M/S FULLFORD VINIMAY (P) LTD(PRESENT;LY M/S ADVENTZ SECURITIES TRADING PVT LTD),KOLKATA vs. I.T.O WD - 7(4),KOLKATA, KOLKATA

Copy of the contract notes issued by Pradeep Kumar Daga for sale of shares of Kwality Builders & Developers Ltd. enclosed at Page 2-3 of the Paper Book.

Copy of the Demat account held by the appellant with Zuari Investments Ltd. enclosed at Page 4-5 of the Paper Book.

Copy of the stock market quotations for the date of purchase and sale of shares enclosed at Page 6-24 of the Paper Book.” The assessee claimed that it has purchased the shares through off market transaction and sold them on the floor of the CSE and against this, the AO sought information relating to, both, the purchase and sale of shares from CSE u/s. 133(6) of the Act and CSE in conformity with the assessee’s contention informed that the purchase transactions were not carried out on the floor of the Exchange but sale transactions were executed on the CSE floor. In this regard it was explained that vide letter dated 10.12.2007 submitted to the AO that the purchases through the broker N.M. Lohia & Co. and not through CSE and confirmation of the broker was placed on record. The broker N. M. Lohia & Co. confirmed the off market purchase transaction as claimed by the assessee. The broker also submitted that purchase on 24.09.2004 of Kwality Builder & Developers Ltd.’s share were from Shri S. K. Tibrewal and sold to the assessee on the same date. It was explained that the payment of the said shares was received from the assessee on 21.03.2005 and in turn transferred the money to Shri S. K. Tibrewal on 23.03.2005. The main contention of the assessee was that the payment was made after six months from the date of purchase but before the end of the financial year. He explained that this was treated as outstanding for the six months from the payment is made. The assessee explained the delivery of shares through Demat account to the assessee that has taken place on 22.03.2005 of 14700 shares, on 24.03.2005 of 600 shares and on 30.03.2005 of 400 shares just before the date of sale. Ld. Counsel for the assessee explained that the entire premise of the AO for disallowance was that the CSE did not confirm the purchase transaction, the stock broker through whom the assessee has purchased did not appear, the payment was made after six months and delivery of shares to the demat account of the assessee just before the date of sale and also purchase of shares at the rate representing PE ratio of 154 times. But he explained that the AO did not point out any deficiency in the sale transactions. He explained that the AO ignored all the evidence of Fullford Vinimay (P) Ltd., AY 2005-06 purchase of shares produced by the assessee and doubted the purchase transaction. The sale transaction was not doubted. He explained that the purchase transactions were off market transactions and obviously there can be no record regarding these transactions with the Stock Exchange. The broker has filed written explanation before the AO admitting and confirming the purchase made by assessee of these shares.

We have gone through the details in entirety and found that the AO’s entire premise for treating the short term capital gain as bogus that the purchase is not genuine. The assessee has produced copy of contract note issued by N.M. Lohia & Co. for purchase of shares of Kwality Builders & Developers Ltd. by the assessee. The assessee also produced copy of demat account wherein shares were held and quotation of stock market for the date of purchase and date of sale of shares, which correlated with the purchase price and sale price of the assessee even though the purchase is through off market transaction. In such facts, Hon’ble Calcutta High Court in the case of CIT Vs. Carbo Industrial Holding Ltd. (2000) 244 ITR 422 (Cal) held as under: “The perusal of the details regarding the transaction of various shares reveals that the sale and purchase in fact was not on the same date, though on the date when the shares are received by the assessee. There are in fact four relevant dates-the date of contract, the date of receipt of the shares and payment, then a date of sale contract of those shares by the assessee and the payment received thereafter. These four stages are on different dates and not on the same date. Therefore, it cannot be accepted that the purchase and sale of the shares are on the same date. It is true that the transactions are with some brokers, but in share transactions, the purchase and sale are normally through some broker. Payment by the account payee cheque has not been disputed. Payment on purchase and sale and payment received by account payee cheque was on two different dates. If the share broker, even after issue of summons does not appear, for that reason, the claim of the assessee should not be denied, specially in the cases when the existence of broker is not in dispute, nor the payment is in dispute. Merely because some broker failed to appear, assessee should not be punished for the default of a broker and on mere suspicion the claim of assessee should not be denied. " Similarly, the coordinate Bench of this Tribunal in the case of DCIT Vs. Sunita Khemka, to 718/Kol/2011 dated 28.10.2015 exactly on identical facts has held as under: “6.2 The appellant has submitted all the original contract notes of sale and purchase, copies of the bills, bank statements in respect of the purchase and sale of shares. All payments were made and received through account payee cheques drawn by the concerned Stock Brokers of Calcutta Stock Exchange and duly recorded in the bank accounts and regular Books-of-A/cs. All the shares sold were transferred through Demat Account or handed over physically to concerned brokers. The price at which the shares have been sold is also published in the daily Quotation issued by the Calcutta Stock Exchange. The shares sold after 1st October’04 pertains to the assessment year 2005-06. Security Transaction tax has been deducted from the sale proceeds.

In the result, the appeal of assessee is allowed.