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08-03-2019, Nicholson Vanijya, Section 68, 4(I), 10(38), Tribunal Kolkata

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1 week 3 days ago #8768 by amit
Section - 68, 4(I), 10(38)
Order Date - 08-03-2019
Favouring - Assessee
Court - Tribunal Kolkata
Appellant - Nicholson Vanijya Pvt. Ltd.
Respondent - ITO
Justice - A. T. Varkey, JM
Citation - 319Taxpundit217
Appeal No. - I.T.A. No. 1856/Kol/2018
Asstt. Year - 2014-15

Order

PER : A.T.Varkey, JM

This is an appeal preferred by the Assessee against the order of Ld. CIT(A) – 1, Kolkata dated 10.07.2018 for Assessment Year 2014-15.

2. The main grievan e of the assessee is against the action of the Ld. CIT(A) confirming the addition of Rs. 18,46,180/-.

3. The brief fact of the case is that the assessee had interest receipt of Rs. 30,99,300/-. The AO noted that the assessee had purchased the shares of M/s. Shree Shaleen Textiles Ltd. at an average price of Rs. 54/- per share and sold it at Rs. 18/- per share thus causing loss of Rs. 18,46,140/-. This claim of loss by the assessee according to the AO was to evade taxes on its income by setting it off with bogus Short Term Capital Loss / bogus Business Loss. According to the AO this was done by circular trading and price was rigged and loss was booked by collusive trading, therefore, the AO treated the loss as bogus and made the addition of Rs. 18,46,140/-. On appeal, the Ld. CIT(A) confirmed the same by holding it as colorable devise to evade tax. Aggrieved the assessee is before us.

4. Assailing the decision of the Ld. CIT(A), the ld. AR submitted that assessee in order to substantiate the claim of STCL on sale of shares of M/s. Shree Shaleen Textiles has produced the following in the paper-book and drew our attention wherein we note the following documents:

a. Demat A/c for the F.Y. 2013-14 in Paper Book on Page 67-68.

b. Share Broker’s contract note on purchase of 30000 shares of Shaleen Textiles Pvt. Ltd. in Paper Book on Page 69.

c. Share Broker’s contract note on purchase of 22000 shares of Shaleen Textiles Pvt. Ltd. in Paper Book on Page 70.

d. Share Broker’s contract note on sale of 52000 shares of Shaleen Textiles Pvt. Ltd. in Paper Book on Page 71.

e. Annual Report for the F.Y. 2013-14, 2014-15, 2015-16 of Shree Shaleen Textiles Ltd. in Paper Book on Page 72-175.

f. Ledger Account for the F.Y. 2013-14 of the share broker in Paper Book on Page 176.

g. Price Movement and Trade Volume for the financia year 2013-14 of Shree Shaleen Textiles in Paper Book on Page 177-181.

h. Closing Stock details as on 31.03.2014 in Paper Book on Page 182.

5. According to the learned AR, the AO has treated the transaction as bogus only on the basis of suspicion or surmises According to him, the AO has made the addition with prejudiced mind after going through the investigation report of the Investigation Wing of the department and has not bother to find out if there is any collusion between the broker and the assessee in respect to the transaction in question to create bogus loss. It was also brought to our notice that suspension of shares of M/s. Shree Shaleen Textiles Ltd. was from 06.01.2015 whereas the assessee had sold the shares on 13.03.2014 which means the
sale of shares was not suspended at the time when the assessee sold the shares. Therefore, according to the learned AR, the AO ought to have allowed the claim of loss on the listed equity of M/s. Shree Shaleen Textiles Ltd. to the tune of Rs. 18,46,140/-. According to the learned AR, the assessee purchased shares of M/s Shree Shaleen Textile Ltd for Rs. 64 and when price was dropping down sold it for Rs 18. So according to ld. AR this was a decision which any prudent businessman would take in such circumstances and purchase and sale are supported by documents as well as the transaction are by account payee cheques. Thereby the claim of loss to the tune of Rs. 18,46,140 /- need to be allowed. According to ld. AR without finding out any fault, the AO/Ld. CIT(A) has not accepted the claim of assessee which is not legally tenable and want us to grant the claim of STCL. On the other hand, the ld. DR vehemently opposing the submission of ld. AR contended that sham transaction was setup to avoid tax on the interest receipt of Rs. 30,99,900/-, which has been correctly noticed by the AO/Ld. CIT(A) as a colorable devise and this claim is based on the colluded, pre-arranged transaction to book bogus claims in some cases LTCG or in other cases STCL. According to ld DR, these transactions were done systematically by circular trading and price was rigged and loss was booked by collusive trading, therefore, the AO/Ld CIT(A) treated the loss as bogus and made the addition of Rs. 18,46,140/-. According to the learned DR the Investigation Wing of the department has gone into the depth of this unscrupulous practice and has dug out the modus operandi and has identified the persons like assessee, who in order to avoid giving tax has booked the loss when he has interest income of Rs. 17,53,963/- and that the SEBI has suspended the sales of Shree Shaleen Textile Ltd. and the AO has also taken note of the observations made by the SIT to curb laundering of blackmoney by bogus claim of LTCG / loss. Therefore, he does not want us to interfere with the order of the Ld. CIT(A).

6. After giving our careful considerations to the contention and the documents placed before us which is running to 188 pages of Paper Book, we note that the assessee has declared interest income of Rs. 30,99,300/- and had claimed loss transaction of shares on listed equity of M/ Shree Shaleen Textile Ltd. to the tune of Rs. 18,46,140/-. According to the AO, the loss has been claimed by the assessee for bringing down the profit so that the assessee can avoid giving tax. The AO took note of the investigation carried out by the Investigation Wing of the department and observations of the SIT to draw a conclusion that the assessee’s claim of loss on sale of shares of Shree Shaleen Textile Ltd. to the tune of Rs. 18,46,140/- as bogus claim and made the addition. On appeal, the Ld. CIT(A) confirmed the action of the AO. We note that the assessee has filed a Paper Book containing188 pages from where we note that the assessee had filed the requisite documents called upon by the AO. The assessee had furnished the following documents:

(i) Copy of Bank Statement
(ii) Copy of DEMAT statement
(iii) Details of share dealing during the year
(iv) The contract notes of Shares traders

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