ITO, Wd-9(4), Kolkata, Kolkata V. M/s Kiran consortium Trade (P)Ltd., Kolkata

ITA 1595/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87632 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 01-11-2012
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: S M SURANA; SUNI
• Keywords: Assessment record
• Section: 133(6); 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE SHRI N. K. SAINI, AM & SHRI MAHAVIR SINGH, JM] I.T.A NO. 1 595 /KOL/201 2 ASSESSMENT YEAR : 200 9 - 1 0 INCOME - TAX OFFICER, WD - 9 ( 4 ), KOLKATA. VS. KIRAN CONSORTIUM TRADE (P) LTD. (PAN:A ABCK3147N ) ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING: 2 2 . 01 .201 5 DATE OF PRONOUNCEMENT: 30 . 01 .201 5 FOR THE APPELLANT: SMT. RANU BISWAS, JCIT FOR THE RESPONDENT: SHRI S. M. SURANA , ADVOCATE & SHRI SUNIL SURANA, FCA / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT (A) - V II I , KOLKATA IN APPEAL NO. 1 46 /CIT(A) - V III/ KOL/2011 - 12 DATED 0 2 . 0 8 .201 2 . ASSESSMENT WAS FRAMED BY ITO, WARD - 9 ( 4 ), KOL KATA U/S. 1 43(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 9 - 1 0 VIDE HIS ORDER DATED 2 8 . 1 1 .20 11 . 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) IN DELETING THE DISALLOWANCE MADE BY AO ON ACCOUNT OF LOSS ARISING OUT OF VALUATION OF SHARES OF QUINTEGRA SOLUTION LTD. AND PAL CREDIT CAPITAL LTD. AT RS.81,84,000/ - . FOR THIS ASSESSEE HAS RAISED FOLLOWING FIVE GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF THE ASSESSEE'S CLAIM OF LOSS OF RS. 81,84,000/ - ARISING OUT OF VALUATION OF 8000 SHARES OF M/S QUINTEGRA SOLUTION LTD. AND 145000 SHARES OF PAL CREDIT CAPITAL LTD AS A PART OF THE CLOSING STOCK AT MARKET RATE, THE ASSESSEE'S METHOD OF VALUATION OF STOCK BEING 'COST PRICE OR MARKET PRICE WHICHEVER IS LESS AND THE MARKET RATE ON THE CLOSING DATE BEING LESS THAN THE PURCHASE RATE. 2. LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF LOSS OF RS. 81,84,000/ - ARISING OUT OF VALUATION OF 8000 SHARES OF M/S QUINTEGRA SOLUTION LTD. AND 145000 SHARES OF PAL CREDIT CAPITAL LTD AS A PART OF THE CLOSING STOCK AT MARKET RATE DISREGARDING THE FACT THAT THE SAID SHARES WERE NOT LYING WITH THE ASSESSEE IN ITS CLOSING STOCK ON THE CLOSING DATE OF THE PREVIOUS YEAR, THE SAME BEING RECEIVED ONLY AFTER THE CLOSE OF THE FINANCIAL YEAR AND ALSO THE TITLE THERETO, BEING NOT PASSED DURING THE PREVIOUS YEAR. 3. LD. CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF LOSS OF RS. 81,84,000 / - ARISING OUT OF VALUATION OF 8000 SHARES OF M/ S QUINTEGRA SOLUTION LTD. AND 145000 SHARES OF PAL CREDIT CAPITAL LTD AS A PART OF THE CLOSING STOCK AT MARKET RATE DISREGARDING THE FACT WHEREAS THE SAID SHARES WERE NOT LYING WITH THE ASSESSEE IN ITS CLOSING STOCK AND TILE TO THE SHARES WERE NOT PASSED DURING THE PREVIOUS YEAR DISREGARDING THE FACT THAT THE VALIDITY OF THE CONTRACT HAS NOTHING TO DO IN RESPECT OF CONSIDERATION OF THE SAME AS A PART OF STOCK IN TRADE INASMUCH IT ALWAYS REMAINS THAT A CONTRACT FOR SALE CAN BE 2 ITA NO.1 595 /K/2012 M/S. KIRAN CONSORTIUM TRADE (P) LTD. AY 200 9 - 1 0 SETTLED EVEN OTHERWISE THAN BY ACTUAL DELIVERY. 