2021 (7) TMI 871 - AT - Income Tax

Addition as speculative income - value shown in the contract note for sale was different than the value shown in Form 10DB in respect of transactions of shares of Ceat Limited - value of sale of equity shares of Ceat Limited - AO considered the sale consideration of equity shares as per the computation for calculating Securities Transaction Tax - assessee's contention that the actual sale consideration has to be taken and not the value considered for computing STT, was rejected - HELD THAT - Conclusion arrived by the learned AO that the assessee suppressed the value of sales by comparing two figures is erroneous. Further there is no difference in the turnover of Ceat Limited between the books and the contract notes. It is only for the purpose of calculation of Securities Transaction Tax (Form 10DB) based on VWAP (Volume Weighted Average Price), two different values of Sales are appearing in the Contract Note - Decided in favour of assessee.

Issues Involved:
1. Addition of ?1,52,000 as speculative income due to differences in sale value of shares of Ceat Limited shown in contract notes and Form 10DB.

Issue-wise Detailed Analysis:

1. Addition of ?1,52,000 as Speculative Income:

The appellant challenged the order of the Commissioner of Income Tax (Appeals)-5, Kolkata, which confirmed the addition of ?1,52,000 as speculative income. The core issue was the discrepancy between the sale value of equity shares of Ceat Limited shown in the contract note and the value shown in Form 10DB for Securities Transaction Tax (STT) computation.

Arguments by the Assessee:
The assessee argued that the actual sale consideration should be considered instead of the value used for computing STT. The discrepancy arose due to brokerage and charges, and hedging profit/loss. The assessee provided detailed reconciliation statements and referred to NSE Circular No. NSE/CMO/0146/2004, explaining that the sale value for STT calculation is derived using the Volume Weighted Average Price (VWAP) method, which can differ from the contract note values.

Details Provided:
The assessee transacted shares of Ceat Limited on five different dates, and detailed tables were provided to illustrate the differences in sale values after brokerage and the values shown in Form 10DB. The reconciliation statements and contract notes were presented to substantiate the claims.

Assessing Officer's Observation:
The Assessing Officer (AO) noted the difference in sale values and added ?1,52,000 to the returned income as undisclosed value of shares during speculative transactions. The AO compared the values in Form 10DB for delivery and non-delivery shares and concluded that the sale values should not differ, rejecting the assessee's explanation.

CIT(A)'s Observation:
The CIT(A) upheld the AO's addition, stating that the difference in sale values could not be reconciled and that the methodology for computing STT does not affect the turnover. The CIT(A) found no merit in the assessee's claim and sustained the addition.

Tribunal's Analysis:
The Tribunal reviewed the detailed submissions, reconciliation statements, and contract notes provided by the assessee. It noted that the AO had erroneously compared the sale values of delivery and non-delivery transactions, leading to an incorrect conclusion. The Tribunal found that the assessee had adequately disclosed the sale values and the differences were due to the methodology of STT calculation, not suppression of sales.

Conclusion:
The Tribunal concluded that the addition of ?1,52,000 was erroneous and based on a flawed comparison of figures. It was determined that there was no suppression of sales and the differences in values were due to the STT calculation method. Consequently, the Tribunal deleted the addition made by the AO and confirmed by the CIT(A), allowing the appeal of the assessee.

Final Judgment:
The appeal of the assessee was allowed, and the addition of ?1,52,000 was deleted. The order was pronounced in the open Court on April 12, 2021.

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