2023 (10) TMI 1228 - AT - Income Tax

Bogus share capital gain/loss - unusual hike in the price of Banas not backed by fundamentals - HED THAT - As decided in PCIT, Mumbai Vs. Indravandan Jain HUF 2023 (7) TMI 1091 - BOMBAY HIGH COURT shares were purchased by respondent on the floor of Stock Exchange and not from the broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. As in the present case the documents clearly establish that the shares were purchased on the floor of stock-exchange (not from broker); the contract note of purchase was issued; shares were sold on the floor of stock exchange; contract note of sale was issued; the deliveries were taken into and given from De-mat A/c within normal time; the payment and receipt of considerations were made through bank a/c (not in cash). Therefore, the transactions are well-explained with the support of all documentary evidences and there is no infirmity or fallacy at any stage of transactions. Thus AO is not justified to disallow the short-term loss declared by assessee. Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in the judgment are the validity of the addition made by the Assessing Officer (AO) regarding the short-term loss declared by the assessee from shares of M/s Banas Finance Ltd., and the applicability of judicial rulings in determining the genuineness of the transactions.

Validity of Addition by AO:
The AO received information indicating that the assessee engaged in transactions involving shares of M/s Banas Finance Ltd., possibly resulting in escapement of income. The AO issued a notice under section 148 and subsequently made an addition of Rs. 3,28,153, treating the loss declared by the assessee as bogus. The first-appeal upheld the AO's decision. However, the assessee contended that the shares were purchased and sold through a legitimate broker, and all transactions were supported by documentary evidence. The Tribunal noted that the AO's doubts were not substantiated by any concrete evidence, and the facts presented by the assessee were consistent with genuine transactions. Therefore, the addition made by the AO was deemed unjustified, and it was deleted.

Applicability of Judicial Rulings:
The AO relied on various judicial rulings to support the disallowance of the short-term loss declared by the assessee. However, the assessee argued that the facts of their case aligned with a recent decision of the Mumbai High Court in a similar matter. The Tribunal examined the facts presented by the assessee, including the purchase and sale of shares through a recognized broker, payment through bank accounts, and adherence to stock exchange rules. These facts mirrored those in the Mumbai High Court decision, leading the Tribunal to conclude that the AO's disallowance was unwarranted. The Tribunal emphasized that the decision was specific to the facts of the case and should not be considered a binding precedent for cases involving bogus capital gain/loss without a detailed examination of the facts.