4. LD. CIT(A) HAS ERRED IN HOLDING THAT THE TRANSACTIONS OF PURCHASE OF SHARES OF 8000 SHARES OF M / S . QUINTEGRA SOLUT ION LTD. ON 23.05.2008 AND 145000 SHARES OF PAL CREDIT CAPITAL LTD. ON 17.06.2008 WERE NOT ILLEGAL UNDER THE SECURITIES CONTRACT REGULATION ACT AS SO HELD ILLEGAL BY THE A.O. FOR DISALLOWING THE LOSS ARISING OUT OF VALUATION OF THE SHARES CONCERNED AT MARK ET RATE. 5. LD. CIT(A) HAS ERRED IN OBSERVING THAT SECTION 14(2) OF THE SECURITIES CONTRACT REGULATION ACT MAKES IT CLEAR THAT THE NON MEMBERS WITHOUT KNOWLEDGE OF THE PROVISIONS OF THE ACT CAN ENFORCE ANY SUCH CONTRACT AND RECOVER THE SUM UNDER THE CONTRACT WHICH MEANS BETWEEN NON MEMBERS WITHOUT KNOWLEDGE (OF) THE LAW IS VALID WHICH IS THE BASIS OF HIS OBSERVATION THAT THE TRANSACTIONS IN QUESTION WERE VALID AND NOT ILLEGAL WHEREAS SECTION 13 OF SECURITIES CONTRACT REGULATION ACT WAS THE RELEVANT GO VERNING PROVISION IN THE MATTER OF DECIDING THE ISSUE AS TO WHETHER THE TRANSACTION OF PURCHASE IN QUESTION WERE ILLEGAL OR NOT AND WHEREAS THE PROVISION OF SECTION 14(I) OR 14(2) OF THE SAID ACT HAS NO RELEVANCE TO THE PROVISION OF SECTION 13 EXCEPTING TH ERE HAVING A REFERENCE IN SECTION 14(I) OF THE NOTIFIED STATE OR STATES OR AREA CONTEMPLATED IN SECTION 13. 3. BRIEF FACTS RELATING TO ABOVE ISSUE ARE THAT THE ASSESSEE DURING THE FINANCIAL YEAR 2008 - 09 RELEVANT TO THIS AY 2009 - 10 PURCHASED 80000 SHARES IN QUINTEGRA SOLUTIONS LTD ON 23.5.2008 @ 97.5P AND 145000 SHARES IN PAL CREDIT CAPITAL LTD @ RS. 7/ - ON 17.6.2008. THE ABOVE SHARES REMAINED AS STOCK IN TRADE OF THE A SSESSEE, WHO VALUED AT THE YEAR ENDING THE SE SHARES AT MARKET RATE , SINCE THE MARKET RATE WAS LOWER THE ASSESSEE SUFFERED A LOSS OF RS.81,84,000/ - IN VALUATION OF THE SE SHARES. THE AO NOTED FACTS IN ASSESSMENT ORDER THAT THE SHARES WERE PURCHASED FROM ONE BEEJAY INVESTMENT & FINANCIAL CONSULTANTS LTD . FOR WHICH BILLS WER E OF THE SAME DATE ON WHICH THE SHARES WERE PURCHASED BUT THE SHARES WERE NEVER TRANSFERRED TO THE D E MAT ACCOUNT NOR ANY PAYMENT WAS MADE TO THE SELLER BY THE ASSESSEE . THE AO FOUND THAT THE SHARE S WERE TAKEN DELIVERY AFTER THE CLOSE OF THE YEAR AND THE PA YMENT WAS ALSO MADE AFTER THE CLOSE OF THE YEAR. THE AO , THEREFORE , WAS OF THE VIEW THAT THE BILLS WERE AFTER THOUGHT AND THE SAME WERE PREPARED IN CONNIVANCE OF BEEJAY INVESTMENTS AND FINANCIAL CONSULTANTS PVT. LTD. THE AO FURTHER NOTED THAT ON THE DATE O F SALE SELLER HAD ONLY 789 SHARES IN THEIR STOCK AS AGAINST THE SALE OF 80000 SHARES IN QUINTEGRA SOLUTIONS LTD AND HAD ONLY 56216 SHARES IN PAL CREDIT CAPITAL LTD. THE AO WAS OF THE VIEW THAT NO SHARES COULD BE SOLD UNDER THE SEBI ACT WITHOUT THE INVOLVE MENT OF THE BROKER EXCEPT IN THE CASE OF SPOT DELIVERY. THEREFORE THE AO TREATED THE SAID PURCHASE OF THE SHARES AS BOGUS TRANSACTION AND DISALLOWED THE LOSS. