter party as transaction per CSE 04.07.05 9000 Purchase Subh Stock Broking (P) Ltd. S. Jhunjhunwala & Co. 17.08.05 8000 Purchase -do- -do- 18.11.05 17000 Sale Deepak Jhunjhunwala & co. Ashok Kr. Kalyan According to AO, the Calcutta Stock Exchange reported that Shri S. Jhunjhunwala & Co., a broker was suspended by SEBI for price rigging and price manipulating and also the scrip of Sarang Viniyog Ltd. was suspended for trading by SEBI from 05.12.2005. Accordingly, the AO

We have heard rival submissions and gone through facts and circumstances of the case. We find that the assessee has disclosed profit from the sale of scrip of Sarang Viniyog Ltd. for FY 2005-06 and 2004-05 at Rs.16,630/- and Rs.21,605/- respectively. The assessee produced copies of entire contract notes and also produced bank statements providing complete details of transactions as well as payments. The assessee also filed copies of DEMAT statements and delivery instructions issued by it to the brokers. We find that the AO has not doubted the genuineness of the transaction or payments made but doubted the transaction only on the basis that the broker Shri S. Jhunjhunwala and the scrip of S. Viniyog Ltd. was subject matter of rigging vide letter ref. dated 02.12.2005. We find that the assessee had made purchase vide 04.07.2005 and 17.08.2005 and these were sold on 18.11.2005 before the SEBI’s action. It is also to be noted that a query was raised from the bench to Ld. Sr. DR, whether this particular transaction is under scanner or not. Ld. Sr. DR could not reply and stated that this particular transaction is not subject matter but the company and the broker is suspended from 05.12.2005. We find that these transactions pertained to the earlier period and not this period and moreover, this particular transaction is not under the scanner of SEBI and revenue is failed to bring anything against the assessee, which proves that the transaction is not bogus or manipulated. In such circumstances, we allow the claim of assessee and this issue of assessee’s appeal is allowed.

The next issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO of undisclosed income amounting to Rs.67 lacs being share application money.

At the outset, ld. Counsel for the assessee took us to assessment order para 3.1.1 relevant chart which reads as under: Sl. Name of applicant Amount Date of credit of Bank address of applicant No. (Rs.) cheque in assessee’s bank i) Consolidated Mercantile (P) Ltd. 4,00,000 06.02.2006 Oriental Bank of (account no. 957) Commerce, Strand Road Branch, Kolkata. ii) Rajnath Commercial Pvt. Ltd. 5,00,000 17.03.2005 Oriental Bank of (Account No.27990) Commerce, Strand Road Branch, Kolkata

We have heard rival submissions and gone through the facts and circumstances of the case. We find that in respect to the four entries relating to share application money to the extent of Rs.25 lacs pertained to AY 2005-06 and not to the relevant AY 2006-07 as added by the AO. Accordingly, to the extent of this amount, we delete the addition. In respect to the addition of Rs. 42 lacs share application money as noted in the above chart and going through the paper book, we find that all the details i.e. the identity of the share applicants, the permanent account no. and income tax particulars and bank accounts where transactions entered into by the assessee with share applicants is enclosed but these have not been gone into by the AO or CIT(A). Hence, we remit this issue back to the file of AO for fresh adjudication in terms of the provisions of the Act. Accordingly, this issue of assessee’s appeal is partly allowed for statistical purposes.

In the result, the assessee’s appeal is partly allowed for statistical purposes.