DCIT CEN CIR 22, MUMBAI vs. NEELAM KAINYA, MUMBAI

The revenue in its appeal is aggrieved for deleting addition of Rs.82.97 lakhs u/s.68 of the Act as unexplained cash credit and Rs.4.14 2 & CO No.169/14 lakhs as unaccounted commission expenditure @5% for earning the same.

Rival contentions have been heard and record perused. Facts in brief are that the assessee had claimed long term capital gain of Rs.82,97,657/- which had been claimed as exempt. The AO has held the said gain as unexplained cash credit under s.68 of the Act; also adding back Rs.4,14,893/- considering the same as expenditure towards commission for the said arrangement. There was a claim of purchase of 35,000 shares of G.K. Consultants Ltd. On 11.06.2003 trough the broker Rajendra Prasad Shah for Rs.1,45,450/-. The same were stated to have been sold in May 2005 for Rs.84,43,107/-, thereby earning profit of Rs.82,97,657/-. The said shares were purchased in physical form and sold in Dmat form during the year and through stock exchange and transaction subjected to STT. Considering these facts the AO held that the claim of long term capital gain cannot be held as genuine.

By the impugned order the CIT(A) deleted the addition, however, he has confirmed the reopening after having the following observations :-. “6. I have considered the findings of the A.O and the submissions of the appellant. The A.O. has held that the transaction resulting in Long term capital gain arising from sale of 35,000 shares is not genuine. On the other hand, the appellant has placed on record the following material/ documents to prove the genuineness of the transaction- i) The shares held were disclosed as investment for A.Y. 2004- 05. ii) Such treatment of the said shares as investment was accepted by the A.O. in the A.Y. 2005-06.

3 & CO No.169/14 iii) Copy of contract note issued by Rajendra Prasad dated 04.06.2003, 0-6.06.2003, 10.6.2003 and 11.6.2003 evidences purchase of shares, which has not been rejected or disowned by the A.O. Hence there is documentary evidence available for purchase of shares. iv) Shares were purchased in physical form and credited in demat account and demat statement dated 30.4.2005 was produced wherein shares are reflected. v) Sale was effected on stock exchange platform and payment received through banking channels. vi) Contract notes have been produced evidencing sale through broker and sales reflected in bank statement of appellant. 6.1 From the above it can be observed that requisite material to evidence the transaction was placed on record by the appellant. The said evidence has not been discounted. When appellant has submitted copies of contract note, shown that money has been received in the bank account, from sale of shares, the purchase of which had not been doubted in the earlier year, it is not possible to accept the finding of the A.O. that the income is from undisclosed source. From the records it can be seen that appellant had submitted contract note, sales bill, demat statement and statement of account to substantiate that sales had been effected. Hence I am unable to sustain the findings of the A.O. Since the disallowance of the long term capital gain has not been upheld, the disallowance of 5% commission is deleted. It is held that the addition made under s. 68 is not in order.”

Against the above order of CIT(A), the revenue is in appeal before us and the assessee has filed cross objection alleging CIT(A)’s for confirming the reopening. We have considered rival contentions and found that at para 6 the CIT(A) has given detailed finding with regard to the documentary evidence placed on record to substantiate the claim of actual purchase and sale of shares. The shares were purchased in physical form and credited in the demat account. Subsequently on sale the amount came in the bank account of the assessee. The CIT(A) also observed that purchase of share in previous year as disclosed in the 4 & CO No.169/14 balance sheet was also not doubted by the AO, therefore, it is not possible to accept the finding of AO that income from sale is from undisclosed source. The detailed finding recorded by CIT(A) at para 6 has not been controverted. Accordingly, we do not find any reason to interfere in the findings of the CIT(A).

So far as reopening of assessment is concerned, we found that after completion of assessment u/s.153A r.w.s.143(3), the AO got information that assessee had indulged in purchase and sale of penny stock shares. The broker concerned had also neither any transaction with the assessee and that SEBI has also initiated requisite enquiry against the various brokers involved in the transaction of these shares. Thus, ,the AO was having sufficient material on record to conclude that there is escapement of income so as to warrant reopening of the assessment. Accordingly, we do not find any infirmity in the order of AO for reopening assessment. Accordingly, ground taken by the assessee alleging for the reopening, is dismissed.

In the result, both appeal of the revenue and cross objection of the assessee are dismissed. Order pronounced in the open court on this 09/12/2015. Sd/- Sd/- (SANDEEP GOSAIN) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 09/12/2015 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2.