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DISALLOWANCE OF LOSS BY OBSERVING AS UNDER: - I FIND THAT THE AO RAISED CERTAIN ISSUES IN THE ASSESSMENT ORDER THAT THE SELLER HAD NO REQUIRED NUMBER OF SHARES FOR THAT THE APPELLANT DID NOT FILE ANY EXPLANATION BUT IN THE 3 ITA NO.1 595 /K/2012 M/S. KIRAN CONSORTIUM TRADE (P) LTD. AY 200 9 - 1 0 WRITTEN SUBMISSIONS THE APPELLANT DISPUTED THE SAME. IN THE REMAND REPORT THE AO HAS NOT ADVERSELY COMMENTED ON THE SAID TWO ISSUES. I ALSO FIND THAT THERE WAS NO DISPUTE ABOUT THE PURCHASE OF SHARES WHICH AS PER THE AO WERE PURCHASED IN THE SUBSEQUENT Y EAR AND ONLY THE BILLS WERE RAISED DURING THE YEAR. I ALSO FIND FROM THE REMAND REPORT THAT THE TRANSACTIONS OF SALE IN THE HANDS OF THE SELLER HAS NOT BEEN TREATED AS INVALID OR BOGUS. IT APPEARS THAT THE ASSESSMENT IN THE SAID CASE WAS COMPLETED UNDER SE C. 143(3). THE AO HAS COMMENTED THAT THE SAID SELLER HAD TRANSACTED HUNDRED OF SHARES AND IT WAS IMPOSSIBLE FOR THE AO ASSESSING THE SAID SELLER NAMELY BEEJAY INVESTMENT TO EXAMINE EACH AND EVERY TRANSACTIONS. HOWEVER, THIS RATHER ESTABLISHED THAT THE SAID BEEJAY INVESTMENT WAS REGULARLY TRADING IN SHARES AND WAS HAVING HUNDREDS OF SHARE TRANSACTIONS. IN THAT CASE THIS PARTICULAR TRANSACTION CANNOT BE TREATED AS A BOGUS TRANSACTION. NO DOUBT ACCEPTANCE OF AN ENTRY IN THE ASSESSMENT RECORDS OF ONE PARTY MAY NOT AN ESTOPPELS IN ARRIVING AT A DIFFERENT CONCLUSION BUT THEN IN THE CASE OF PURCHASE AND SALE THERE IS IMPLIEDLY TRANSFER OF THE PROPERTY AND IF THE TRANSFER IS ACCEPTED IN THE HANDS OF ONE PARTY THEN NECESSARY COROLLARY FOLLOWS THAT THE OTHER PARTY HAS RECEIVED IT. I FULLY AGREE WITH THE VIEW OF THE A/R THAT IN FACT THERE WOULD HAVE BEEN SIMILAR LOSS IN THE HANDS OF THE SELLER HAD THE SALE BEEN NOT ACCEPTED IN THE HANDS OF THE SELLER. THEREFORE, THE PURCHASE FROM BEEJAY INVESTMENT CANNOT BE TREATED AS BOGUS. THIS IS FORTIFIED FROM THE FACT THAT THE PAYMENT WAS DULY MADE BY A/C CHEQUES DURING THE ASSESSMENT YEAR ITSELF AND THE SAID CHEQUES APPEARED IN THE BANK RECONCILIATION STATEMENT. THE A. 0' S FINDING IN THE REMAND REPORT THAT NEITHER THE SHARES APP EARED IN THE CLOSING STOCK NOR THE AMOUNT WAS SHOWN AS OUTSTANDING IN THE NAME OF SELLER IN THE LIST OF SUNDRY CREDITORS IS FACTUALLY INCORRECT SINCE IT IS SEEN THAT THE SHARES APPEARED IN THE BALANCE SHEET OF THE APPELLANT COMPANY VIDE SCHEDULE - F OF THE AUDITED BALANCE SHEET FILED BEFORE THE AO AND FURTHER THE PAYMENT WAS MADE TO THE SELLER AND THE SAME APPEARED IN THE BANK RECONCILIATION STATEMENT FILED BEFORE THE AO AND SUCH RECONCILED BANK BALANCE IS TALLIED FROM THE BALANCE SHEET. THE SAID BANK RECON CILIATION STATEMENT AS FILED BEFORE THE AO IS APPENDED HERE BELOW: KIRAN CONSORTIUM TRADE (P) LTD. BRS OF IDBI BANK LTD. AMOUNT (RS.) BALANCE AS PER BANK 50,41,273.22 LESS: CHEQUES ISSUED BUT NOT PRESENTED INTO BANK CH.NO. DATE 623995 28.3.2009 BEEJAY INVESTMENT & FINANCIAL CONSULTANTS PVT. LTD. 20,00,000.00 RTGS 30.3.2009 BEEJAY INVESTMENT &FINANCIAL CONSULTANTS PVT. LTD. 40,00,000.00 623998 30.3.2009 BEEJAY INVESTMENT & FINANCIAL CONSULTANTS PVT. LTD. 20,00,000.00 624000 30.3.2009 BEEJAY INVESTMENT & FINANCIAL CONSULTANTS PVT. LTD. 8,15,000.00 88,15,000.00 ( - )37,73,726.78 THEREFORE, IT IS SEEN THAT THE AO HAS MADE A FACTUAL ERROR THAT THE SHARES WERE NOT SHOWN IN THE CLOSING STOCK OR LIABILITY IN BALANCE SHEET. THIS LEAVES ONLY ONE ASPECT OF 4 ITA NO.1 595 /K/2012 M/S. KIRAN CONSORTIUM TRADE (P) LTD. AY 200 9 - 1 0 THE MATTER AS TO WHETHER THE TRANSACTION WAS ILLEGAL UNDER THE SECURITIES CONTRACT REGULATION ACT. FOR THIS PURPOSE IT WILL BE WORTHWHILE TO QUOTE THE RELEVANT PROVISI ONS OF SECTION 13 TO SECTION 18 OF SCRA ACT FOR THE SAKE OF CLARITY: 'CONTRACTS IN NOTIFIED AREAS ILLEGAL IN CERTAIN CIRCUMSTANCES. 13. IF THE CENTRAL GOVERNMENT IS SATISFIED, HAVING REGARD TO THE NATURE OR THE VOLUME OF TRANSACTIONS IN SECURITIES IN ANY STATE OR STATES OR AREA THAT IT IS NECESSARY SO TO DO, IT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, DECLARED THIS SECTION TO APPLY TO SUCH STATE OR STATES OR AREA AND THEREUPON EVERY CONTRACT IN SUCH STATE OR STATES OR AREA WHICH IS ENTERED INTO AF TER THE DATE OF THE NOTIFICATION OTHERWISE THAN BETWEEN THE MEMBERS OF A RECOGNISED STOCK EXCHANGE OR RECOGNISED STOCK EXCHANGES IN SUCH STATE OR STATES OR AREA OR THROUGH OR WITH SUCH MEMBER SHALL BE ILLEGAL: PROVIDED THAT ANY CONTRACT ENTERED INTO BETW EEN MEMBERS OF TWO OR MORE RECOGNIZED STOCK EXCHANGES IN SUCH STATE OR STATES OR AREA, SHALL - I) BE SUBJECT TO SUCH TERMS AND CONDITIONS AS MAY BE STIPULATED BY THE RESPECTIVE STOCK EXCHANGES WITH PRIOR APPROVAL OF SECURITIES AND EXCHANGE BOARD OF INDIA; II) REQUIRE PRIOR PERMISSION FROM THE RESPECTIVE STOCK EXCHANGES IF SO STIPULATED BY THE STOCK EXCHANGES WITH PRIOR APPROVAL OF SECURITIES AND EXCHANGE BOARD OF INDIA. ADDITIONAL TRADING FLOOR - 13A. A STOCK EXCHANGE MAY ESTABLISH ADDITIONAL TRADING FLOOR W ITH THE PRIOR APPROVAL OF THE SECURITIES AND EXCHANGE BOARD OF INDIA IN ACCORDANCE WITH THE TERMS AND CONDITIONS STIPULATED BY THE SAID BOARD. EXPLANATION: FOR THE PURPOSES OF THIS SECTION, 'ADDITIONAL TRADING FLOOR' MEANS A TRADING RING OR TRADING FACI LITY OFFERED BY A RECOGNISED STOCK EXCHANGE OUTSIDE ITS AREA OF OPERATION TO ENABLE THE INVESTORS TO BUY AND SELL SECURITIES THROUGH SUCH TRADING FLOOR UNDER THE REGULATORY FRAMEWORK OF THAT STOCK EXCHANGE. CONTRACTS IN NOTIFIED AREAS TO BE VOID IN CERTAIN CIRCUMSTANCES. 14.(1) ANY CONTRACT ENTERED INTO IN ANY STATE OR AREA SPECIFIED IN THE NOTIFICATION UNDER SECTION 13 WHICH IS IN CONTRAVENTION OF ANY OF THE BYE LAWS SPECIFIED IN THAT BEHALF UNDER CLAUSE (A) OF SUB - SECTION (3) OF SECTION 9 SHALL BE VOID: (I) AS RESPECTS THE RIGHTS OF ANY MEMBER OF THE RECOGNISED STOCK EXCHANGE WHO HAS ENTERED INTO SUCH CONTRACT IN CONTRAVENTION OF ANY SUCH BYE - LAW, AND ALSO (II) AS RESPECTS THE RIGHTS OF ANY OTHER PERSON WHO HAS KNOWINGLY PARTICIPATED IN THE TRANSACTION ENTAILING SUCH CONTRAVENTION. (2) NOTHING IN SUB - SECTION (1) SHALL BE CONSTRUED TO AFFECT THE RIGHT OF ANY PERSON OTHER THAN A MEMBER OF THE RECOGNISED STOCK EXCHANGE TO ENFORCE ANY3UCH CONTRACT OR TO REC OVER ANY SUM UNDER OR IN RESPECT OF SUCH CONTRACT IF SUCH PERSON HAD NO KNOWLEDGE THAT THE TRANSACTION WAS IN CONTRAVENTION OF ANY OF THE BYE - LAWS SPECIFIED IN CLAUSE (A) OF SUB - SECTION (3) OF SECTION 9. MEMBERS MAY NOT ACT AS PRINCIPALS IN CERTAIN CIRC UMSTANCES. 15. NO MEMBER OF A RECOGNISED STOCK EXCHANGE SHALL IN RESPECT OF ANY SECURITIES ENTER INTO ANY CONTRACT AS A PRINCIPAL WITH ANY PERSON OTHER THAN A MEMBER OF A RECOGNIZED STOCK EXCHANGE, UNLESS HE HAS SECURED THE CONSENT OR AUTHORITY OF SUCH P ERSON AND 5 ITA NO.1 595 /K/2012 M/S. KIRAN CONSORTIUM TRADE (P) LTD. AY 200 9 - 1 0 DISCLOSES IN THE NOTE, MEMORANDUM OR AGREEMENT OF SALE OR PURCHASE THAT HE IS ACTING AS A PRINCIPAL: PROVIDED THAT WHERE THE MEMBER HAS .SECURED THE CONSENT OR AUTHORITY OF SUCH PERSON OTHERWISE THAN IN WRITING HE SHALL SECURE WRITTEN CONFIRMA TION BY SUCH PERSON OR SUCH CONSENT OR AUTHORITY WITHIN THREE DAYS FROM THE DATE OF THE CONTRACT: PROVIDED FURTHER THAT NO SUCH WRITTEN CONSENT OR AUTHORITY OF SUCH PERSON SHALL BE NECESSARY FOR CLOSING OUT ANY OUTSTANDING CONTRACT ENTERED INTO BY SUCH PERSON IN ACCORDANCE WITH THE BYE - LAWS, IF THE MEMBER DISCLOSES IN THE NOTE, MEMORANDUM OR AGREEMENT OF SALE OR PURCHASE IN RESPECT OF SUCH CLOSING OUT THAT HE IS ACTING AS A PRINCIPAL. POWER TO PROHIBIT CONTRACTS IN CERTAIN CASES. 16. (1) IF THE CEN TRAL GOVERNMENT IS OF OPINION THAT IT IS NECESSARY TO PREVENT UNDESIRABLE SPECULATION IN SPECIFIED SECURITIES IN ANY STATE OR AREA, IT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, DECLARE THAT NO PERSON IN THE STATE OR AREA SPECIFIED IN THE NOTIFICATION S HALL, SAVE WITH THE PERMISSION OF THE CENTRAL GOVERNMENT, ENTER INTO ANY CONTRACT FOR THE SALE OR PURCHASE OF ANY SECURITY SPECIFIED IN THE NOTIFICATION EXCEPT TO THE EXTENT AND IN THE MANNER, IF ANY, SPECIFIED THEREIN. (2) ALL CONTRACTS IN CONTRAVENTION OF THE PROVISIONS OF SUB - SECTION (1) ENTERED INTO AFTER THE DATE OF NOTIFICATION ISSUED THERE UNDER SHALL BE ILLEGAL. LICENSING OF DEALERS IN SECURITIES IN CERTAIN AREAS. 17. (1) SUBJECT TO THE PROVISIONS OF SUB - SECTION (3) AND TO THE OTHER PROVISIONS CONTAINED IN THIS ACT, NO PERSON SHALL CARRY ON OR PURPORT TO CARRY ON, WHETHER ON HIS OWN BEHALF OR ON BEHALF OF ANY OTHER PERSON, THE BUSINESS OF DEALING IN SECURITIES IN ANY ST ATE OR AREA TO WHICH SECTION 13 HAS NOT BEEN DECLARED TO APPLY AND TO WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, DECLARE THIS SECTION TO APPLY, EXCEPT UNDER THE AUTHORITY OF A LICENCE GRANTED BY THE SECURITIES AND EXCHANGE B OARD OF INDIA IN THIS BEHALF. (2) NO NOTIFICATION UNDER SUB - SECTION (L) SHALL BE ISSUED WITH RESPECT TO ANY STATE OR AREA UNLESS THE CENTRAL GOVERNMENT IS SATISFIED, HAVING REGARD TO THE MANNER IN WHICH SECURITIES ARE BEING DEALT WITH IN SUCH STATE OR AR EA, THAT IT IS DESIRABLE OR EXPEDIENT IN THE INTEREST OF THE TRADE OR IN THE PUBLIC INTEREST THAT SUCH DEALINGS SHOULD BE REGULATED BY A SYSTEM OF LICENSING. (3) THE RESTRICTIONS IMPOSED BY SUB - SECTION (1) IN RELATION TO DEALINGS IN SECURITIES SHALL NOT A PPLY TO THE DOING OF ANYTHING BY OR ON BEHALF OF A MEMBER OF ANY RECOGNISED STOCK EXCHANGE. EXCLUSION OF SPOT DELIVERY CONTRACTS FROM SECTIONS 13, 14, 15 AND 17. 18. (1) NOTHING CONTAINED IN SECTIONS L3, 14, 15 AND 17 SHALL APPLY TO SPOT DELIVERY CONT RACTS. (2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECTION (1), IF THE CENTRAL GOVERNMENT IS OF OPINION THAT IN THE INTEREST OF THE TRADE OR IN THE PUBLIC INTEREST IT IS EXPEDIENT TO REGULATE AND CONTROL THE BUSINESS OF DEALING IN SPOT DELIVERY CONTRAC TS ALSO IN ANY STATE OR AREA (WHETHER SECTION L3 HAS BEEN DECLARED TO APPLY TO THAT STATE OR AREA OR NOT), IT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, DECLARE THAT THE PROVISIONS OF SECTION 17 6 ITA NO.1 595 /K/2012 M/S. KIRAN CONSORTIUM TRADE (P) LTD. AY 200 9 - 1 0 SHALL ALSO APPLY TO SUCH STATE OR AREA IN RESPECT OF SPOT DELIVERY CONTRACTS GENERALLY OR IN RESPECT OF SPOT DELIVERY CONTRACTS FOR THE SALE OR PURCHASE OF SUCH SECURITIES AS MAY BE SPECIFIED IN THE NOTIFICATION, AND MAY ALSO SPECIFY THE MANNER IN WHICH, AND THE EXTE NT TO WHICH, THE PROVISIONS OF THAT SECTION SHALL SO APPLY.' IT APPEARS FROM THE READING OF THE ABOVE PROVISIONS OF SCRA THAT THE PROVISIONS MAINLY APPLY TO THE MEMBERS OF THE STOCK EXCHANGE. IN SO FAR AS THE TRANSACTION BETWEEN NON MEMBERS ARE CONCERN ED SECTION 14 (2) MAKES IT CLEAR THAT THE NON MEMBERS WITHOUT KNOW LEDGE OF THE PROVISIONS OF THE ACT CAN ENFORCE ANY SUCH CONTRACT AND RECOVER THE SUM UNDER THE CONTRACT WHICH MEANS BETWEEN NON MEMBERS WITHOUT KNOWLEDGE THE LAW IS VALID. IT IS NOT THE CA SE OF THE AO THAT THE APPELLANT COMPANY HAD KNOWLEDGE OF THE PROVISIONS. IT MAY ALSO BE KEPT IN MIND THAT THE TRANSACTION WAS ENTERED INTO IN THE PRESENCE OF A MEMBER OF THE STOCK EXCHANGE WHO ALSO DID NOT INFORM THE APPELLANT OF ANY SUCH PROVISIONS. RAT HER SUCH BROKER WAS INSTRUMENTAL IN PERSUADING THE TRANSACTION TO BE CARRIED OUT. I FIND THAT THE APPELLANT HAS FILED A LETTER BEFORE THE AO ON 29.11.2011 ALONG WITH THE COPY OF THE MEMBER BROKER'S LETTER BY SPEED POST. THE BROKER'S LETTER SHOWS THAT THE T RANSACTION WAS COMPLETED BEFORE THE SAID BROKER. IT ALSO APPEARS FROM THE SAID BROKER DID NOT EVEN CHARGE THE COMMISSION BECAUSE OF SOME DISPUTES BUT THE TRANSACTION WAS OUT ON THE PERSUASION OF THE SAID BROKER. THEREFORE, IT APPEARS THAT THERE IS NO ILLEG ALITY IN THE SAID TRANSACTION. THERE IS NO DISPUTE ABOUT THE QUOTED MARKET PRICE OF THE SHARES AS ON THE DATE OF PURCHASE OF SHARES AS ON 31.03.2009. THERE IS ALSO NO DISPUTE THAT THE APPELLANT WAS FOLLOWING THE SYSTEM OF VALUATION OF CLOSING STOCK AT COST OR MARKET VALUE WHICHEVER IS LOWER . SINCE THE SHARES WERE ACTUALLY PURCHASED FROM THE SELLER DULY ACCEPTED BY THE DEPARTMENT IN HIS HANDS THE BALANCE OF PROBABILITIES GOES IN FAVOUR OF THE APPELLANT AND THE PURCHASE CANNOT BE TREATED AS BOGUS. AGG RIEVED, REVENUE IS IN SECOND APPEAL BEFORE TRIBUNAL. 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS THAT THE ASSESSEE PURCHASED THE SE SHARES FROM BEEJAY INVESTMENTS A ND FINANCIAL CONSULTANTS P. LTD (IN SHORT BIFC) AND CONSEQUENTLY, T HE SAID PARTY ISSUED THE SALE BILL TO ASSESSEE , COPY OF WHICH WAS FILED BEFORE THE AO AND THE SAME IS NOT DISPUTED. THE AO HAS RAISED THE ISSUE THAT BIFC DID NOT HAVE THE ADEQUATE N UMBER OF SHARES IN THEIR STOCK A S ON THE DATE SALE. HOWEVER, THE FACTS ARE CONTRARY TO THE FINDINGS OF THE AO, AS WOULD APPEAR FROM THE COPY OF ACCOUNT ENCLOSED HEREWITH , THAT THE SAID BFIC HAD THE REQUIRED N UMBER OF SHARES IN THEIR STOCK AND IN RESPONSE TO THE QUERY OF THE AO , AN EXPLAN ATION WAS FILED VIDE LETTER DATED 30.11.2011 ( COPY IS ENCLOSED IN ASSESSEE S PAPER BOOK) . FURTHER, THE AO ALSO MADE ENQUIRY U /S. 133(6) FROM THE SELLER BIFC, WHO ALSO REPLIED AND ADMITTED THE FACT UM OF THE SALE OF SHARE. THEREFORE SIMPLY BECAUSE THE SHARES AMOUNT TRANSFERRED TO THE DEMAT ACCOUNT OF THE A SSESSEE OR THAT THE PAYMENTS WERE MADE IN THE SUBSEQUENT YEAR , THE TRANSACTION CANNOT BE TAKEN TO BE NOT GENUINE. THE AO NOTED THAT THE TRANSACTION IS BOGUS AND FURTHER THE PURCHASE WAS INFLATED. HOWEVER, TH ERE IS NO BASIS FOR THE SAME BUT IT IS ONLY THE PRESUMPTIONS OF THE AO. MOREOVER , AS INFORMED DURING THE COURSE OF THIS APPEAL HEARING BEFORE US BY LD. COUNSEL THAT AFTER COMPLETION OF THE ASSESSMENT OF THE 7 ITA NO.1 595 /K/2012 M/S. KIRAN CONSORTIUM TRADE (P) LTD. AY 200 9 - 1 0 A SSESSEE, SCRUTINY ASSESSMENT OF THE SELLER WAS TAKEN UP AND IN SUCH SCRUTINY ASSESSMENT, THE SALE OF THE HAVE BEEN TREATED TO BE GENUINE. THIS FACT WAS ALSO NOT EXAMINED BY THE AO FROM THE ASSESSMENT RECORDS OF THE SELLER, AS THE PAN WAS GIVEN. WE ARE OF THE VIEW THAT IN CASE THE TRANSACTION HAVE BEEN TREATED AS GENUINE IN THE HANDS OF THE SELLER , THE SAME VERY TRANSACTION CANNOT BE NON - GENUINE IN THE HANDS OF THE PURCHASER. APART FROM THIS, LD. COUNSEL ALSO RELIED ON THE JUDGEMENT OF HON.BLE GUJARAT HIGH COURT IN THE CASE OF CIT V PRU DENT FINANCE (P.) LTD.(2014)225 TAXMAN0125(GUJ), WHEREIN EXACTLY IDENTICAL ISSUE WAS TAKEN UP AND THE FACTS DISCUSSED BY HON BLE HIGH COURT AS UNDER: - RESPONDENT OF TAX APPEAL NO. 1003/2013 AND OTHER CONNECTED APPEALS IS ONE PRUDENT FINANCE PVT. LTD, A COMPANY REGISTER ED UNDER THE COMPANIES ACT. ONE NITIN B. PARIKH AND OTHER MEMBERS OF HIS F AMILY REFERRED TO AS NITIN B. PARIKH GROUP OF ASSESSEE WHO HAD CONTROL OVER OTHERS, WAS SUBJECTED TO SEARCH ACTION UNDER SECTION 132 OF THE ACT. IT WAS FOUND THAT LARGE NUMBER OF SHA RES WERE TRADED BETWEEN THE COMPANY AND THE SAID GROUP OF PERSONS AT OFF - MARKET TRANSACTIONS. SUCH OFF MARKET TRANSACTIONS WERE ENTERED BY THE COMPANY WITH OTHER UNRELATED ASSES SEES ALSO. THE ASSESSING OFFICER CARRIED A BELIEF THAT SUCH TRANSACTIONS WERE NOT GENUINE, IN THE SENSE THAT THE SAME WOULD HAVE TAKEN PLACE WITH ANTERIOR DATES. IN THE OPINION OF THE ASSESSING OFFICER, THIS WAS DONE TO CONTRIVE LOSS IN THE HANDS OF SOME OF THE ASSESSEES WHO IN TURN TRANSFERRING THE PROFITS IN THE HANDS OF OTHER AS SESSEES. THIS WAS DONE TO ENSURE THAT THE ASSESSEES WHO HAD SIZABLE PROFITS FROM SALE OF SHARES COULD CLAIM SUCH LOSSES AS SET OFF. THE ASSESSING OFFICER QUESTIONED THE ASSESSEE COMPANY IN DETAIL. THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT FORMED A B ELIEF THAT FULL DETAILS WERE NOT MADE AVAILABLE WITH RESPECT TO SUCH TRANSACTIONS. THE SALES WERE NOT AT MARKET PRICE. THE AMOUNTS WERE NOT PAID, BUT ONLY ACCOUNT ENTRIES WERE MADE. THE SHARES WERE ALSO NOT TRANSFERRED IN THE NAME OF THE PURCHASERS. ON SUCH BASIS, THE ASSESSING OFFICER CONCLUDED THAT THE TRANSACTIONS WERE NOT GENUINE AND APPLYING THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MCDOWELL CO. LTD V. COMM ERCIAL TAX. O FFICER (1985) 154 ITR 148/22 TAXMAN 11, HELD THAT SUCH LOSS CANNOT BE ALLOWED. THE ASSESSING OFFICER OBSERVED THAT WHENEVER SALES WERE MADE TO OTHER ENTITIES, THEY WERE NOT FOLLOWED BY CHEQUE RECEIPTS. SIMILARLY WHEN PURCHASES WERE MADE FROM OTHER ENTITIE S, THEY WERE ALSO NOT FOLLOWED BY CHEQUE PAYMENTS. HE CONCLUDED THAT THE ASSESSEE CARRIED OFF MARKET TRANSACTIONS BY SIMPLE PURCHASE BILLS OR SALES BILLS IGNORING MARKET RATES. THIS WAS DONE TO AVOID TAX. AND FINALLY HELD AS UNDER: 8. ADDITIONALLY, WE ALSO NOTE THAT NECESSARY ENTRIES WERE MADE IN THE ACCOUNT BOOKS OF BOTH SIDES, I.E. PURCHASER AND SELLER AND DELIVERY RECEIPTS WERE ALSO PASSED D EMONSTRATING CONTEMPORANEOUS SALE AND PURCHASE OF THE SHARES. IT IS NOT EVEN THE CASE OF THE REVENUE THAT SUCH OFF MARKET TRANSACTIONS WERE NOT PERMISSIBLE. WHEN WE FIND THAT OFF MARKET T RANSACTIONS WERE PERMITTED IN LAW, THAT THERE WAS NO EVIDENCE TO SUGGEST THAT A RTIFICIALLY THEY WERE SOLD AT RATES LOWER THAN THE PREVAILING MARKET RATES AND WE FURTHER FIND THAT THE ASSESSING OFFICER COULD NOT BRING ON RECORD ANY MATERIAL TO SHOW THAT THE TRANSACTIONS WERE SHOWN TO BE DELIBERATELY BACK - DATED, THE FINDINGS OF THE C OMMISSIONER (APPEALS) AS WELL AS THAT OF THE TRIBUNAL, IN OUR OPINION, CALL FOR NO INTERFERENCE. IN VIEW OF THE ABOVE FACTS AND IDENTICAL ISSUE TAKEN UP BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRUDENT FINANCE (P.) LTD., SUPRA, WE ARE OF THE VIEW THAT THE TRANSACTION TO UNRELATED PARTIES I.E. OFF MARKET TRANSACTION, THERE WAS NO EVIDENCE IN THE PRESE NT CASE ALSO WHICH 8 ITA NO.1 595 /K/2012 M/S. KIRAN CONSORTIUM TRADE (P) LTD. AY 200 9 - 1 0 SUGGESTS THAT THE SHARES WERE ARTIFICIALLY SOLD AT A LOWER RATE THAN THE PREVAILING MARKET RATE. EVEN THE AO COULD NOT BRING ANYTHING ON RECORD, WHICH SUGGESTS THAT THE SELLING RATE WAS LOWER THAN THE MARKET RATE. RESPECTFULLY FOLLOWIN G HON'BLE GUJARAT HIGH COURT, WE CONFIRM THE ORDER OF CIT(A) AND THE ISSUE OF REVENUE S APPEAL IS DISMISSED. 6 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 7 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.01.2015 SD/ - SD/ - ( N. K. SAINI ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30TH JANUARY , 201 5 JD.(SR.P.S.) - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT ITO, WARD - 9(4), KOLKATA. 2 / RESPONDENT M/S. KIRAN CONSORTIUM TRADE (P) LTD., ROOM NO. 104, 1 ST FLOOR, 2, BARETTO LANE, KOLKATA - 700 069. 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .