Shree Suprinit Tradinvest Pvt. Ltd., Ahmedabad V. The ITO, Ward-4(1)(3), Ahmedabad

ITA 550/AHD/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6596 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-09-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 04-07-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sham transactions
• Section: 142(1); 143(1); 143(2)

Judgement Text

ITA No.550/Ahd/2023 Assessment Year: 2014-15 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.550/Ahd/2023 Assessment Year: 2014-15 Shree Suprinit Tradinvest Pvt. Ltd., 75, Kamdhenu Complex, Panjrapole Cross Roads, Ahmedabad - 380 015. [PAN – AACCS 6445 A] Vs. Income Tax Officer , Ward-4(1)(3), Ahmedabad. (Appellant) (Respondent) Assessee by Shri Tej Shah, Advocate Revenue by Shri Urjit Shah, Sr. DR Da te o f He a r in g 13.09.2023 Da te o f P ro n o u n ce m e n t 15.11.2023 O R D E R This appeal is filed by the Assessee against order dated 08.06.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2014-15. 2. The Assessee has raised the following grounds of appeal :- “1. That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in disallowing business loss of Rs.1,53,890/-. 2. That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in not granting opportunity of cross examination of persons as demanded by the appellant.” 3. The assessee company is engaged in the business of trading in shares and securities. Return of income for the Assessment Year 2014-15 was filed on 30.09.2014 declaring total income at Rs.5,08,113/-. The return of income was processed under Section 143(1) of the Income Tax Act, 1961. The case was selected for scrutiny under CASS and statutory notice under Section 143(2) of the Act was issued on 28.08.2015 which was duly served upon the assessee. Notice under Section 142(1) of the Act dated 16.08.2016 alongwith questionnaire was ITA No.550/Ahd/2023 Assessment Year: 2014-15 Page 2 of 5 issued to the assessee and served on the assessee. In response to the notices, the Chartered Accountant of the assessee attended the assessment proceedings from time to time and furnished the details called for. After verification of the books of account, the Assessing Officer observed that the among other few shares the assessee has also carried out share transactions in following scrips which were admittedly used by the entry providers for providing accommodation entry of Long Term Capital Gain/Short Term Capital Gain/Business Loss etc :- Name of the scrip PURCHASE SALE PROFIT/LO SS Qty. Value Qty. Value Loss Comfort Fincap Ltd. 2667 1173879 2667 1163194 -10685 Radford Global Ltd. 10000 787600 10000 787400 -200 SMIL 35000 462000 35000 452900 -9100 Turbo Tech Engg. Ltd. 330750 109594143 330750 109511438 -82705 Dhenu Buildcon Infra Ltd. 40000 1379000 40000 1327800 -51200 -153890 4. The assessee was issued show cause notice to that extent for which the assessee furnished written submission dated 15.12.2016. The Assessing Officer observed that the explanation offered by the assessee is general in nature. The Assessing Officer further observed in paragraph no.4.8 various statements recorded of the entry providers/exit providers/brokers which was provided to the assessee but the same was not responded except making general comments. Thus, paragraph no.4.8 of the Assessment Order alongwith paragraph no.4.9 describes the various unusual movements in price and volume of scrips wherein the assessee dealt with. The Assessing Officer has also given his remarks regarding statement wherein admission of share brokers was recorded and offered his observation. The Assessing Officer, therefore, concluded that the transaction of purchase and sale of shares of Comfort Fincap Limited, Radford Global Limited, SMIL, Turbo Tech Engineering Limited and Dhenu Buildcon Infra ITA No.550/Ahd/2023 Assessment Year: 2014-15 Page 3 of 5 Limited were sham transactions and the amount of Rs.1,53,890/- claimed as loss on trading in these shares were treated as bogus and the same was disallowed. 5. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 6. The Ld. AR submitted that the Investors’ Report from 01.04.2013 to 31.03.2014 relating to share transactions in the regular exchange i.e. BSE and NSE wherein the assessee has shown various shares/scrips. The assessee has also submitted Contract Note of the assessee’s broker while dealing with the above mentioned scrips. The Ld. AR submitted that the Assessing Officer failed in his duty in discharging the onus while making erroneous observations about the transaction in trading of shares on the floor of stock exchange resulting into aggregate loss of Rs.1,53,890/- to be non-genuine except merely on suspicion and not specific basis. The Ld. AR submitted that the statement of persons provided by the Assessing Officer were of no relevance since there were no transactions of trading by the assessee with those persons. The assessee’s explanation was never rebutted by the Assessing Officer while disallowing loss genuinely incurred on transactions done on platform of BSE through SEBI registered intermediatory. The Assessing Officer observed that the beneficiaries were voluminous and name of few big exempted LTCG beneficiaries were only mentioned in such statements. The Ld. AR submitted that this establishes the case of the assessee that the assessee has not claimed any exemption of LTCG and name of assessee is not mentioned in any of the statements. The Ld. AR further submitted that the assessee has already submitted documentary evidences regarding genuine transaction being carried out and discharged the onus to prove the actual loss incurred and, therefore, these evidence are to be taken into account by the Assessing Officer and merely observing that the statements are general in nature cannot suffice the Revenue’s case. The admission mentioned in paragraph no.4.8 of the Assessment Order has nothing to do with the transaction of the assessee as nowhere the said persons have any connection with the assessee regarding transactions carried out and nowhere there is any mention of assessee having been the beneficiary of any such loss. The Ld. AR further submitted that the disallowance of loss was merely on irrelevant ground and without taking into account copies of the Ledger Account, ITA No.550/Ahd/2023 Assessment Year: 2014-15 Page 4 of 5 invoices and account of recognised brokers account through whom the shares were traded by the assessee which was thereon record before the Assessing Officer. Thus, the Ld. AR submitted that the disallowance made by the Assessing Officer and confirmed by the CIT(A) is not justified. 7. The Ld. DR submitted that the assessee has not dealt with the admission of the various parties related to the transactions as stated in paragraph no.4.8. The Ld. DR further submitted that the shares involved were admittedly controlled by the entry providers during the relevant period and considering the modus operandi followed by the entry providers ait can be easily concluded that all the trades during such period are pre-arranged trades wherein the buyers and sellers are pre-decided through the trades are executed on recognised stock exchange though depository participants at different locations. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 8. Heard both the parties and perused all the relevant material available on record. The Assessing Officer has not contradicted these scrips as to how far the assessee’s involvement was there, except in paragraph no. 4.12 of the Assessment Order thereby observing that the shares involved were admittedly controlled by the entry providers. The Assessing Officer related to this scrip has not given observation as to how the entry providers and the assessee as well as the share broker i.e. ASE Capital Markets Limited has involved in the entire transactions except that the assessee through ASE Capital Markets Limited has purchased and sold the shares. The same is related to scrips of Comfincap, Radford Global Limited, SIMIL, Turbo Tech Engineering Limited and Dhenu Buildcon Infra Limited. The documents such as contract notes, investor’s report and client-wise sauda summary were before the Assessing Officer but the Assessing Officer has not taken cognisance of these documents thereby stating that the assessee was directly involved in sham and bogus transactions of entry providers. Though the Assessing Officer has given the chart of fluctuation as well as increase of the data during the said period, the same cannot be the sufficient reason for disallowing the business loss of the assessee. Thus, the Assessing Officer was not right in disallowing the claim of business loss of the assessee. Appeal of the assessee is thus allowed. ITA No.550/Ahd/2023 Assessment Year: 2014-15 Page 5 of 5 9. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on this 15 th November, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 15 th November, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad