SKS Fincap Private Limited, Kolkata V. DCIT, Circle - 8, Kolkata, Kolkata

ITA 89/KOL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3180 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 21-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 16-01-2012
• Court: TRIBUNAL
• Department Lawyers: BS S ALAM
• Assessee Lawyers: D S DAMLE

Judgement Text

1 ITA NO.89/KOL/2012 SKS FINCAP PRIVATE LTD.. ,A.Y. 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM ] ITA NO.89/KOL/2012 ASSESSMENT YEAR : 2006-07 SKS FINCAP PRIVATE LIMITED -VERSUS- D.C.I.T., CIRC LE-8, KOLKATA KOLKATA (PAN:AADCP 1039 N) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.S.DAMLE, FCA FOR THE RESPONDENT : SHRI BS.S.ALAM, JCIT, SR.DR DATE OF HEARING : 18.01.2016. DATE OF PRONOUNCEMENT : 3.2.2016. ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 22.11.2011 OF CIT(A)-VIII, KOLKATA RELATING TO A.Y.2006-07. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE FOR SHARE TRADING LOSS OF RS.49,11,450/-. 3. THE FACTS AND CIRCUMSTANCES IN WHICH THE APPEAL ARISES FOR CONSIDERATION ARE AS FOLLOWS :- THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS EN GAGED IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES. IT IS REGISTERED AS A NON-BANKING FINANCIAL COMPANY(NBFC). THE ASSESSEE HAD CLAIMED LOSS ON SHA RE TRADING OF RS.49,11,450/-. THIS COMPRISES OF LOSS ARISING OUT OF SALE OF 2900 SHARES OF SANGOTRI CONSTRUCTION OF RS.2,53,252/- AND LOSS ON SALE OF 20800 SHARES OF S ARANG VINIYOG. 2 ITA NO.89/KOL/2012 SKS FINCAP PRIVATE LTD.. ,A.Y. 2006-07 4. THE EVIDENCE ON RECORD SHOWS THE FOLLOWING FACT S :- I)LOSS ON SALE OF 2900 SHARES OF SANGOTRI CONSTRUCT ION : THE ASSESSEE PURCHASED 2500 SHARES OF SANGOTRI CONS TRUCTION ON 19.07.2005 THROUGH A BROKER SHYAM LAL SULTANIA FOR CONSIDERATION OF RS.3 ,75,300/- AND ANOTHER 400 SHARES OF SANGOTRI CONSTRUCXITON ON 12.08.2005 FROM SHYAM LAL SULTANIA. THE CONTRACT NOTE ISSUED BY THE BROKER IS PLACED AT PAGES 14 AND 15 O F THE ASSESSEES PAPER BOOK. ON 17.01.2006 THE ASSESSEE SOLD 2900 SHARES THROUGH A BROKER S.B.BHUTRA & CO. THE CONTRACT NOTE OF THE BROKER IS AT PAGE 17 OF ASSESS EES PAPER BOOK. PAGES 18 TO 20 OF THE ASSESSEES PAPER BOOK IS THE STOCK EXCHANGE QUO TATION FOR THE PERIOD DURING WHICH ASSESSEE PURCHASED AND SOLD THE SHARES OF SANGOTRI CONSTRUCTION. THE PURCHASE OF 2500 SHARES ON 19.07.2005 BY THE ASSESSEE WAS AT 15 0 PER SHARE AND THE PURCHASE OF 400 SHARES ON 12.08.2005 WAS AT 107.39 PAISE. THE R ATE AT WHICH THE SHARES WERE SOLD WAS 56.90 PAISE (NET). THE PURCHASE AND SALE PRICE ARE IN ACCORDANCE WITH THE STOCK EXCHANGE QUOTATION FOR THE RELEVANT PERIOD AS PER T HE QUOTATION INFORMATION HISTORY OF SANGOTRI CONSTRUCTION SHARES GIVEN AT PAGES 18 TO 2 0 OF THE ASSESSEES PAPER BOOK. THE ASSESSEE REALISED THE SHARE VALUE OF THE SHARES THR OUGH CHEQUES AND THE BANK STATEMENT ARE PLACED AT PAGES 22 AND 23 OF THE PAPER BOOK AND EVIDENCES REALISATION OF SALE PROCEEDS THROUGH BANKING CHANNELS ON SALE OF SHARES . 5. THE MAIN REASON WHY THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON SALE OF SHARES OF SANGOTRI CONSTRUCTION WAS THAT SHYAM LAL SULTANI A WAS SUSPENDED BY SEBI VIDE ITS ORDER DATED 29.09.2009 FOR PRICE RIGGING AND MANIPU LATION. THE AO HAS ALSO OBSERVED THAT THE PRICE VARIATION OF THE SHARES OF SANGOTRI CONSTRUCTION WAS NOT JUSTIFIED BY ANY ANNOUNCEMENT MADE BY THE COMPANY GIVING ROOM TO THE SUSPICION THAT THE BROKERS WERE RIGGING THE PRICE OF THE SHARES OF SANGOTRI CO NSTRUCTION. AO THEREFORE DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON LOSS OF SHARES. CIT(A) CONFIRMED THE ORDER OF AO. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE E VIDENCE ON RECORD CLEARLY SHOWS THAT THE PURCHASE AND SALE OF SHARES WERE GEN UINE AND WERE THROUGH BROKERS. 3 ITA NO.89/KOL/2012 SKS FINCAP PRIVATE LTD.. ,A.Y. 2006-07 THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL S. THE PRICE WAS IN TUNE WITH THE QUOTATION IN THE STOCK EXCHANGE. THERE CAN BE N O DOUBT OR DISPUTE ON THESE ASPECTS. THE ONLY REASON WHICH NEEDS CONSIDERATION IS ORDER OF THE SEBI BANNING SANGOTRI CONSTRUCTION FROM TRADING. ORDER PASSED BY STOCK EXCHANGE IS PLACED AT PAGES 29 TO 37 OF ASSESSEES PAPER BOOK. A PERUSAL OF THE ORDER SHOWS THAT SHYAM LAL SULTANIA WAS BANNED FOR PRICE RIGGING IN CERTAIN SH ARES. THE SHARES OF SANGOTRI CONSTRUCTION IS NOT ONE SUCH SHARE. IT IS FURTHER S EEN THAT ORDER OF SEBI BANNING SANGOTRI CONSTRUCTION IS W.E.F. 29.09.2005 WHEREAS THE ASSESSEE PURCHASED THE SHARES OF SANGOTRI CONSTRUCTION THROUGH SHYAM LAL SULTANIA ON 19.07.2005 AND 12.08.2005. IN THE GIVEN CIRCUMSTANCES WE ARE OF THE VIEW THAT THE REASONS ASSIGNED BY THE AO FOR DISREGARDING LOSS ON PURCHASE AND SALE OF SHARES OF SANGOTRI CONSTRUCTION CANNOT BE SUSTAINED. AO HAS ALSO MADE REFERENCE TO THE FACT T HAT THE S.B.BHUTRA & CO. THROUGH WHOM THE SHARES OF SANGOTRI CONSTRUCTION HAS SOLD H AVE BEEN SUSPENDED BY SEBI VIDE ITS ORDER DATED 13.04.2007 FOR PRICE RIGGING AND MA NIPULATION. THIS ORDER OF SEBI IS PLACED AT PAGES 38 TO 46 OF THE ASSESSEES PAPER BO OK. THE FIRST ASPECT WHICH WE NOTICE IS THAT THE ORDER OF SEBI WAS OPERATIVE FROM 13.04. 2007 WHEREAS THE ASSESSEE SOLD THE SHARES OF SANGOTRI CONSTRUCTION THROUGH S.B.BHUTRA & CO., ON 17.01.2006. SECONDLY, S.B.BHUTRA & CO., WAS FOUND GUILTY OF MANIPULATION OF STOCK PRICE OF A DIFFERENT COMPANY AND NOT THAT OF SANGONTRI CONSTRUCTION. TH IS REASON ASSIGNED BY THE AO FOR DISBELIEVING THE LOSS CLAIMED BY THE ASSESSEE ON SA LE OF SHARES OF SANGOTRI CONSTRUCTION CANNOT BE SUSTAINED. AO SEEMS TO HAVE PROCEEDED ON THE PRESUMPTION THAT PERSONS INVOLVED IN TRANSACTION WERE TAINTED P ERSONS. SUCH GENERAL ALLEGATION IN THE LIGHT OF DOCUMENTARY EVIDENCES AVAILABLE ON REC ORD CANNOT BE THE BASIS FOR DISALLOWING THE CLAIM ON LOSS OF SHARES OF SANGOTR I CONSTRUCITON. WE ACCORDINGLY HOLD THAT LOSS OF SHARES SHOULD BE ALLOWED. II. LOSS ON 20,800 SHARES OF SARANG VINIYOG : 7. AS FAR AS THE ABOVE TRANSACTION IS CONCERNED THE EVIDENCE ON RECORD SHOWS THAT THE ASSESSEE PURCHASED 4,800, 12,000 AND 4000 SHARE S OF SARANG VINIYOG ON 15.07.2005, 18.07.2005, 19.07.2005 AND 20.07.2005 R ESPECTIVELY. THE CONTRACT NOTES 4 ITA NO.89/KOL/2012 SKS FINCAP PRIVATE LTD.. ,A.Y. 2006-07 EVIDENCING PURCHASES BY THE ASSESSEE THROUGH A STOC K BROKER SUBH STOCK BROKING PVT. LTD ARE AT PAGES 3 TO 6 OF THE ASSESSEES PAPER BOO K. THESE SHARES WERE SOLD IN AN OFF- MARKET TRANSACTION ON 29.03.2006. THE SHARES WERE P URCHASED BY ONE SYNERGY VYAPAAR PVT. LTD THROUGH PENGUINE EXIM (P)LTD. THE EVIDENCE IN THIS REGARD IS AT PAGE 8 OF THE ASSESSEES PAPER BOOK THE HISTORICAL QUOTATION IN CALCUTTA STOCK EXCHANGE OF SHARES OF SARANG VINIYOG IS PLACED AT P AGES NOS. 9 TO 11 OF THE ASSESSEES PAPER BOOK. THE QUOTATION IN THE STOCK EXCHANGE IS IN TUNE WITH THE SHARE PRICE AT WHICH THE ASSESSEE PURCHASED AND SOLD THE SHARES OF SARANG VINIYOG LTD. AS WE HAVE SEEN THAT THE ASSESSEE PURCHASED THE SHARES THROUGH A BROKER SUBH STOCK BROKING PVT. LTD. ACCORDING TO THE AO THE COUNTER PARTY OF THE T RANSACTIONS OF PURCHASE WAS ONE S.JHUNJHUNWALA & CO. ANOTHER STOCK BROKER AND THAT STOCK BROKER WAS SUSPENDED BY SEBI FOR PRICE RIGGING VIDE ORDER DATED 29.09.2005. IT IS NOTE-WORTHY THAT THE BROKER THROUGH WHOM THE ASSESSEE PURCHASED WAS NOT SUSPEND ED BY SEBI AND IT WAS ONLY THE BROKER FROM WHOM SUBH STOCK BROKING PVT. LTD., PURC HASED VIZ., S.JHUNJHUNWALA & CO. THAT WAS SUSPENDED. THE DATE OF SUSPENSION IS O NLY ON 29.09.2005. THE ASSESSEE PURCHASED THE SHARES OF SARANG VINIYOG BETWEEN 15.0 7.2005 AND 20.07.2005. S.JHUNJHUNWALA & CO WAS NOT SUSPENDED FOR PRICE RIG GING OF THE SHARES OF SARANG VINIYOG BUT WAS GUILTY OF HAVING RIGGED THE PRICE O F S.T.SERVICES LTD. IN THE GIVEN CIRCUMSTANCES WE ARE OF THE VIEW THAT THE DISALLOWA NCE OF LOSS ON SHARES OF SARANG VINIYOG CANNOT BE SUSTAINED. 8. AS FAR AS THE SALE OF SHARES OF SARANG VINIYOG I S CONERNCED IT WAS AN OFF MARKET SALE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE SHARES IN QUESTION WERE HELD AS STOCK IN TRADE AND AS PER THE HISTORICAL QU OTATION OF STOCK EXCHANGE THE SHARES WERE OF THE VALUE OF RS.43.20 PAISE PER SHARE AS O N THE LAST DATE OF THE PREVIOUS YEAR. EVEN IF THE SALE IS DISBELIEVED THE ASSESSEE SHALL BE ENTITLED TO VALUE OF THE SHARES AT THE COST OF THE MARKET PRICE AND IN ANY EVENT THE L OSS IN QUESTION SHOULD BE ALLOWED TO THE ASSESSEE. WE FIND FORCE IN THIS SUBMISSIONS MAD E BY THE LEARNED COUNSEL AS WELL. FOR THE REASONS STATED ABOVE WE DIRECT THAT THE LOS S ON SALE OF SHARES SHOULD BE ALLOWED AS DEDUCTION. 5 ITA NO.89/KOL/2012 SKS FINCAP PRIVATE LTD.. ,A.Y. 2006-07 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. O RDER PRONOUNCED IN THE COURT ON 03.02.2016. SD/- SD/- [M.BALAGANESH ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.02.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SKS FINCAP PRIVATE LIMITED, 11/1, SARAT BOSE ROAD , NORTH BLOCK, 2 ND FLOOR, ROOM NO.218,KOLKATA-700020. 2.D.C.I.T., CIRCLE-8, KOLKATA. 3. CIT(A)-VIII, KOLKATA 4. CIT-III, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCHES