PRAFULLA JAYANTILAL GANGER , MUMBAI V. ITO WD 3(2) , MUMBAI

ITA 1936/MUM/2021

AI Insights

The case revolves around an appeal by Prafulla Jayantilal Gangar against the order of the National Faceless Appeal Centre (NFAC), which upheld the addition of Rs. 4,88,848 as unexplained credit in the assessee's income for the assessment year 2011-12. The addition was based on the presumption that the assessee had earned long-term capital gains from the sale of shares of M/s. Vax Housing Finance Corporation Ltd, alleged to be a penny stock. The assessee contested that the transactions were genuine, involving intraday trading, and resulted in a speculation loss, not a capital gain. The Tribunal examined the evidence provided by the assessee, including contract notes, bank statements, and broker reports, and concluded that the assessee's transactions were legitimate and did not result in any unaccounted income.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 300217 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-08-2022
• Assessment Year: misc
• Appeal Filed On: 20-01-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA JEPH
• Assessee Lawyers: PRASHANT SHAH; ENTERING INTO INTRADAY
• Keywords: Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI SHRI AMIT SHUKLA, JM आयकरअपीलसं./ I.T.A. No. 1936/Mum/2021 (निर्धारणवर्ा / Assessment Year: 2011-12) Prafulla Jayantilal Gangar. Room No.11, 1 st Floor, Jay Kanta Bhavan, Paterill Road, Dombivli, Thane, Maharashtra, 421201 बिधम/ Vs. ITO WD 3(2) Mumbai. Rani Mansion, 2 nd Floor, Murbad Road, Kalyan Maharashtra 421301 स्थायीलेखासं./जीआइआरसं./PAN No. AGLPG4386N (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अपीलाथीकीओरसे/ Appellant by : Shri. Prashant Shah प्रत्यथीकीओरसे/Respondent by : Ms. Neeta Jeph सुनवाईकीतारीख/ Date of Hearing : 01.09.2022 घोषणाकीतारीख / Date of Pronouncement : 29.11.2022 आदेश / O R D E R Per Amit Shukla, Judicial Member: The aforesaid appeal has been filed by the assessee against the impugned order dated 31.08.2021, passed by National Faceless Appeal Centre (NFAC), Delhi for the quantum of assessment passed u/s143(3) r.w.s 147, AY 2011-12. 2 I . T . A . N o . 1936/ M u m / 2 0 2 1 PRAFULLA JAYANTILAL GANGER 2. In the various of grounds of Appeal, the Assessee has challenged the validity of re-opening u/s.147; and on merits, addition of Rs. 4,88,848/- as unexplained credit on account of sale consideration of shares of M/s. Vax Housing Finance Corporation Ltd. 3. The facts in briefs are that, Assessee is an individual having income from speculation business, capital gain and income from other sources. The Assessee was regularly engaged in the activity of trading of shares and securities and the resulted income/loss was offered to tax under the head business income. During the year under reference Assessee has traded in 414 scripts listed with the stock exchange which is evident from the Global Summary report issued by the broker the copy which has been placed in the paper book from paged 64-84. 4. Further, from the records it is evident that, out of the 414 scrip traded by the assessee during the year under reference, one scrip, viz., M/s. Vax Housing Finance Corporation Ltd (VHFC) was alleged to be a penny stock scrip as per the findings of DDIT (Inv) Unit 6(2), Mumbai. As evident from the Global report, the Appellant 3 I . T . A . N o . 1936/ M u m / 2 0 2 1 PRAFULLA JAYANTILAL GANGER has purchased shares of VHFC for a consideration of Rs.5,01,024/- and sold the shares on the very same day at a consideration of Rs.4,88,848/- and accordingly, speculation loss of Rs.12,176/- was declared in the return of income of the Appellant. 5. Before, the Assessing officer, the Assessee has submitted various documents to substantiate the genuineness of the transaction, that the there is no exemption claimed whatsoever in the return of income, in fact from the intraday trading activity, she has suffered a loss of Rs.12,176/-. The genuineness of the transactions undertaken in respect of script M/s. Vax Housing Finance Corporation Ltd was proved from the following:  Contract notes in respect of purchase and sale of shares of M/s. Vax Housing Finance Corporation Ltd.  Bank statement evidencing payments made to/received from the registered broker.  Global summary report from the registered broker for the year under reference.  Ledger account of Your Appellant in the books of Broker. 4 I . T . A . N o . 1936/ M u m / 2 0 2 1 PRAFULLA JAYANTILAL GANGER  Computation of income and ITR Acknowledgement for the year under reference. 6. Further, Assessee submitted that the;  The shares were traded in the open market and listed on the stock exchange as regulated by SEBI and Securities Transaction Tax (STT) was duly paid and hence no manipulation is possible under any circumstances whatsoever.  The share was not a penny stock at the time of trading and hence no adverse inference should be drawn.  The shares were held by Your Appellant for not even a single day as she had purchased and sold the share on same day itself and hence there is no question of manipulation.  The rise and fall in its share prices could be due to the market forces of demand and supply, which is beyond the control of Your Appellant and hence the contention that prices have been artificially rigged high is invalid and thus no adverse inference should be drawn.  No benefit is taken by the Appellant by entering into intra-day transaction for sale of such shares as nature of such 5 I . T . A . N o . 1936/ M u m / 2 0 2 1 PRAFULLA JAYANTILAL GANGER transaction would not give rise to convert the unaccounted money into capital gain. In fact the Appellant has suffered a loss of Rs.12,176/-by entering in to such transactions.  No benefit of long term capital gain arose out of trading activity of such shares and hence there is no question of claiming any tax benefit.  There is no offline transfer of shares in either purchase or sale transaction in the case of your Appellant and hence there is no chance of manipulation.  There is no cash deposit or withdrawal from the bank account of your Appellant pursuant to trading activity in respect of the shares. 7. However, the Ld. Assessing Officer based on some general finding of the investigation viewing held that Assessee was one of the beneficiary of selling of shares of said company for consideration of Rs. 4,88,848/-. In fact, Assessing Officer has presume that Assessee has earned long term capital gain which is an exempt. Which fact is incorrect. 6 I . T . A . N o . 1936/ M u m / 2 0 2 1 PRAFULLA JAYANTILAL GANGER 8. The Ld. CIT(A), has simply conformed the order of the Assessing Officer without any discussion. 9. After hearing both the parties, I find that first of all, Assessee is regular trader who has traded in 414 scrips during the year. The Assessee has purchased the share of VHFC online from the Bombay Stock Exchange for consideration of Rs. 5,01,024/- on 14.01.2011; and on the same day was sold at Rs. 4,88,848/-. Thus, Assessee incurred speculation loss of Rs. 12,176/-. It was intraday transaction which was speculative in nature as there was no delivery of share. There is no benefit of long term capital gain taken by the Assessee which has been alleged by the Assessing Officer who was not even verified the records. It is not a case of any accommodation entry in some “Penny Stock” where Assessee has bought the share for any exempt long term capital gain or long term capital loss or short term capital loss. Once the Assessee is dealing in 414 scrips and out of which one scrip was intraday transaction, it cannot be held that Assessee was any beneficiary of some accommodation entry by some any entry operator. Thus, the 7 I . T . A . N o . 1936/ M u m / 2 0 2 1 PRAFULLA JAYANTILAL GANGER addition made by Assessing Officer and as sustained by the Ld. CIT(A) is deleted. 10. Accordingly, Appeal by the Assessee is allowed. Orders pronounced in the open court on 29 th November. 2022. Sd/- (Amit Shukla) Judicial Member मुंबई Mumbai;ददनांक Dated : 29.11.2022 Mrs. Urmila आदेशकीप्रनिनिनिअग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलाथी/ The Appellant 2. प्रत्यथी/ The Respondent 3. आयकरआयुक्त(अपील) / The CIT(A) 4. आयकरआयुक्त/ CIT- concerned 5. दवभागीयप्रदतदनदध, आयकरअपीलीयअदधकरण, मुंबई/ DR, ITAT, Mumbai 6. गार्डफाईल / Guard File आदेशधिुसधर/ BY ORDER, .उि/सहधयकिंजीकधर (Dy./Asstt.Registrar) आयकरअिीिीयअनर्करण, मुंबई/ ITAT, Mumbai