PCIT v. Ziauddin A. Siddique (Bombay High Court)

Court: Bombay High Court
Head Notes:

S. 68 : Cash credits-Long term capital gains-Penny stock-Not subjected to any enquiry by SEBI-Sold through DMAT account-STT paid-Purchased at a rate as low as Rs.2.5/- to Rs. 3/- per share and they were sold at a rate extremely as high as Rs.125/- to Rs. 185/- per share-Order of Tribunal deleting the addition is affirmed. [S. 10(38), 45, 260A]
The assessee purchased shares Ramkrishna Fincap Ltd. (RFL) at par in February 2004 and demated the same immediately in March 2004. Purchase of these shares happened in the off market and not through exchange. Payments were not done through banking channels. The shares were purchased at a rate as low as Rs.2.5/- to Rs.3/- per share in February 2004 and they were sold at a rate extremely as high as Rs.125/- to Rs.185/- per share in the Kolkata Stock Exchange. The AO made addition of Rs.1,03,33,925/- u/s. 68 of the Act. The AO held the financials of RFL are too weak to command such a high price and, therefore, he came to the conclusion that the transactions related to the shares were sham and not genuine. It is a case of colourable device. On appeal the CIT(A) deleted the addition. On appeal by the Revenue on behalf of the assessee, it was contended that there is no iota of deficiencies of any kind found by the AO with regard to the documentation i.e. purchase and sale bills, contract notes, cheque payments, SEBI transactions etc. It is a straight case of buying shares of RFL though bona fide transactions involving the stock exchange and selling of the same for earning Long term capital gains. The gains are exempt from tax. The AO has not brought out any incriminating evidence or material to demonstrate that the transactions are sham or bogus or entered with any mala fide intentions of converting unaccounted money into accounted gains. Dismissing the appeal of the Revenue the Tribunal held that the decision of the AO is not valid and appropriate as there is no adverse criticism on the relevant documentation involving these share transactions. There is no allegation against the assessee individually as involved in price rigging. Accordingly the Tribunal affirmed the order of the CIT(A) .On appeal High Court affirmed the order of the Tribunal and dismissed the appeal of the Revenue. (Arising out of ITA Nos 5182 & 5183/Mum/2011 dt.9-9 -2016) (AY, 2005 -06, 2006-07) (ITA No. 2012 of 2017 dt. 4-3-2022) (AY. 2005-06)
PCIT v. Ziauddin A. Siddique (Bom)(HC) www.itatonline.org

Section(s): 68
Counsel(s): Sameer Dalal, Advocate
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