S. 45 : Capital gains -Penny Stock-Cash credits –Accommodation entries – DMAT account and contract note showed details of share transaction- Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction cannot be treated as cash credits – Addition as cash credit was deleted- Order of Tribunal allowing the exemption was affirmed. [S. 10(38), 68]
The Respondent had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as long term capital gains and claimed exemption under the Act. Respondent had claimed to have purchased this scrip at Rs.3.12/- per share in the year 2003 and sold the same in the year 2005 for Rs.155.04/- per share . The Assessing Officer held that investigation has revealed that the scrip was a penny stock and the capital gain declared was held to be accommodation entries. A broker Basant Periwal & Co through whom these transactions have been effected had appeared and it was evident that the broker had indulged in price manipulation through synchronized and cross deal in scrip of RFL. SEBI had also passed an order regarding irregularities and synchronized trades carried out in the scrip of RFL by the said broker. The Assessing Officer made addition under section 68 of the Act . On appeal the CIT(A) deleted the addition . On appeal by the Revenue, the Tribunal Affirmed the order of the CIT(A). Tribunal followed the order of Jurisdictional High Court in CIT v. Shyam R. Pawar (2015) 54 Taxmann.com 108/ 229 Taxman 256 (Bom)(HC). On appeal by the Revenue, dismissing the appeal the Court held that The Tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. Order of Tribunal is affirmed . (ITA No. 454 of 2018 dt. 12-7-2023)(AY. 2005-06) (Arising out of ITA No. 5168/M/2014 dt. 27-5-2016).
PCIT v. Indravadan Jain, HUF ( Bom)( HC) www.itatonline.org
[CORAM : HON’BLE JUSTICE MR. K.R. SHRIRAM & HON’BLE JUSTICE MR. FIRDOSH P. POONIWALLA]