Tejal Mahendrabhai Shah, Surat V. ITO, Ward-3, Palanpur

ITA 510/AHD/2019

AI Insights

Tejal Mahendrabhai Shah appealed against the order of the CIT(A)-4, Ahmedabad, which confirmed the addition of Rs. 48,74,036 as LTCG on the sale of shares of Miska Finance & Trading Ltd. The shares were sold under circumstances that raised suspicions of being part of a tax evasion scheme. The Assessing Officer and CIT(A) relied on a SEBI report indicating that the scrip was under surveillance and the broker was involved in similar dubious transactions. The Tribunal found that the assessee failed to provide adequate evidence to substantiate the genuineness of the transactions and did not comply with the procedural requirements for such transactions, such as timely transfer of shares to a Demat account.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299981 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 08-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 27-03-2019
• Other Referred Cases: ITO vs. Gokuldham Enterprise LLP
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Earning of tax free income; Bogus
• Section: 68; 28; 142(1); 250; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I .T .A . No .5 10 /A h d / 20 19 ( A s se ss m e nt Y e a r : 20 15- 16 ) Tej a l M ah en dr ab ha i S ha h B / 70 1 , Vi r b h a d r a S o ci et y, P ip lo d, Su r a t -3 95 0 0 7 V s . I T O War d - 3 , Pa l an p u r [ P AN N o. A F Q P S0 8 28 B ] (Appellant) .. (Respondent) Appellant by : Shri S. N. Divatia, A.R. & Shri Samir Vora, A.R. Respondent by: Shri N. J. Vyas, Sr. D.R. D a t e of H ea r i ng 09.03.2023 D a t e of P r o no u n ce me nt 17.03.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals)-4, Ahmedabad on 27.02.2019 for A.Y. 2015-16. 2. The grounds of appeal raised by the assessee are as under: “1.1 The order passed u/s 250 on 27.2.2019 for A.Y. 2015-16 by CIT(A)-4, A’bad upholding LTCG of Rs.48,74,036/- on sale of shares of Miska Finance & Trading ltd. as bogus and thereby confirming addition of Rs.48,74,036/- is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence produced by the appellant. The Ld. CIT(A) ought not to have relied upon the material such as report of the investigation wing, etc, without providing the copy of the same and allowing opportunity to cross examine the said parties. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the LTCG of Rs.48,74,036/- on sale of shares of Miska Finance & Trading ltd. as bogus and thereby confirming addition of Rs.48,74,036/-. 2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) has grievously erred in upholding the LTCG of Rs.48,74,036/- on sale of shares of Miska Finance & Trading ltd. as bogus and thereby confirming addition of Rs. 48,74,036/- 2.3 The ld. CIT(A) has grievously erred in law and or on facts in not allowing opportunity of cross examination of the alleged operator as well as providing the material relied upon for confirming the impugned addition. ITA No. 510/Ahd/2019 Tejal Mahendrabhai Shah vs. ITO Asst.Year–2015-16 - 2 - 3.1 The observations made and findings given by CIT(A) with regard to the transaction of purchase and sale of shares as well as the said company are not admitted by the appellant in so far as the same are contrary to the facts on record and prejudicial to the appellant. It is therefore prayed that the addition of Rs.48,74,036/- upheld by the CIT(A) deserved to be deleted.” 3. The assessee filed return of income on 27.03.2016 declaring total income of Rs. NIL claiming exempt income of Rs. 48,95,152/- under Section 10(38) of the Act. The case was selected for scrutiny and notice under Section 143(2) was issued on 20.09.2016. The Assessing Officer observed that the assessee has derived income from house property, income from other sources etc. The assessee declared Long Term Capital Gain (in short “LTCG”) on sale of shares of Mishka Finance & Trading Ltd. and claimed exemption under Section 10(38) of the Act. The Assessing Officer observed that the scrip Mishka Finance & Trading Ltd. in which the assessee traded has also been put under “surveillance measure” by SEBI and suspended. The assessee was one of such beneficiary who has taken the entry of Rs. 48,74,036/- during the A.Y. 2015-16 under consideration. The assessee purchased Mishka Finance & Trading Ltd. scrips through Roongta Rising Stock Ltd. and also sold through Roongta Rising Stock Ltd. in the month of July & November 2014 i.e. 104000 shares (the details of which are reproduced at Page of the Assessment Order). The Assessing Officer has issued notice under Section 142(1) dated 18.12.2017 thereby asking the assessee to furnish the specific details in respect of purchase / sale of Mishka Finance & Trading Ltd. The assessee submitted its response vide letter dated 21.12.2016 and submitted the contract notes for purchase of shares alongwith the details of mode of payment made to share broker as well as banking passbook reflecting sale of investment, ledger copy of share broker, ledger account of source of investment. The Assessing Officer after taking cognizance of the reply the addition of Rs. 48,74,036/- thereby ITA No. 510/Ahd/2019 Tejal Mahendrabhai Shah vs. ITO Asst.Year–2015-16 - 3 - disallowing the exempt income under Section 10(38) of the Act and added the same under Section 68 of the Act. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee. 5. The Ld. A.R. submitted that the assessee has given all the details related to the purchase of sale of the scrip Mishka Finance & Trading Ltd. through the broker Roongta Rising Stock Ltd. There was no blacklisting as such in respect of this scrip as well as in respect of broker by the statutory authority i.e. SEBI. Merely stating that the scrip is under surveillance cannot deeper the trading of the said scrip. The assessee has purchase the said scrip through the proper banking channel and has also produced the payment mode, the details of contract notes, bank passbook, ledger copy of share broker as well as copy of ledger account source of investment. The Ld. A.R. submitted that all the relevant documents related to the purchase of sale of the said transaction was totally ignore by the Assessing Officer and only on the basis of SEBI report has denied the claim of LTCG under Section 10(38) of the Act to the assessee. 6. The Ld. D.R. relied upon the assessment order and the order of the CIT(A) and further submitted that the SEBI’s report has been reproduced in Para 6.2 and in fact at Sr. No. 40 the scrip was under surveillance for the particular period for which the assessee had transaction in the said scrip. Therefore, the Assessing Officer has rightly denied the exemption claimed by the assessee under Section 10(38) of the Act. 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the fact that the assessee has purchased the ITA No. 510/Ahd/2019 Tejal Mahendrabhai Shah vs. ITO Asst.Year–2015-16 - 4 - scrip of Mishka Finance & Trading Ltd. and the same was notified for the particular period under surveillance is clearly pointed out while dealing with the said scrip, the assessee has not taken cognizance of the SEBI’s orders / report. In fact, the assessee’s broker has also not taken the same into consideration. The contractual notes which has been produced by the assessee letter dated 02.09.2017 and those notes are not reflecting the price of the each scrip at the time of purchase. The assessee sold the scrips between the period 01.04.2014 to 30.03.2015 on which date the trade price per unit was 46.2000 but the purchase price was nowhere mentioned of each share of the said scrip. The assessee has not given the proper details about the said scrip to the Assessing Officer as well as to the CIT(A). In fact, in the present case the shares were not transferred to the assessee’s Demat Account within 24 hours and thus the assessee’s plea in respect of share in bill account of the broker is not correct and hence rightly rejected by the CIT(A). The shares were sold without getting the same in individual Demat Account and the name of the broker was also promptly reflected in investigation report on the said issue involved. Therefore, the Assessing Officer as well as CIT(A) after taking proper cognizance has rightly made addition and confirm the same. The Ld. A.R. relied upon the decision of Ahmedabad Tribunal in case of ITO vs. Gokuldham Enterprise LLP wherein the similar scrip has been allowed. In the present case the scrip as well as the brokers name has been found in the SEBI report and in fact the modus operandi of the broker as well as assessee was specifically pointed by the Assessing Officer as well as CIT(A) thereby stating that the said dealing in share has not been transferred to the Demat Account of the assessee within the stipulated time as given by the statutory authority i.e. SEBI. These aspects were not discussed in those decisions and therefore, the same will not be applicable in the present case. The facts are different in the ITA No. 510/Ahd/2019 Tejal Mahendrabhai Shah vs. ITO Asst.Year–2015-16 - 5 - present case in respect of observations made by the Assessing Officer in detail regarding the purchase and sale of the scrip as well as the conduct of the share broker and therefore, the appeal of the assessee is dismissed. 8. In result, the appeal of the assessee is dismissed. This Order pronounced in Open Court on 17/03/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 17/03/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 14.03.2023 2. Date on which the type draft is placed before the Dictating Member 15.03.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 16.03.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .03.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 17.03.2023 7. Date on which the file goes to the Bench Clerk 17.03.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................