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Income Tax Appellate Tribunal, ‘PANAJI’ BENCH, PANAJI-GOA
Before: SHRI CHANDRA MOHAN GARG & SHRI GIRISH AGRAWAL
IN THE INCOME TAX APPELLATE TRIBUNAL, ‘PANAJI’ BENCH, PANAJI-GOA BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.406/PAN/2018 Assessment Year: 2014-15 Mrs. Priyanka Agarwal ITO, Ward-1(4), Panaji, Goa House No. 28-Y, Machado Residential Cove, Vs. Vainguinim Valley, Donapaula, Goa-403004. PAN: BJKAPS 3952 B (Appellant) (Respondent) Present for: Appellant by : Shri Shrinivas Nayak, CA Respondent by : Shri Mayur Kamble, Sr. DR Date of Hearing : 16.06.2022 Date of Pronouncement : 02.09.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal by the assessee is arising out of the order of Ld. CIT(A)-2, Panaji in ITA No.233/CIT(A)-2/PNJ/2017-18 dated 24.08.2018 against the order passed by ITO, Ward-1(4), Panaji u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 27.12.2016 for A.Y. 2014-15.
The grounds taken by the assessee in the present appeal are reproduced as under:
“i. The order of the ld. CIT(A) is bad in law and is void-ab-initio. ii. The assessment order passed by the ld. AO u/s 143(3) of the Income- tax Act, 1961 and sustained by the ld. CIT(A) is without jurisdiction, misconceived and without following the principles of natural justice. iii. The ld. CIT(A) has erred in dismissing the appeal as not prosecuted by the appellant, without considering the submissions in regard to the similar appeal of the appellant pending before CIT(A) for A.Y. 2013-14.
2 ITA No.406/PAN/2018 Mrs. Priyanka Agarwal A.Y. 2014-15 iv. The ld. CIT(A) has erred in dismissing the appeal without deciding the same on merit of the case. v. The ld. CIT(A) has erred in sustaining the addition of Rs. 43,48,421/- made by the AO. vi. The appellant craves leave to add, amend, alter, delete or withdraw any or all the grounds of appeal.” 3. The only issue involved is this appeal by the assessee before us is in respect of treatment of Long Term Capital Gain earned by the assessee on sale of shares and claimed as exempted u/s 10(38) of the Act as Short Term Capital Gain brought to tax by the ld. AO.
3.1. Ld. CIT(A) has dismissed the appeal of the assessee for non- prosecution.
Before us, ld. Counsel of the assessee, Shri Srinivas Nayak, CA submitted that assessee has earned an income of Rs. 43,48,421/- as profit on sale of shares and claimed it as exempted u/s 10(38) of the Act. Ld. Counsel pointed out that ld. AO has considered the purchase of shares in the current year i.e. A.Y. 2014-15 instead of the financial year 2011-12 when they were actually purchased which is without any basis and thus treated the Long Term Capital Gain as Short Term Capital Gain bringing it to tax under the Act. He also pointed out that all the documentary evidences for purchase and sale of the shares were placed on record before the ld. AO which have been accepted without any doubt or dispute. Ld. Counsel further stated that despite submission of relevant documents relating to the purchase of shares and the necessary relevant details, ld. AO made a factually incorrect observation that no documentary evidences were produced by the assessee in support of her claim that shares were purchased in financial year 2011- 12.
3 ITA No.406/PAN/2018 Mrs. Priyanka Agarwal A.Y. 2014-15 4.1. He pointed out from the order of ld. AO that assessee was asked to furnish the details regarding date and cost of acquisition of the shares purchased and sold for which it was stated that the share transactions were carried out through the broker M/s. Religare Securities Ltd. for which copy of ledger extracts and statement was furnished. Ld. AO noted in this respect that sale of shares of M/s. Turbotech Engineering was made through M/s. Religare Securities Ltd. with Account Code PS9735 for which he called for documentary evidence in support of Securities Transaction Tax (STT) paid by the assessee and also the evidence for purchase of shares. Ld. Counsel submitted that assessee produced the contract note in respect of the sale of shares and share transfer form for purchase of the same along with statement of DMAT account. It was also pointed out that shares were purchased in physical form and after their transfer to DMAT account, they were sold in DMAT form. He stated that share transfer deed, share certificates, debit note, receipt ledger extracts and details of STT paid were all furnished before the ld. AO.
4.2. Ld. Counsel categorically pointed out that assessee had purchased the shares in Financial Year 2011-12 in physical form from M/s. Corporate Commodity Brokers Pvt. Ltd. for which the payment was made in cash out of regular income, gift received and past savings of the assessee. Ld. Counsel thus argued that for the payment made by the assessee in cash for purchase of shares, a cash receipt dated 25.11.2011 vide receipt no. 54 was issued by M/s. Corporate Commodity Brokers Pvt. Ltd. acknowledging the receipt of Rs. 6 lacs, which is placed in Paper Book at page 6. Ld. Counsel also referred to various documents noted above forming part of the Paper Book to demonstrate that all of these were furnished before the ld. AO in the assessment proceeding.
4 ITA No.406/PAN/2018 Mrs. Priyanka Agarwal A.Y. 2014-15 4.3. The assumption by the ld. AO in respect of purchases that they have been made during the year under consideration and not during the F.Y. 2011-12 is without any basis even though all the relevant documentary evidences as desired by the ld. AO are placed on record strongly submitted the ld. Counsel. He further stated that despite holding the shares for around 21 months, the ld. AO has re- characterized the Long Term Capital Gain on the sale of shares as income from Short Term Capital Gain and brought it to tax as against claimed exempted u/s 10(38) of the Act by the assessee.
4.4. It was also submitted by the ld. Counsel that assessee had purchased 60,000 shares out of which shares sold are 30,031 through Bombay Stock Exchange. The balance quantity of shares remained in the DMAT account of the assessee. Ld. Counsel also stated that ld. AO has verified the website of M/s. Religare Securities Ltd. and came to the conclusion that “no transaction on the said date of purchase made by the assessee”. He stated that ld. AO was very well aware that the assessee has purchased the shares from M/s. Corporate Commodity Brokers Pvt. Ltd. in physical form and not from M/s. Religare Securities Ltd, fact of which is noted at page 3 of the order. According to the ld. Counsel, ld. AO has wrongly concluded that there was no purchase in F.Y. 2011-12 despite all the documentary evidences placed on record before him.
4.5. Ld. Counsel thus emphasized that treating the Long Term Capital Gain claimed as exempted u/s 10(38) of the Act as Short Term Capital Gain chargeable to tax is a conclusive evidence that all the submissions made by the assessee in support of her claim have been accepted except for the year in which purchase of shares was made. He thus strongly submitted that considering the documentary evidences for purchase of
5 ITA No.406/PAN/2018 Mrs. Priyanka Agarwal A.Y. 2014-15 shares which evidently demonstrate that the purchase is made in F.Y. 2011-12, Long Term Capital Gain reported by the assessee in her return by claiming it as exempt u/s 10(38) of the Act is ought to be allowed and the re-characterization done by the ld. AO as Short Term Capital Gain to be set aside.
Per contra, ld. Sr. DR, Shri Mayur Kamble placed his reliance on the order of ld. AO.
We have heard the rival contentions and perused the material placed on record in the Paper Book filed by the assessee containing 25 pages along with written submission.
We note that the only issue before us is in respect of treatment of profit earned by the assessee on sale of shares as Long Term Capital Gain claimed by her or as Short Term Capital Gain as assessed by the ld. AO. If it is treated as Long Term Capital Gain, it is exempted u/s 10(38) of the Act and if it is considered as Short Term Capital Gain, it is subjected to tax under the Act. The relevant extracts from the order of ld. AO is reproduced as under:
“During the course of assessment proceedings, it is noticed that assessee has earned an income of Rs.43,48,421/- as profit on sale of shares and claimed exemption of the entire income u/s. 10(38) of IT Act. The assessee’s AR was asked to furnish the details regarding date and cost of acquisition of the shares purchased and sold. The AR has stated that the share transactions are carried out through the broker M/s. Religare Securities Limited. He has furnished copy of ledger extracts and statement obtained from M/s. Religare Securities Ltd., in support of sale j of shares of M/s.Turbotech Engineering made through M/s. Religare Securities Ltd., with Account Code PS9735, but no proof in support of ! Securities Transaction Tax paid and also no documentary evidence regarding purchase of shares has been furnished. The AR has also produced contract note/ share transfer form for purchase and sale of shares and demat statement. Further it is stated that the shares purchased
6 ITA No.406/PAN/2018 Mrs. Priyanka Agarwal A.Y. 2014-15 are in physical form and after transfer to demat account the same are sold in demat form.
During the course of assessment proceedings the AR was asked to furnish the documentary evidence in respect of shares purchased ar also the sources of investment in purchase of shares. The AR has submitted copy of share transfer deed, share certificates, debit note, receipt ledger extracts etc. Further, the AR has stated that assessee has purchased shares in FY 2011-12 in physical form, from M/s. Corporate Commodity Brokers Pvt. Ltd. The sources for the payment was from our regular income, gift received and savings for which we have also filed our income tax return. The assessee’s authorized representative has filed a letter dated 06.12.2016 enclosing the details of S.T.T. paid along with copies of Contract Notes/ share transfer form from Religare Securities Ltd. However, no proof or documentary evidence have been produced in respect of the sources of investments. It is clear that the shares have been purchased in cash however, sources of investment have not been proved.
On verification of the website of stock brokers, there are no transactions on the said date of purchase made by the assessee. The assessee has stated that these shares have been purchased from recognized stock exchange through stock broker, however, as per SEBI laws, the broker is not empowered to accept cash in excess of rupees fifty thousand towards purchase. No documentary evidence have been produced by the assessee in support of her claim that shares were purchased in 2011-12.
In view of the above, it is evident that the assessee has made the purchases during the year and not during the year 2011-12 and also has failed to explain the sources of investment. Considering the above facts and also based on the reasons for selection being “suspicious Long Term Capital Gains” the claim of the assessee regarding exemption u/s. 10(38) is disallowed and Rs.43,48,421/- are brought to tax under the head income from “Short Term Capital Gains”.
7.1. From the perusal of the assessment order, we note that ld. AO has called for various documentary evidences and details, all of which have been placed on record by the assessee as referred by the ld. Counsel in
7 ITA No.406/PAN/2018 Mrs. Priyanka Agarwal A.Y. 2014-15 his submission. Ld. AO has acknowledged and confirmed the submission of all the relevant documentary evidences stated in the order itself. We also note that ld. AO has observed that shares have been purchased in cash. Further, despite the documentary evidences placed on record in respect of purchase of shares, ld. AO noted that no documentary evidences have been produced to support the claim that shares were purchased in F.Y. 2011-12 and thus he arrived at a conclusion that the year of purchase is the current year under the consideration and not the financial year 2011-12. By considering the purchases as made during the year which in our observation is without any basis, ld. AO treated the Long Term Capital Gain on sale of shares as Short Term Capital Gain and brought it to tax under the Act.
Considering the facts and circumstances of the case and the material placed on record which has not been doubted or disputed by the ld. AO, we find it proper to treat the profit on sale of shares as Long Term Capital Gain. It has been claimed as exempt u/s 10(38) of the Act by the assessee and thus we set aside the treatment given by the ld. AO of Short Term Capital Gain. Accordingly, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced under Rule 34(4) of the IT(AT) rules, 1963 on 02.09.2022. Sd/- Sd/- (CHANDRA MOHAN GARG) (GIRISH AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 02.09.2022. Biswajit, Sr. P.S.
8 ITA No.406/PAN/2018 Mrs. Priyanka Agarwal A.Y. 2014-15 Copy to: 1. The Appellant: Mrs. Priyanka Agarwal. 2. The Respondent: ITO, Ward-1(4), Panaji, Goa. 3. The CIT, Concerned, 4. The CIT (A) Concerned, 5. The DR Concerned Bench //True Copy//
By Order
Sr. Private Secretary