Income Tax Appellate Tribunal - Mumbai
Mahavir Roads & Infrastructure, Mumbai vs Dcit Circle-3(4), Mumbai on 8 December, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC" Bench, Mumbai
Before Shri Shamim Yahya, Accountant Member
I.T.A. No. 6219/Mum/2019
(Assessment Year 2011-12)
ITO-33(1)(2) Vs. Smt. Bhavna Nitin Bavisi
Room No.946, 9 t h Floor D/417, Raj Garden CHS
Kautilya Bhavan, BKC Ltd., Mahavir Nagar
Bandra(E), Mumbai-400 051 Kandivali(W),
Mumbai-400 067
PAN : AEDPB4969G
(Appellant) (Respondent)
Assessee by Shri Ravikant Pathak
Department by Ms. Smita Verma
Date of He aring 11.10.2021
Date of Pronounceme nt 08 .12.2021
ORDER
Per Shri Shamim Yahya (AM) :-
This appeal by the revenue is directed against the order of learned Commissioner of Income Tax (Appeals)-45 dated 27.06.2019 and pertains to assessment year 2011-12.
2. Grounds of appeal read as under:-
1." On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.47,288/- as unexplained cash credit u/s68 of the l.T. Act, 1961 in respect of income shown as long term capital gains from sale of shares of M/s. Nivya Infrastructure 85 Telecom Services Ltd. ( S.V. Electricals) which was a penny stock company without appreciating the facts and ignoring the information found by the Investigation Wings."
2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.94,650/- as unexplained investment u/s.69 of the l.T. Act, 1961 in respect of purchases of shares of M/s. Nivya Infrastructure & Telecom Services Ltd. (S.V.Electricals) which was a penny stock company without 2 IT A N o . 6 2 1 9 / M u m/ 2 0 1 9 appreciating the facts and ignoring the information found by the Investigation Wings."
3. The appellant prays that the order of the Ld. C1T(A) on the above grounds be set aside and that of the Assessing Officer be restored.
3. Brief facts of the case are as under :-
In this case,the AO received information from the DDIT(Inv), Mumbai that M/s. Nivyah Infrastructure & Telecom Service Ltd is a penny stock listed on BSE and used to facilitated introduction of unaccounted income of members of beneficiaries in the form of exempt LTCG or STCL in their books of account. It was also informed that the assessee traded in this script during F.Y. 2010-11. Assessee gave a detailed submission and argued that the assessee purchased and sold the shares of S V Electronics Ltd.(SVEL) [before there was change in the name as NITSL] in the normal course of business on the stock exchange through registered broker and STT was paid on both purchase and sale transactions. Assessee also filed documents in support of her argument to show the facts. The AO did not accept the arguments and added the total sale consideration received on sale of 250 shares as unexplained cash credit u/s 68 of the Act.
4. In the assessment order, the AO extensively referred to DDIT report and held as under:-
"The assessee was issued a final show-cause notice on 13.12.2018, asking him to show-cause as to why the total sale consideration in the above scrip of Rs. 47,288/- should not be treated as unexplained cash credits u/s 68 of the IT Act, 1961 by disallowing of bogus long term capital gains of Rs.39,476/- . Further the assessee was also asked to explain as to why the unexplained purchases of Rs.94,650/- pertaining to the purchases of shares of above scrip of M/s. Nivya Infrastructure & Telecom Services Ltd. which is kept as holdings, should not be treated as unexplained investment u/s.69 of the Act.
The assessee was required to file her explanation on or before 17.12.2018. However, there has been no compliance from the end of the assessee. Accordingly, as discussed above, the sale consideration of Rs.47,288/- in the scrip of penny stock M/s. Nivya Infrastructure & Telecom Services Ltd. is hereby treated as unexplained cash credits u/s.68 of the Act, Further, the purchases of Rs.94,650/- in the scrip of M/s. Nivya Infrastructure & Telecom Services Ltd. which has been kept on hold is hereby treated as unexplained investment u/s.69 of the Act. and added to the total income of the assessee."3
IT A N o . 6 2 1 9 / M u m/ 2 0 1 9
5. Upon assessee's appeal, qua the addition u/s. 68 Ld.CIT(A) deleted the same, after giving a finding that AO has been factually wrong in his assessment order. Ld.CIT(A) has held as under:-
" I have carefully considered the facts of the case, the views held by the AO in the assessment order and contentions of the appellant. I have also considered judicial pronouncements relied upon by the appellant. In his submissions the appellant argued that she purchased the shares and sold the shares of SV Electrical Ltd in the open market keeping in view the history and track record of SVEL as available in the public domain. The shares of SVEL were purchased on a recognized Stock Exchange through registered brokers and payment was made through proper banking channels and the purchases and sales are reflected in Demat Account. In support of the same the appellant filed following documents.
i) Brokers contract issued by R.B.K. Share Broking Limited (page 14 of PB).
ii) Bank statement of the Appellant maintained with Canara Bank showing that the consideration towards sale of shares have been credited in this bank account.
iii) Form 10DB showing that Appellant has traded in the shares to the volume of Rs.
82.78,959/- proving that the Appellant who does the trading for such huge amount will not enter into malpractice of trading in penny stock From the record it is seen that shares were not allotted through preferential allotment but purchased on the exchange through broker. It is also seen that the assessee purchased and sold shares of other companies on regular basis on the Stock Exchange apart from the shares of SVEL now known as Nivyah Infrastructure and Telecom Services Ltd.(NITSL). Further it is seen that the AO made the addition of Rs.47,197 u/s 68 of the Act for the following reasons as mentioned in the assessment order.
a) The shares were allotted off market,
b) The shares were allotted on preferential basis.
c) STT was not paid
However , all the reasons given by the AO for coming to conclusion are factually not correct in the case of the appellant The shares were not purchased off market, the shares were not allotted to the appellant on preferential basis but shares were purchased by the appellant on the exchange in demat form through broker. It is seen from the contract notes that STT was paid while purchasing and selling of shares. Therefore AO was completely wrong on facts and the decision taken on such wrong facts is ought to be wrong. It appears from the facts arising from the documents that the assessee purchased the shares of SVEL like any normal investor on the exchange when the rates were on the rise and sold the shares when she saw a considerable gain. There is no order by the SEBI or BSE/NSE in the shares of SVEL in any manner and there is no merger or splitting of shares by the company to increase the number of shareholding by the investors. Therefore, the investment by the assessee in the shares of the company on the stock exchange, to my mind appears to be an investment in the 4 IT A N o . 6 2 1 9 / M u m/ 2 0 1 9 normal course of her investment activities in the shares. Having concluded so, the statements recorded by the wing, does not affect the assessee, as she was not there in the loop from the beginning in any form like purchasing shares at a lower rate in physical form, rigging and selling through exit providers as discussed by the AO in the order without connecting to the facts of the case. Therefore, the receipts on sale of shares of SVEL now known as NITSL are not liable to be considered as unexplained credits because these receipts were received on sale of investments made in the regular course. The finding of the AO is erroneous and the addition made u/s 68 is hereby deleted. Appellant gets relief. Ground Nos. 3(a) and (b) are allowed."
6. As regards addition u/s. 69, Ld.CIT(A) noted that AO has treated the amount paid for purchase of the impugned shares an unexplained investment without any discussion on this point. He deleted the addition by holding as under:-
" I have considered the assessment order and submissions of the appellant. As already mentioned in the paragraphs 5.2 and 5.3 the appellant purchased the shares of SVEL /NITSL on a recognized Stock Exchange like all other shares through registered brokers and payment was made by banking channels from the bank account All purchases and sales are reflected in the Demat Account of the appellant. When the purchases are through registered broker and the purchase consideration was paid from the bank account, it cannot be said that the purchase consideration paid is an unexplained investment u/s 69 of the Act. The finding of the AO is erroneous and the addition made is hereby deleted. Appellant gets relief. Ground Nos. 4(a) and (b) are allowed"
7. Against the above order, revenue is in appeal before ITAT
8. I have heard both the parties and perused the records. Ld. DR relied upon the order of AO. Ld. Counsel of the assessee submitted that order of AO is full of factual inaccuracies and Ld.CIT(A) has correctly deleted the addition. Ld. Counsel of the assessee made following submission referring to the paper book submitted in this regard.
Sr. No Reasons given in the assessment order Facts of the case
5
IT A N o . 6 2 1 9 / M u m/ 2 0 1 9
1 2,00,000 number of shares have been issued to the Total number of shares
assessee on 1/12/2009 [para 6.3 of assessment bought by the assessee is
order] 16,350 only which has been
bought over the period of 4
years [refer page 22 of
paper book]
2 The shares has been issued through preferential Shares have been bought
mode and shares have been issued off market through stock exchange from
[para 6.5 of assessment order] open market [refer page 4 to
9 of paper book]
3 STT was not paid on purchase and sale of STT was paid on purchase as
shared [para 6.5 of assessment order] well as sale of shares [refer
page 4 to 9 of paper
book]
4 Shares have been bought to make huge profit The assessee has incurred the
[para 6.5 of assessment order] loss [refer page 22 of
paper book]
5 Shares have been bought in one lot of 2,00,000 Assessee bought 16,350
number of shares at Rs. 23.70 per shares and sold number of shares in 12 at Rs. 205 per shares resulting into earning of tranches running into four 1780% [para 6.5 of assessment order] years. The price at which shares have been bought ranges between Rs. 10 to Rs.
144 per share. The price at which shares have been sold ranges between Rs. 7.72 to Rs. 188 per share.
6 Shares have been sold to the known parties Shares have been sold in [para 7.2 of assessment order] open market and parties who bought them are not known to the assessee [refer page 4 to 9 of paper book]
9. Upon careful consideration, I find that in this case the shares have not been issued through preferential mode and AO is factually wrong in observing 6 IT A N o . 6 2 1 9 / M u m/ 2 0 1 9 that shares have been issued off market. Ld.CIT(A) has given a finding that shares have been bought through stock exchange from open market. The purchases were also made through registered brokers and payments made were through banking channals and the purchases and sales got reflected in Demat account. In support in this regard, there is brokers contract note banking statement and Form-10DB have been taken into account by the Ld.CIT(A). The AO is also wrong is observing that STT was not paid. Ld.CIT(A) has also observed that assessee who does the trading for such huge amount will not enter into such malpractice. Moreover, there is no order by SEBI or BSE/NSE in the shares of SVEL. In these circumstances Ld.CIT(A) is right in holding that assessee is not guilty of indulging in malpractice of any stock trade. Hence, the addition u/s.68 as well as u/s.69 has been rightly deleted by Ld.CIT(A). The addition by the AO is purely on surmise and conjectures and wrong appreciation of facts. Accordingly, I uphold the order of Ld.CIT(A).
10. In the result, this appeal by the assessee stands allowed.
Pronounced in the open court on 08.12.2021 Sd/-
(SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 08/12/2021 Thirumalesh, Sr.PS Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT
5. DR, ITAT, Mumbai
6. Guard File.
BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai